The Biden administration on Saturday issued an expanded license to Chevron Corp, allowing it to produce petroleum or petroleum-based products produced by its joint ventures in Venezuela.
Under the agreement, Chevron would regain partial control of its activities in Venezuelan oil fields that it had stakes in through joint ventures with the country’s state-run oil producer, Petroleos de Venezuela SA. The joint ventures were producing about 200,000 barrels a day.
A senior administration official told reporters that the Venezuelan government will not receive any profits under the deal. Chevron will be prohibited from any transactions with Iran or Russian-controlled entities in Venezuela.
The authorization comes after the Venezuelan government and its political opposition announced Saturday plans to implement a $3 billion humanitarian program using funds unfrozen by the U.S.
As part of that agreement, both sides will resume talks next month in Mexico City to develop a framework to usher in political changes, including potentially holding presidential elections by 2024.
The license would restore Chevron’s operations in Venezuela to the levels in place in 2019 before the Trump administration restricted the oil company’s activities there as part of a sanctions campaign to oust President Nicolas Maduro. Before the U.S. halted Chevron’s operations in Venezuela produced about 15,000 barrels of crude oil a day.
It is not a permanent license and would need to be renewed every six months. The U.S. reserves the right to withdraw or amend the license at any time. Chevron’s existing license was set to expire on Dec. 1.
The senior administration official disputed that the move was aimed at lowering soaring energy costs as the U.S. heads into the winter. Instead, the official said, the U.S. was providing sanctions relief because the Venezuelan government was taking “concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy.”
Chevron expanded license “is not something that is going to impact international oil prices,” the official said. “It is about Venezuela and a policy about supporting a peaceful, negotiated outcome to a political, humanitarian, and economic outcome in Venezuela today.”
Still, the license comes just ahead of new sanctions on Russia that will reduce the global oil supply and send prices north. By easing sanctions on Venezuela, the Biden administration appears to be sending a signal to world oil markets that may panic over a potential shortfall.
Venezuela produces about 700,000 barrels of oil per day, up from the 525,000 barrels it produced one year ago. But it is well below its target of producing 1 million barrels a day by the end of 2021 and a significant decline from the more than 3 million barrels per day the country produced in the 1990s.
Still, some Wall Street analysts have predicted that Venezuela could easily produce more than 1 million barrels a day.
But Chevron Chief Executive Mike Wirth cautioned that his company would need months or, possibly years, to refurbish Venezuela’s dilapidated oil fields to resume production.
“It wouldn’t be an instantaneous effect,” he told Bloomberg television about the possibility of resuming oil production in Venezuela.