Chevron will transfer part of the oil it produces in Venezuela to the Maduro government, Bloomberg has reported, citing unnamed sources. The deal follows the U.S. granting a sanction exemption to the supermajor so it could continue operating in Venezuela.
The terms of the deal are similar to those of other international oil majors operating in Venezuela, Bloomberg’s sources said, notably paying royalties in the form of crude. Chevron specifically was banned by the U.S. federal government from making any cash payments to the Venezuelan government. It was a condition for the license to return to Venezuela.
The U.S. government has made it clear it wants to prevent the Venezuelan government from reaping any financial benefit from the country’s oil wealth, but this has proved difficult, since U.S. refiners are sizable buyers of Venezuelan crude and the chief reason why Chevron was granted that sanction exemption. Last year, imports of Venezuelan crude in the U.S. hit peaks of some 300,000 barrels daily, per data from Kpler.
Before it had the sanction door slammed in its face earlier this year, Chevron was producing some 240,000 barrels daily in Venezuela. This supply is now set to return to the market, with ING noting this will happen gradually over the second half of the year, with the suggestion that prices for heavy crude grades are set to suffer a negative impact from this return.
With a portion of this now going to the Venezuelan government, it would betray the purpose of Washington’s condition since thus oil can be sold abroad at a profit. However, trying to prevent any form of benefit for the state of Venezuela from Chevron’s business activities in the country would likely trigger retaliation from the Maduro government, leading to the loss of these business activities and important barrels of heavy crude for Gulf Coast refiners.
By Irina Slav for Oilprice.com
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