Despite sanctions, US firm to keep drilling for oil in Venezuela

The administration of United States President Donald Trump said on Friday that it has renewed Chevron Corp’s licence to drill for oil and gas in Venezuela despite sanctions, signalling that it sees value in having the US oil producer operate in a country on the verge of economic and political collapse.

The US Department of the Treasury said it renewed the licence for three months for Chevron, the last US oil company operating in Venezuela, which is a member of the Organization of Petroleum Exporting Countries (OPEC). The licence runs through October 25, 2019.

“Our operations in Venezuela continue in compliance with all applicable laws and regulations,” Chevron spokesman Ray Fohr said in a statement.

The US imposed heavy sanctions on Venezuela early this year in an effort to force out socialist President Nicolas Maduro. Washington supports opposition leader Juan Guaido, the head of the National Assembly.

In January the administration imposed sanctions on Venezuela’s state-run oil company PDVSA that have cost Maduro’s government billions of dollars in oil assets, but issued Chevron a six-month licence to keep its operations going.

Chevron has four joint ventures with PDVSA that produce the equivalent of about 200,000 barrels per day (bpd) of oil, and its stake in the ventures recently produced about 40,000 bpd. The company, which has been in Venezuela for nearly a century, says there are about 8,000 employees, contractors and direct suppliers involved in these ventures.

The renewal of the licence was a win for US Secretary of State Mike Pompeo and others in the Trump administration who believe that having a US company in Venezuela would be an asset after any removal of Maduro and would help the country’s oil-dependent economy recover more quickly.

US National Security Advisor John Bolton, who has pushed for maximum pressure on Venezuela, had favoured letting Chevron’s licence expire in the hope that it would tighten the noose on Maduro’s leadership by leading to another dip in the country’s energy production.

The Treasury Department also renewed licences for three months for oil-field service companies Halliburton Co, Schlumberger Limited, General Electric’s Baker Hughes and Weatherford International. All have largely halted operations in Venezuela because of the instability there.

A US State Department spokesperson said the licence had been extended for the five companies, adding that “the limited scope of the licence is intended to facilitate U.S. oil companies in abiding by their contractual obligations, maintaining their operations assuming they choose to do so, and avoiding economic harm to the United States.”

The spokesperson added that Washington “will continue to take appropriate action against Maduro and those aligned with him”.

As of July, Venezuela’s oil output was just 734,000 bpd, about half of what it averaged in 2018, prior to US sanctions, when production was 1.4 million bpd, according to OPEC figures.