Venezuela’s government and Chevron Corp are in preliminary talks to give the company greater control of some operations in exchange for debt relief as the country’s socialist leaders try to increase production despite US sanctions.
The head of Chevron’s Venezuela unit, Javier La Rosa, and the president of state oil company PDVSA, Asdrubal Chavez, have been involved in the discussions, according to two people with knowledge of the matter.
Before any agreement can be reached, however, Chevron would need a special waiver from the US Treasury allowing it to engage in more formal negotiations.
The company is simultaneously requesting the license from the Treasury’s Office of Foreign Assets Control, which oversees foreign sanctions, according to a third person with knowledge of the situation. The four fields Chevron and PDVSA jointly operate produced more than 200,000 barrels prior to sanctions, compared to the current output of 140,000 barrels a day.
“We continue to conduct our businesses in compliance with the current sanctions framework provided by the US Office of Foreign Assets Control,” Chevron spokesman Ray Fohr said in a statement responding to questions. He said the company does not comment on rumors or speculation.
The discussions with Chevron reveal how President Nicolas Maduro’s government is willing to cede parts of its prized oil industry to outside companies as it attempts to increase production to his latest target of 2 million barrels a day.
By using local contractors and importing additives from Iran, the country has managed to more than double output to around 800,000 barrels a day from a seven-decade low it hit in 2020. Foreign companies like Chevron are critical if the country is to pump more.
In one scenario under discussion, PDVSA would keep financial control in joint ventures with Chevron but turn over the operational lead on matters such as contracting, accounting, paying service providers, and technical decisions, according to the people.
In exchange, Chevron would increase its revenue from the ventures and deduct those sales from the more than $3 billion it is owed by PDVSA, the people said.
The debts relate to old Chevron investments and sales it was not able to book due to the sanctions.
The talks began about three months ago, according to one of the people. Chevron and PDVSA regularly hold meetings about business related to their joint operations, which are permitted under the sanctions.
The San Ramon, California-based company is one of few oil majors to keep operations in Venezuela. France’s TotalEnergies SE, Norway’s Equinor ASA and others have mostly pulled out in recent years as conditions in the country deteriorated and the risks of doing business increased due to US economic sanctions first put in place 2017.
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