United States: Chevron to Increase Oil Production in Venezuela

The U.S. government has granted Chevron Corp., the second-largest U.S. oil corporation, permission to increase its output in Venezuela and import crude oil from the South American country.

The decision strengthens the protections of the only major American oil corporation still running in Venezuela despite U.S. sanctions. However, it limits the amount of money that can be sent to Venezuela, which may limit the amount of oil that can be exported.

According to U.S. officials, the terms of Chevron’s license are structured to restrict the state-run oil corporation Petróleos de Venezuela, also known as PDVSA, from benefiting financially from the sale of petroleum. The U.S. Treasury has announced that the license is valid for six months and will be automatically renewed each month thereafter.

The California-based business Chevron said in a statement that the U.S. approval “brings added transparency to the Venezuelan oil sector” and will allow it to profit from sales of “oil that is currently being produced” by its joint ventures with PDVSA.

Royalties and taxes on oil exports to the Venezuelan government, as well as in-kind payments to PDVSA, are prohibited by the permit. Additionally, Chevron is prohibited from doing business with any Venezuelan firm that is under Russian influence.

A U.S. official noted that existing sanctions against Venezuela and its leaders would continue to be in effect and that the terms would “require significant reporting by Chevron on financial operations of their joint ventures to ensure transparency.”

“There is not a big incentive in the short term” for Venezuela, said Francisco Monaldi, expert on Latin American energy policy at Rice University’s Baker Institute for Public Policy.

“We’ll see how Maduro’s government reacts to it and how many cargoes will be assigned to Chevron after,” said Monaldi.

Venezuela has the greatest oil reserves in the world at almost 300 billion barrels however is unable to meet its production goals due to underinvestment, poor maintenance, a lack of suppliers, and sanctions from the United States.

Original source material for this article taken from here