Chevron in Venezuela: Oil Truths and Facts Amid Russia-Ukraine Confrontation

By Yoselina Guevara  – Mar 25, 2022

On Thursday, March 24, various news outlets published the false news that the oil company Chevron had received a special license from the US Secretary of State Anthony Blinken to continue operating in Venezuela.  Obviously this is not true. The truth is that according to General License No. 81 issued by the Office of Foreign Assets Control of the U.S. Treasury Department, not only Chevron Corporation but also Halliburton, Schlumberger Limited, Baker Hughes Holdings LLC, and Weatherford International may work in Venezuela from November 24, 2021 to June 1, 2022. Said document is very explicit, it says textually that it authorizes  Transactions Involving Petróleos de Venezuela, S.A. (Pdvsa) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Closing of Operations in Venezuela for Certain Entities.

(a) Except as provided in paragraphs (c) and (d) of this general license, all transactions and activities prohibited by Executive Order (E.O.) 13850 of November 1, 2018, as amended by E.O. 13857 of January 25, 2019, or E.O. 13884 of August 5, 2019, each as incorporated into the Venezuela Sanctions Regulations, 31 CFR part 591 (the VSR), that are ordinarily incident to and necessary for the limited maintenance of essential operations, contracts, or other agreements, that: (i) are for the security or preservation of assets in Venezuela; (ii) involve PDVSA or any entity in which PDVSA owns, directly or indirectly, an interest of 50 percent or more; and (iii) were in effect before July 26, 2019, are authorized until 12:01 a.m. Eastern Time, June 1, 2022, for the following entities and their subsidiaries.

In this regard, so far from the United States no document has been issued to repeal this License No. 81, according to the US Treasury Department’s website.

RELATED CONTENT: Chevron Asks US Government for License to Expand Operations in Venezuela

Delegation visit from Washington
All this wave of rumors arose from the visit of a U.S. delegation to Caracas at the beginning of March, which was received by President of Venezuela, Nicolás Maduro Moros. Surprisingly, direct representatives of the government of Joe Biden met with authorities of a country on which 524 sanctions have been imposed, blocking it economically and financially worldwide, against whom the White House tried to force a change of government by supporting the installation of a false and illegal presidency under the figure of self-appointed Juan Guaidó, through whom they have committed a number of thefts and abuses against the Venezuelan people.

How is it possible that countries that only a few months ago were considered rogue states by the West, now return to the circle of those accepted by the hegemonic powers? The answer is clear: Washington has sanctioned Russian oil, an unsustainable measure in the medium term without putting at stake the oil and gas of other countries and evidently these American steps in light of what is happening in Ukraine, is nothing more than a move against Russia. This may be a ploy to try to distance Putin from his main allies in Latin America, in the midst of the uncertainty about the future of the Russian economy that the United States is generating with the sanctions on Moscow.

Russian oil data in the United States
U.S. market has been the main destination for Venezuelan crude oil for years. But since Caracas has been subject to U.S. sanctions, Russian oil has begun to play an important role for Washington. Since the 1990s, trade relations with Russia in that sector grew to a peak in 2011 (624 thousand barrels per day), boomed in 2019 when another wave of sanctions on Venezuelan oil forced Washington to increase imports from Moscow.

Although Russia has come to occupy the third place, behind Canada and Mexico, in terms of volumes of oil exported to the United States, on an absolute level the figure cannot be defined as significant: in 2021, the United States imported from Russia an average of 672 thousand barrels of oil per day (less than 8% of total imports), compared to a daily consumption of about 20 million barrels. US purchases of Russian oil accounted for 3.2 percent of its total imports, some four billion 714 million dollars, of which 91.5% were concentrated in six states: California (20%), Washington (16.4%), Texas (16.1%), Pennsylvania (15.3%), Louisiana (12.2%) and Delaware (11.4%).

But Russian oil plays an important role from a cost-cutting standpoint. A 1920 US federal law, the Jones Act, stipulates that only ships built in the United States and manned mostly by US citizens can be used for domestic maritime trade. Because of this law, transporting oil from Gulf Coast refineries (in states such as Texas, Florida, etc.) is often so costly for companies located far from major pipelines that it is cheaper to import from abroad, including from the Russian Federation.

As a consequence of the recent blockade of imports from Russian energy sources, the United States may be forced to import crude oil from new markets (probably West Africa or the North Sea), paying a higher price due to longer transportation times; this is a factor through which Venezuela could come into play.

Rising prices
But beyond the deficit that this reduction in the purchase of Russian oil may cause to the US market, the real problem is generated by prices that are increasingly approaching $130 per barrel, as buyers are avoiding Russian crude.

Energy market analysts warn that prices could rise to $160 or even $200 per barrel if buyers continue to shun Russian crude. That trend could push U.S. average gasoline prices above $5 per gallon, a scenario that Biden and other political figures are desperate to avoid, hence the quest to stabilize oil markets. With the announcement made by President Putin on Wednesday, March 23, regarding the payment of energy supplies in rubles, oil prices soared, for this Friday, March 25. Brent was at 118.21 dollars per barrel and WTI at 111.09 dollars. With the course of actions in Ukraine, the price variation is not predictable.  

RELATED CONTENT: OPEC Advises EU Not to Ban Russian Oil Imports, Warns of Price Instability

Venezuelan oil production
However, although Venezuela is once again positioning itself as a key player at a geopolitical level, due to its location and the amount of oil reserves it possesses (around 303,800 million barrels), the problem continues to be oil production, which has been strongly hit by US sanctions and is still at low levels. The solution to this problem, according to oil expert Einstein Millán, would be an investment of about US$ 12.2 billion per year to be focused on the recovery of the Venezuelan energy industry. Millán estimates that with this figure Venezuela’s production could be increased by the end of 2022 between 1,500,000 and 1,700,000 BPD and -by 2023- a projection of 2 million BPD; but this is an investment that can only be made by foreign capital.

Lifting of sanctions against Venezuela
The key would be lifting US sanctions, especially on the Venezuelan oil industry. This would allow companies such as Chevron Corporation to benefit from this easing of the blockade and obtain new exploitation licenses in Venezuelan territory, as well as commercialization abroad. At the regional level, Colombia is especially concerned about a possible opening from Washington to the Venezuelan government. The reduction of the scope of the sanctions would be conditioned to certain demands from the U.S. side, such as the guarantee of “free” elections, according to U.S. interference, and the release of the so-called “political” prisoners, in addition to other requests. For now it is not known if the negotiations between both actors continue or will continue, but given the complex situation in Ukraine, it is most likely that there will be a softening on the part of Washington towards Caracas, hopefully it will not be within the framework of a world war conflict.


Featured image: PDVSA/PetroPiar facilities. PetroPiar is the joint venture where Chevron is the second majority shareholder. File photo.


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Yoselina Guevara
Website | + posts

Venezuelan professor. Correspondent for Correo del Alba Magazine in Europe. Her articles have been published in Spanish, Italian and English by different news outlets in Europe (Rebelión, Ideología Socialista, Libya 360, etc) as well as in Latin America (Cubadebate, Redh-Cuba, Redh-Argentina, Portal Alba, Transformar Argentina, Resumen latinoamericano in English, Orinoco Tribune, Quinto Poder Argentina, etc).


Yoselina Guevara

Venezuelan professor. Correspondent for Correo del Alba Magazine in Europe. Her articles have been published in Spanish, Italian and English by different news outlets in Europe (Rebelión, Ideología Socialista, Libya 360, etc) as well as in Latin America (Cubadebate, Redh-Cuba, Redh-Argentina, Portal Alba, Transformar Argentina, Resumen latinoamericano in English, Orinoco Tribune, Quinto Poder Argentina, etc).