(Bloomberg) – Chevron Corp. will hand over a percentage of its Venezuelan production to the local government under new terms negotiated after receiving a license to restart operations in the South American nation, according to people with knowledge of the matter.
The deal was signed between the U.S. energy giant and Petroleos de Venezuela in recent days, shortly after Chevron’s private license was issued by the U.S., according to the people, who asked not to be identified discussing a private matter. They said the pact has terms similar to those reached by other foreign energy companies operating there, which also deliver a percentage of their production to the Venezuelan government as payment.
Trump administration officials sought to ensure Chevron paid no royalties or taxes in cash to the government of Nicolás Maduro, while Venezuela sought to see benefit from the driller’s restarted production, the people said. Getting oil instead of cash effectively means Maduro’s regime has another way to get revenue, by selling its portion of the production to other buyers.
See also: Chevron cleared to restart Venezuela oil production
It remains unclear if Maduro will be allowed to export the oil to the U.S. or other markets, the people said.
A State Department spokesman said the US government won’t allow the Maduro regime to profit from the sale of oil. Venezuela’s information ministry declined to comment.
“Chevron conducts its business globally in compliance with laws and regulations applicable to its business, as well as the sanctions frameworks provided for by the U.S. government, including in Venezuela,” spokesman Bill Turenne said in a statement.
Chevron, which has had a presence in the country for more than a century, is the only major U.S. oil company still there, and has been a vital lifeline for its battered economy. The U.S. let its production license expire in May before opening the door again this month.
Following Trump’s re-election, a license authorizing Chevron to produce oil there became a bargaining chip in the country’s relationship with the U.S. Special envoy Ric Grenell and others in the administration pushed for a more transactional relationship with Maduro, while Secretary of State Marco Rubio encouraged a tough stance.
When Chevron lost its license at the end of May, it was pumping about a quarter of the country’s oil, or around 240,000 bpd. Production levels are expected to have remained stable in the past two months as Chevron had recently imported more diluents — a feedstock used help transport tar-like oil in pipelines — before its license expired.
Their recent pivot on Venezuela, restoring Chevron’s production, means the country will be able to sustain oil production of around 900,000 bpd and potentially increase it to 1 million bpd late next year, according to Rapidan Energy. Previously, output was seen falling to as low as 600,000 bpd.
Since the expiry of licenses issued by the U.S. Treasury at the end of May, China had become virtually the only buyer of Venezuelan crude. The Trump administration has previously warned it could apply tariffs to buyers of Venezuelan oil, but thus far hasn’t publicly followed through on that threat.
