Chevron files for license renewal in Venezuela, proposing broader deal

Chevron’s logo is seen at the company’s office in Caracas, Venezuela, on April 25, 2018. REUTERS/Marco Bello/File Photo

HOUSTON, Sept 1 (Reuters) – Chevron Corp has asked the US government to expand its license to operate in Venezuela after the oil major agreed with state-owned PDVSA to renew joint ventures in the sanctioned country, six people said who are close to the matter.

Chevron’s permit application is the latest attempt by the California-based company to have a greater say in its Venezuelan operations to revive production and resume trading in Venezuelan oil. US sanctions have severely curtailed the country’s production and operations, especially with foreign partners, in recent years.

Last spring, Chevron received approval to negotiate with Venezuelan officials, but Washington insisted it would not ease sanctions without making progress on a dialogue between President Nicolas Maduro and the political opposition led by Juan Guaido.

In late August, the US Treasury Department’s Office of Foreign Assets Control (OFAC) asked Chevron for clarification and details of the deal with PDVSA, two of the people said.

Without concrete results from talks between Maduro and the country’s opposition, Chevron’s chances of getting approval for expanded operations in Venezuela could be slim.

At stake are millions of barrels of Venezuelan oil, which could help replace Russian supplies that some European nations and the United States blocked after invading Ukraine. An expanded license could also allow Chevron to collect at least some of the billions of dollars in unpaid debt from its four joint ventures.

Chevron declined to comment, adding that the company is complying with the sanctions framework.

“We remain committed to the safety and well-being of our employees and their families, the integrity of our joint venture assets and the company’s social and humanitarian program,” said spokesman Ray Fohr.

The US Treasury Department declined to comment. PDVSA and the Venezuelan Oil Ministry did not respond to a request for comment.

DEEP REWORK

The Chevron-PDVSA pact envisages a profound transformation of activities in their four projects. It includes a swap of crude oil for diluents to facilitate heavy oil processing for export at the major Petropiar venture in the Orinoco Belt and proposes resuming oil production at the Petroboscan venture, which recently halted due to operational shortages, the two said of persons.

“Chevron wants to have more influence over the ventures’ sourcing, hiring and oil trading,” said another person. “From PDVSA’s point of view, the projects will continue to be its business units, so it will appoint its managers,” added this person.

PDVSA has agreed to rely on Chevron for key operational decisions, although legal changes to the partnership’s involvement are not planned in the near term, the people said.

Venezuela’s Oil Minister Tareck El Aissami said this week “the ball is in the US government’s hand” when asked about negotiations with Chevron. “We have discussed and agreed with (Chevron) everything related to the immediate resumption of operations.”

If President Joe Biden’s administration agrees to Chevron’s proposed terms, it could release oil stockpiles Venezuela could not export and solve its shortage of diluents to convert heavy oil to exportable grades.

Chevron would also have more say in the conduct of its operations, which Venezuelan law requires it to operate jointly with PDVSA. The US company would also become the preferred buyer for the projects’ exports, directing barrels to the United States and elsewhere.

hurdles abound

Washington views Maduro’s re-election in 2018 as a sham, and Maduro has branded Venezuela’s opposition as puppets of the United States while remaining in power despite sanctions.

At least one US lawmaker recently asked Chevron for a copy of its PDVSA deal, two of the people said. The US Congress this year rejected any business expansion that could be seen as easing sanctions aimed at ousting Maduro.

Congressional opposition remains a major obstacle to an expanded license for Chevron, though some influential US State Department officials advocate a license that would at least allow trade below the limits initially set by President Donald Trump’s administration, the people said.

State Department officials have kept in touch with Maduro’s envoy over a deal with the country’s opposition, which initially mainly involved negotiating free presidential elections. There has been little progress.

Reporting by Marianna Parraga in Houston. Additional reporting by Deisy Buitrago in Caracas, Timothy Gardner in Washington; Adaptation by Gary McWilliams and David Gregorio

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