Chevron reportedly in talks with PdVSA

Chevron has reportedly entered into talks with Venezuela’s national oil company (NOC) PdVSA over the US major’s aim to gain more control over its upstream assets in the South American state. Reports of the discussions have come to light as Venezuela seeks to increase oil production, even though it remains subject to US sanctions.

Caracas has little hope of pushing crude output up to the target level of 2mn barrels per day (bpd) unless it teams up with foreign private companies. However, US sanctions on the Venezuelan oil sector are a significant obstacle to investments in production.

Although Chevron has been active in the South American state for decades, it has had to ramp down most of its operations in response to the imposition of trade restrictions. To revive its business in Venezuela, the company would require a special waiver from the US Treasury.

It does not need to take any such steps for the ongoing exploratory talks, as these are permissible under US law. However, the waiver would be required if the parties began formal discussions on conducting business in the Latin American country.

Chevron spokesman Ray Fohr acknowledged these requirements, saying last week that the company “[continues] to conduct our businesses in compliance with the current sanctions framework provided by the US Office of Foreign Assets Control [OFAC].”

Should a deal based on the ongoing talks be reached, Chevron stands to obtain greater control over its upstream assets in Venezuela in exchange for debt relief. The US major owns minority stakes in four joint ventures with state-owned PdVSA, with shares ranging from 25% to 39%. Under Venezuelan law, foreign companies are permitted a maximum ownership stake of 49.9%.

Since the imposition of US sanctions on the oil sector in early 2019, Chevron is one of the few foreign companies to continue conducting business in Venezuela. France’s TotalEnergies and Norway’s Equinor are among the companies that have withdrawn from the country operations since then.

With US companies barred from conducting business in Venezuela, Chevron’s activities have been effectively frozen in the South American state since April 2020. The US major is prohibited from collecting revenue or expanding its investments in the country.