Chevron’s 100-year-long relationship with Venezuela could end today
The fate of Chevron’s nearly century-long relationship with Venezuela could be decided at any moment.
Chevron, the last major US oil company still operating in Venezuela, will be forced to leave the OPEC nation if the Trump administration decides not to extend sanctions waivers. A decision on the waivers, which expire on Saturday, is coming down to the wire. An announcement could come as soon as Friday.
A retreat from Venezuela would deal a financial and emotional blow to Chevron, which has spent decades sinking resources into the nation. Venezuelan President Nicolas Maduro could even seize Chevron’s assets by nationalizing them.
And a forced exit by Chevron would only deepen the historic decline of Venezuela’s oil industry, which is already grappling with a humanitarian crisis, infrastructure nightmares, tough US sanctions and gross mismanagement.
“Chevron’s legacy in Venezuela dates back to the 1920s. We hope to continue our long history in country,” Chevron said in a statement.
The company added that it “remains hopeful” that the Trump administration will renew its General License 8, the waiver that allows the company to continue to operate in Venezuela despite US sanctions against PDVSA, the national oil company.
Chevron, one of the leading private oil companies in Venezuela, supports more than 8,000 people in the crisis-stricken country. The company produced an average of 40,000 barrels of oil and natural gas in Venezuela during the first quarter.
Subdued oil prices may give the Trump administration extra leeway to crack down further on Venezuela without fear of causing a spike in gasoline prices at home. Despite elevated tensions between the United States and Iran, oil prices have been under pressure from robust production from West Texas, the heart of the US shale oil boom.
Earlier this week, Venezuelan opposition leader Juan Guaido pledged on Twitter to protect Chevron’s assets in Venezuela if US officials don’t renew the license. While Washington and other Western capitals have recognized Guaido as Venezuela’s legitimate leader, he has little power to enforce that pledge given that Maduro remains in charge.
In January, US President Donald Trump imposed punishing sanctions on PDVSA in an effort to force Venezuelan President Nicolas Maduro from power. Those sanctions prohibited American companies from doing business with the national oil company.
However, the US Treasury Department later granted six-month waivers to Chevron and five oil services companies: Halliburton, Schlumberger, Baker Hughes and Weatherford International. Those licenses, scheduled to expire on Saturday, give the companies permission to conduct transactions and activities with PDVSA.
The Treasury Department did not immediately respond to a request for comment
If the Trump administration decides not to extend the waivers, Chevron would have little choice but to halt the five onshore and offshore production projects it has in Venezuela with PDVSA. It is possible that officials will allow Chevron several months to wind down those operations.
Chevron would join a long list of American companies that have exited Venezuela for various reasons.
ExxonMobil and ConocoPhillips left Venezuela years ago following the nationalization of foreign-run oilfields by former Venezuelan President Hugo Chavez. More recently, Pepsi wrote off its business in Venezuela in 2015 and took a $1.4 billion loss. Mondelez, Bridgestone, Colgate and Kimberly-Clark have also shut down their Venezuela operations.
Venezuela represents a very small chunk of Chevron’s total production, which climbed to 3 million barrels per day during the first quarter. Still, leaving Venezuela would cause a loss of earnings for Chevron and likely force the company to write down at least a portion of the value of its assets there.
