Caracas, Venezuela, May 25, 2022 (venezuelanalysis.com) - The US Treasury Department is reportedly set to renew oil corporation Chevron's license in Venezuela adding limited sanctions exemptions.
According to Reuters, the Treasury's Office of Foreign Assets Control (OFAC) is weighing issuing a license by June 1 with some of the conditions Chevron had during 2020, which allowed certain drilling, processing or shipping operations involving Venezuelan oil.
A source close to the negotiations said that the extended sanctions waiver is yet to be approved, with the possibility of Chevron keeping its current minimal license also on the table.
Last week, senior US officials speaking anonymously to reporters announced that the Biden administration had authorized the oil giant to negotiate its license and "the terms of potential future activities in Venezuela" with Venezuelan state oil company PDVSA. The potential relaxation of restrictions would likewise include allowing European oil companies to negotiate the import of Venezuelan crude to Europe amidst scarce energy supplies and skyrocketing fuel costs.
The announcement was confirmed by Venezuelan Vice President Delcy Rodriguez who hoped that the preliminary measures would "pave the way for the total lifting of the illegal sanctions."
In efforts to oust the Nicolas Maduro government, the US Treasury Department imposed financial sanctions against PDVSA in 2017 followed by a full-fledged oil embargo in 2019 and subsequent secondary sanctions. The measures crippled Venezuela's oil industry as foreign companies were forced to abandon their joint ventures and trade deals with PDVSA sending output to historic lows of less than 500,000 barrels per day (bpd) by the end of 2020.
Since then, Chevron was the only international oil firm to secure a sanctions waiver to continue working in some capacity in its four joint ventures in western and eastern Venezuela, including the PetroPiar crude upgrader. However, in April 2020 the Treasury Department ordered Chevron to wind down operations and limited its license to essential work for the preservation of its assets in the South American country. Last year, the license was extended until June 2022.
In early 2021, Chevron began lobbying US officials to obtain a broader license and take control of oil projects in Venezuela in order to collect PDVSA's US $3 outstanding billion debt. While the company had made some inroads, it was the ban on Russian oil imports in March 2022 following the Ukrainian war which led to the current possibility of sanctions relief. Caracas used to export approximately 500,000 bpd to American refineries until the 2019 embargo.
For its part, the Venezuelan government has repeatedly called for the complete removal of unilateral coercive measures against its oil industry which at one point pulverized 90 percent of the country's foreign income. The sanctions have exacerbated a previous economic crisis and created acute gasoline and diesel shortages.
However, with sanctions relief far from materializing, Venezuela began recovering oil production by ramping up cooperation with Iran through an oil-for-condensate swap deal signed in September 2021. The lighter crude has allowed PDVSA to blend its extra-heavy crude into exportable grades, boosting output and exports. The latest OPEC monthly report placed the Caribbean nation's April production at 707,000 bpd, measured by secondary sources.
Additionally, the Middle Eastern ally has played a key role in tackling fuel scarcity by sending fuel shipments while also supplying materials and expertise to kickstart several refineries throughout 2020.
In early May, Iranian Oil Minister Javad Owji met with President Maduro in Caracas to discuss energy deals. Soon after, the allied nations expanded the crude-for-condensate swap agreement to add the supply of Iranian heavy crude in order to feed refineries and increase fuel production. On May 23, the first tanker carrying one million barrels of heavy crude arrived in Venezuelan waters.
Owji's visit was likewise followed by the announcement of the state National Iranian Oil Refining and Distribution Company (NIORDC) reportedly signing a 110 million deal ($116 million) with PDVSA to bring the 146,000 bpd El Palito refinery in Carabobo state to full capacity.
According to Reuters, Iranian state firms are now negotiating another contract to restore the Amuay and Cardon refineries which form the 955,000 bpd-capacity Paraguana Refining Complex in Falcon state, the largest in the hemisphere.
"They [Iranian officials] have been very focused on preparations, including housing for the workers," said one of the people involved in the talks. The Paraguana complex is currently operating at just 17 percent of capacity, as stated by independent estimates.
Nonetheless, efforts to recover the country's oil facilities have been constantly plagued by numerous accidents and alleged sabotage acts. On Tuesday, President Maduro denounced new terrorist attacks against the Cardon and El Palito refineries as well as the country's main electricity generator, the Guri Dam, located in Bolivar state.
"Our refineries are under attack by infiltrated enemies to harm our refining network, to harm our people. Behind this is the savage right-wing [sector] and the plans of Ivan Duque", said Maduro pointing the finger at his Colombian counterpart, who he has accused on several occasions of financing sabotage against Venezuela's infrastructure.
Venezuelan Oil Minister Tareck El Aissami said the attacks did not compromise fuel production.
Edited by Ricardo Vaz in Caracas.
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Andreina Chavez Alava | source: venezuelanalysis