The Biden administration granted oil giant Chevron Corp. a license to resume oil production in Venezuela after U.S. sanctions halted all drilling activities almost three years ago.
The reprieve coincided with the resumption of talks by Venezuela’s battling political factions on Saturday with a deal to work together on a humanitarian spending plan.
Chevron received a six-month license that authorizes the company to produce petroleum or petroleum products in Venezuela, according to a general license from the US Treasury Department.
The San Ramon, California-based driller is also allowed to resume exports of crude oil that had been been halted since 2019, when the US ratcheted up sanctions against the OPEC producer. In 2020, before the US ordered a complete halt of drilling operations, Chevron’s share of Venezuelan crude oil production was 15,000 barrels a day.
The sanctions relief comes after Norway mediators announced the restart of political talks between President Nicolas Maduro and the opposition this weekend. The return of Venezuela to the negotiation table was a key condition for the easing of curbs on the oil-dependent nation’s crude production.
With the European Union set to ban imports of crude oil from Russia on Dec. 5, the US is seeking to alleviate an energy crisis that has sparked inflation and slowed growth across the globe.
The reprieve doesn’t mean oil production will soar in the short term. It might take “months and years in order to begin to maintain and refurbish fields and equipment and change any investment activity,” Chevron’s CEO Mike Wirth said in October.
Once sanctions are lifted, Chevron’s projects could triple oil production to around 200,000 barrels a day in a period of six months to a year from 150,000 currently, a person with knowledge of the situation said earlier this year.
Oil production in Venezuela has rebounded this year to 679,000 barrels a day but it’s still far from the 2.9 million barrels it produced a decade ago. Output slumped following sanctions and mismanagement of oil fields and refineries under the socialist rules of Hugo Chavez and Maduro.
Previous rounds of talks between Maduro and the opposition have collapsed, most recently in October 2021. Since then, interest in resuming negotiations have gained momentum as Venezuela faces increased competition of Russian and Iranian barrels in Asia, the top destination for its crude production.
Venezuela’s state-owned energy company PdVSA won’t receive dividends from the resumption of oil production and sales by Chevron’s joint ventures, according to the license. Chevron will be prohibited from any transactions with Iran or dealings with Russian-owned or controlled entities in Venezuela.
OFAC’s decision also allows for US service oil providers Halliburton Co., Schlumberger Ltd., Baker Hughes Co. and Weatherford International Plc. to restart work, the Treasury said. The license is valid through May 26, 2023.