(Bloomberg) -- The Biden administration granted Chevron Corp. a license to resume oil production in Venezuela after US sanctions halted all drilling activities almost three years ago.
The reprieve followed the resumption of talks by Venezuela’s political factions on Saturday with a deal to work together on a humanitarian spending plan.
Chevron received a six-month license from the US Office of Foreign Assets Control, OFAC, that authorizes the company to produce crude oil and petroleum products in its projects in Venezuela, according to a general license from the US Treasury Department. While no new drilling is authorized, the company will be able to repair and do maintenance of oil fields.
In 2020, before the US ordered a complete halt of drilling operations, Chevron’s share of Venezuelan crude oil production was 15,000 barrels a day, less than the production of a single oil field in the Permian.
The San Ramon, California-based driller is also allowed to resume crude exports that were halted since 2019, when the US ratcheted up sanctions against the OPEC producer. All exports should go to the US and the company will be allowed to import feedstocks, including diluents used to bolster crude production, from the US.
“OFAC’s decision brings added transparency to the Venezuelan oil sector,” said a Chevron representative in an emailed statement. “The issuance of General License No. 41 means Chevron can now commercialize the oil that is currently being produced from the company’s Joint Venture assets.”
The sanctions relief comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition this weekend. The return of Venezuela to the negotiations was a key condition for easing curbs on the oil-dependent nation’s crude production.
Read more: Venezuela to Restart Opposition Talks, Hoping US Eases Curbs
The license should do little to alleviate an energy crisis that has sparked inflation and slowed growth across the globe, but advances the political agenda with aim to set conditions for Venezuela’s 2024 presidential elections.
It might take “months and years in order to begin to maintain and refurbish fields and equipment and change any investment activity,” Chevron Chief Executive Officer Mike Wirth said in October. For some, Chevron’s projects with PDVSA, including the Venezuela state-owned company’s share, could increase production to around 200,000 barrels a day in a period of six months to a year, a person with knowledge of the situation said earlier this year. The joint ventures produced around 50,000 barrels a day as recently as 2020, according to Bloomberg calculations of company data.
Oil production in Venezuela has rebounded this year to 679,000 barrels a day, far less than the 2.9 million barrels produced a decade ago. Output slumped following sanctions and mismanagement of oil fields and refineries under the socialist rules of Hugo Chavez and Maduro.
Previous talks between Maduro and the opposition collapsed, most recently in October 2021. Interest in resuming negotiations have gained momentum as Venezuela faces increased competition of Russian and Iranian barrels in Asia, the top destination for its crude.
Venezuelan state-owned energy company PDVSA won’t receive profits from the sale of oil as proceeds will go toward repayment of old debt to Chevron. The US company will be prohibited from any transactions with Iran or dealings with Russian-owned or controlled entities in Venezuela.
OFAC’s decision also allows for US service oil providers Halliburton Co., Schlumberger Ltd., Baker Hughes Co. and Weatherford International Plc. to continue certain work in the country, the Treasury said. The license is valid through May 26, 2023.
--With assistance from Eric Martin and Amy Stillman.
(Corrects production of Chevron projects in joint ventures with PDVSA in ninth paragraph and clarifies the decision for US oil service providers in last paragraph.)
©2022 Bloomberg L.P.
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