By Peter Millard and Lucia Kassai on 11/18/2020

(Bloomberg) –Chevron’s willingness to keep a foothold in oil-rich Venezuela will now be a thorny political issue for President-elect Joe Biden to sort out.

The U.S. Treasury Department extended until June 3 its authorization for Chevron to carry out essential transactions in the country to preserve its assets, from a previous Dec. 1 deadline. Since April, the U.S. oil giant has been barred from drilling wells or selling, buying or transporting crude and oil products in the South American nation.

Chevron has long argued the U.S. benefits from having a producer on the ground in a country that holds the world’s largest crude reserves. But the sanctions imposed by President Donald Trump against Nicolas Maduro’s regime have won bi-partisan support, making it difficult for Biden to change tack.

“Any sign of accommodation from the Biden administration could be interpreted in Venezuela as acceptance of the status quo, and could inadvertently strengthen Maduro’s position,” said Schreiner Parker, the vice president for Latin America at consultancy Rystad Energy.

Over the Edge

Nobody sees Venezuela returning to its glory days as a petrostate, when its crude production rivaled that of Mexico and Iraq, and it supplied more oil to the U.S. than most any other country. Too much has changed in the world for that to happen. The U.S. shale boom flooded global markets and prices plunged from more than $100 a barrel in 2014, long before Trump imposed sanctions.

Relations with the impoverished country, however, remain a hot foreign policy topic.

In Florida, polling during the presidential election was off by wide margins due to higher-than-expected support for Republicans among Latinos, many of whom fled the regimes of the late Hugo Chavez and his successor Maduro. This made it difficult for Democrats to shore up support among the state’s urban voters, a key block for the party in the rest of the country.

Opposition from conservative Latinos didn’t stop the Obama administration from opening up to Cuba, though. Biden has so far been silent on his Venezuela stance.

Maduro has expressed hope for improved U.S. relations after Biden won, but accusations of a legislative power grab also won’t make a potential thaw in relations any easier for the president-elect.

Meanwhile, San Ramon, California-based Chevron has consistently lobbied for extensions to its authorization to operate in Venezuela and was in contact with U.S. officials ahead of Tuesday’s decision, said a person familiar with the company’s outreach efforts, who asked not to be named because they are not authorized to discuss the matter publicly.

Chevron will continue to comply with laws and regulations related to its activities in Venezuela and remains committed to the integrity of its joint venture assets there, Ray Fohr, a spokesperson for the company, said in an email.

Oil production in OPEC-founding member Venezuela fell to 367,000 barrels a day in October, the lowest level seen since the 1940s, according to OPEC data from secondary sources. Sanctions caused partners in oil fields to significantly reduce operations. After Russia’s Rosneft PJSC and China National Petroleum Corp. stopped buying oil from the regime, Maduro has been relying mostly on another sanctioned nation: Iran. Tehran has sent oil, refinery parts and gasoline to Caracas in exchange for payments in gold.

100 Years

Chevron started exploring for oil in Venezuela about a century ago. Its Pascagoula refinery in Mississippi is engineered to handle the heavy oil coming from the field, underscoring the importance of Venezuela in its business model.

Other U.S. majors Exxon Mobil Corp. and ConocoPhillips pulled out of Venezuela when Chavez tore up existing contracts and charged more taxes under a nationalization, but Chevron stuck around and was investing about $700 million a year even after Chavez took over operational control.

The company has spent more than $100 million on social programs in the country in the past 10 years, but its share of production from two Venezuela projects fell 16% in 2019 to 35,300 barrels a day, a fraction of its global output.

Source: World Oil