The U.S. government has given Chevron Corporation until December 1 to close its businesses in Venezuela. Until then, the oil company can only conduct limited activities.
The ultimatum also includes oil services companies Baker Hughes Co. Halliburton Co, Schlumberger NV, and Weatherford International, which can continue activities in Venezuela. However, the four companies have mostly wind down operations there.
The decision was announced by the Department of the Treasury. The measure is part of the Trump administration’s push to unseat Nicolas Maduro, responsible for leading the country to a severe economic crisis, as well as a deep social and political crisis.
El Departamento del Tesoro de EE.UU. extiende la licencia de Chevron Corporation, Halliburton, Schlumberger Limited, Baker Hughes (compañía de GE) y Weatherford International para operar en Venezuela hasta el 1 de diciembre. Más Info: https://t.co/OioQ6vfV6X pic.twitter.com/9B8d33GHom
— Embajada Virtual de los EE.UU., Venezuela (@usembassyve) April 22, 2020
Pressure on oil activity
On January 28, 2019, the U.S. Department of the Treasury imposed strict restrictions on PDVSA operations. The department blocked the Venezuelan company’s properties and assets in U.S. jurisdictions. Similarly, it prohibited transactions between PDVSA and U.S. companies.
Nonetheless, Chevron, Halliburton, and Baker Hughes were granted licenses every couple of months to operate in the country. The most recent license expires in late July. The new extension only allows Chevron to perform the necessary transactions “for the limited maintenance of essential operations in Venezuela or the wind down of operations” by early December.
Thus, Chevron is barred from drilling, sale, and transport of Venezuelan oil, infrastructure work (except for security reasons) and any financial transaction with PDVSA. The Treasury is not directly ordering the company to exit Venezuela, but it is allowing so little activity that it would be untenable to stay.
Chevron’s presence in Venezuela
So far, the exemption enabled Chevron to continue oil production in collaboration with PDVSA and selling Venezuelan crude in international markets. Some U.S. officials justified these exemptions as a way to help Venezuela safeguard its oil infrastructure so that it will not be a burden for a future democratic government. They also said that Russia could fill this void in case Chevron decided to leave the country.
The California-based company holds staked in four O&G joint ventures with PDVSA; which include two of the largest oil fields in Venezuela: Petroboscán, in Zulia, and Petropiar in the Orinoco Belt. Together, these fields generate a fourth of the country’s total crude production.
Last month, Chevron cancelled the companies’ services contracts and purchase processes. It attributed this to the price fall and the fact that production fell by 35,000 barrels per day.
Chevron is the only U.S. company operating in Venezuela. ExxonMobil and ConocoPhillips were kicked out by order of Hugo Chavez. Neither company wanted to accept the established terms to operate as minority partners in mixed companies.
Dpto del Tesoro extiende hasta 1 de diciembre licencia a petroleras para operar en Venezuela. Incluye a Chevron, las compañías Halliburton, Schlumberger, Baker Hughes y Weatherford International. Chevron es la única petrolera que se mantiene en #Venezuela con 8.000 empleados. pic.twitter.com/jPTbgOorcA
— Soy Gente del Petróleo (@soygdelpetroleo) April 22, 2020
Washington has strengthened the sanctions against Venezuela over the past months. The Department of the Treasury recently blacklisted two Rosneft companies for doing business with Venezuela. The Russian oil company accused the United States of having double standards, for allowing U.S. companies to continue working in a joint venture with PDVSA.
U.S. federal prosecutors accused Maduro of narco-terrorism and crimes against humanity. They are offering a $15 million reward for his capture and have threatened with a life sentence. Meanwhile, warships and airplanes from the U.S., the UK, and the Netherlands are guarding Venezuela’s territorial waters to prevent the passage of shipments containing drugs or illegally mined gold.
U.S. officials also revealed plans for a transition government that would hold presidential elections this year, without Maduro’s involvement.
You can read the Treasury’s statement here: