US Renews Chevron License as European Refiner Cuts Venezuela Ties over Sanctions

Finnish-Venezuelan refiner Nynas is one of PDVSA’s few remaining cash buyers.

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Chevron produces around 200,000 bpd in several joint ventures with Venezuela’s PDVSA. (Daniel Acker / Bloomberg)
Chevron produces around 200,000 bpd in several joint ventures with Venezuela’s PDVSA. (Daniel Acker / Bloomberg)
By Lucas Koerner
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Philadelphia, October 23, 2019 (venezuelanalysis.com) – The US Treasury Department has allowed Chevron to continue its operations in Venezuela for a further 90 days.

One of the few remaining US petroleum companies still in Venezuela, Chevron currently produces around 200,000 barrels per day (bpd) in several joint ventures with Venezuelan state oil company PDVSA. The California-based energy giant had its Treasury-issued sanctions waiver extended on Monday.

The Trump administration imposed an oil embargo in January, barring dealings with Venezuela’s oil sector, including US imports of Veneuzelan crude, which then stood at 586,000 bpd. At the time, Chevron was issued a six-month license to wind down its Venezuela operations, which was renewed in a last-minute late July decision after months of lobbying. Other beneficiaries of the renewal are Haliburton, Schlumberger, GE’s Baker Hughes, and Weatherford International.

The license does not cover sales of diluents to PDVSA, which were outlawed by the Treasury Department in June. Venezuela relies on imports of diluents to blend its heavy crude into exportable grades, as well as produce gasoline and diesel for internal consumption.

Venezuela’s oil production has plummeted over the past two years since the US began imposing economic sanctions. According to OPEC secondary sources, output fell to just 644,000 bpd in September, down from an average of 1.911 and 1.354 million bpd in 2017 and 2018, respectively.

Caracas has scrambled to find new crude buyers, reportedly selling shipments to Russian state energy company Rosneft which then reroutes them to other customers. PDVSA has also moved to convert its heavy petroleum upgraders into blending facilities so as to produce lighter Merey grade crude favored by Asian markets.

In August, Washington upgraded its sanctions regime to a general embargo, prohibiting all US dealings with the Venezuelan state and its associated entities as well as authorizing secondary sanctions against third party actors.

The Trump administration has been reluctant to renew Venezuela operating licences, insisting on the need to deprive the Maduro government of export revenues in the hope of removing it from power. Venezuela depends on oil sales for over ninety percent of its hard currency earnings, which it uses for vital imports of food, medicine, and all classes of inputs.

Despite opting to greenlight Chevron’s operations for three additional months, the Treasury Department moved last week to modify the license of a European refining company prohibiting new purchases of Venezuelan crude.

Jointly owned by PDVSA and Finland’s Neste Oil, Nynas AB operates speciality refineries in Sweden, Germany, and the UK geared mainly towards asphalt production.

Under the terms of the new license, Nynas is authorized to sell Venezuelan oil or petroleum products already in inventory but is barred from making new purchases.

Nynas is one of only two remaining buyers of PDVSA’s lighter, Western-sourced crudes following Washington’s ratcheting up of sanctions this year, which have led most cash-paying customers to cut ties with the Venezuelan state oil firm.

Reuters reports that the move could lead Petrozamora, a Venezuelan-Russian joint venture in the western border state of Zulia, to cut production by 50,000 bpd in order to avoid overflowing oil stocks.

With additional reporting by Ricardo Vaz from Caracas.

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