The Biden Administration is preparing to give Chevron a license to pump oil again in Venezuela, news organizations reported on Wednesday, in what appears to be a coordinated news leak.
The policy would lead to other oil companies restarting business with Venezuela in response to the tensions with Russia, and the U.S. and Europe embargo on Russian energy, including oil, gas, and coal.
If the permit goes forward, Chevron would regain partial control of its mothballed oil-production and other facilities in the underproducing Venezuelan oil fields, where it still maintains a stake along with partner Petróleos de Venezuela SA, the state-owned oil company, according to the Wall Street Journal. It wouldn’t make additional investments in Venezuela until certain debts are repaid, the newspaper reported.
PDVSA, the government-owned company, owns the majority stakes in Chevron’s four onshore joint ventures in the country. Under the Trump administration, the company and others were banned from drilling or transporting oil from Venezuela, as Trump cracked down on money going to the corrupt government of socialist President Nicholas Maduro.
“Granting the new license is contingent on the Venezuelan government and its political opponents’ announcement, expected Saturday, to implement a $3 billion humanitarian program using Venezuelan funds unfrozen by the U.S. as well as an agreement to resume talks in Mexico City next month on resolving the country’s political crisis through free and fair elections, people familiar with the matter said. The talks would quickly set in motion U.S. authorization for Chevron’s return to Venezuela’s oil fields,” according to the Journal report, which cited unnamed sources familiar with the plan.
Chevron was the last major US oil company operating in Venezuela. It applied for permits to begin pumping oil again in early summer, with most of the oil destined to head to Europe, where energy supplies are low.
“Between the 25th and 26th of November, the dialogue between the [Venezuelan] Maduro government and the Venezuelan opposition will restart,” Colombian President Gustavo Petro wrote Wednesday on Twitter.
Oil from Venezuela is not top quality. It’s considered to be dirty oil, unlike oil from Alaska’s North Slope, where strong environmental standards are rigorous. Earlier this year, the Biden Administration cancelled drilling sales in Alaska and the Gulf of Mexico, saying there was a lack of interest among bidders. Instead, the administration is looking to socialist countries offering dirty oil.
The oil from Venezuela is In 2017, Reuters wrote that Venezuela’s state-run oil company was increasingly delivering poor quality crude oil to major refiners in the United States, India and China, resulting in repeated complaints, canceled orders and demands for discounts.
The disputes involved oil that was contaminated with high levels of salt, water, and metals, all of which cause refineries problems, Reuters wrote.
Quality issues stem from “shortages of chemicals and equipment to properly treat and store the oil, resulting in shutdowns and slowdowns at PDVSA production facilities, along with hurried transporting to avoid late deliveries, the sources said,” Reuters reported.
U.S. refiner Phillips 66 canceled at least eight crude cargoes because of poor oil quality in the first half of 2017 and demanded discounts on other deliveries, according to the PDVSA documents and employees from both firms. The canceled shipments – amounting to 4.4 million barrels of oil – had a market value of nearly $200 million, Reuters reported.
“Another key buyer of Venezuelan crude – India’s Reliance Industries Ltd RELI.NS, operator of the world’s largest refinery – has repeatedly complained about oil quality, a PDVSA employee told Reuters. State-run firm China National Petroleum Corp (CNPC) also complained earlier this year about excessive water levels in oil cargoes, a former PDVSA employee said,” Reuters wrote.
It’s not just the Venezuelan oil that is dirty. Oil spills in Venezuela between 2020 and 2021 have caused serious damage to the environment, according to the Venezuelan Academy of Physical, Mathematical and Natural Sciences. Some 26,730 barrels of oil spilled on the the northwest coast, polluting the national park Morrocoy.