(Argus, 17.Jan.2020) — Washington will allow Chevron and four US oil field service providers to continue operating in Venezuela until 22 April by granting a fourth waiver late yesterday from US sanctions imposed almost a year ago on the Opec country.
The US Treasury Department sanctions enforcement arm, the Office of Foreign Assets Control (OFAC), renewed Chevron’s license to remain in Venezuela for another 90 days ahead of the 22 January expiry of its current authorization. Also granted another reprieve are US services giants Halliburton, Schlumberger, Baker Hughes and Weatherford.
Venezuelan opposition leader Juan Guaido’s ability to maintain a tenuous claim to the country’s interim presidency in place of Nicolas Maduro was a key factor in this decision.
The US has justified the waiver on the need to preserve Venezuela’s ailing oil industry for a future democratic government. Opposition officials have also indicated their support for Chevron to remain, as they see the firm as a key future partner under the post-Maduro administration they hope to install.
In response to the White House decision, Chevron reiterated that it is a “constructive presence in Venezuela” where its operations support more than 8,800 workers and their families. “Our operations continue in compliance with all applicable laws and regulations,” the company said.
US supporters of an extension argue that Chevron’s withdrawal would only open the door for deeper Russian and Chinese participation in the oil industry. But the late-evening sanctions waiver extension ahead of a long holiday weekend in the US points to some brewing discomfort with Chevron’s exemption, especially after the US major’s PetroPiar joint venture with Venezuelan state-owned PdV recently resumed valuable heavy crude upgrading operations and synthetic crude exports.
In early January, Guaido beat back an attempt by the Maduro government, supported by Russia, to displace him as head of the National Assembly, a position that underpins his claim to the interim presidency that is recognized by the US and dozens of other Western countries.
But Maduro retains control of the government and armed forces despite the imposition of US financial and oil sanctions, stifling early hopes in Washington for a quick transition to democratic government in the heady aftermath of Guaido’s 23 January 2019 declaration of an interim presidency.
US officials concede they underestimated Maduro’s staying power, but pledge to keep the sanctions regime in place with the goal of forcing him out of power.
PdV has stabilized oil production after it plunged to just 650,000 b/d around September 2019 because of a sanctions-related export backlog that PdV was able to clear partly by shifting cargoes to Cuba, its close political ally. Venezuela exported at least 730,000 b/d of crude in the first half of January, including a cargo of medium-quality syncrude from PetroPiar lifted by Chevron.
Citgo shielded from creditors, for now
In a win for the Guaido-led opposition, OFAC separately decided to continue ringfencing PdV’s US refining arm Citgo from potential takeover by holders of a PdV 2020 bond by extending for another three-month period – also until 22 April – a prohibition on their right to seize 50.1pc of Citgo for missed principal and interest payments. The US administration hoped its action would facilitate negotiations between bondholders and Guaido’s debt restructuring team. But Guaido’s shadow administration, which has effective control over Citgo but no authority over its parent company PdV or direct access to Citgo revenue, instead defaulted on $842mn in principal and $72mn in interest on 27 October and asked a US court to declare the debt invalid.
By Haik Gugarats ***