Oil Giants Look to Venezuela as Politics Remain Cloudy

As the U.S. eases sanctions on Venezuela, geopolitical powers are eying the South American nation's energy resources, especially as Russia continues to withdraw its hydrocarbons from certain markets. Recent comments from Chevron Corporation (NYSE:CVX) (San Ramon, California) and a visit by the head of leading Russian oil company Rosneft underscored Venezuela's growing potential on the world stage.

Igor Sechin, the president of Rosneft, and Venezuela's Oil Minister Tareck El Aissami met this week in Caracas. Rafael Telleche, the president of Venezuela's state-owned energy company Petroleos de Venezuela (PDVSA), and Alexander Khramov, the general director of Russian oil company Roszarubezhneft, also were present to discuss Venezuela's energy future and the possible use of technology sharing to increase efficiency and productivity.

Rosneft left Venezuela in March 2020 due to possible U.S. sanctions. As a result, Roszarubezhneft took over Rosneft assets in the South American country.

"We are going to continue complementing our potential in oil and gas," El Aissami said in a statement released by PDVSA. "We have defined a work agenda to increase crude oil production and advance new business opportunities."

Russia is part of five joint ventures in Venezuela: Petromonagas, Petromiranda, Petrovictoria, Boqueron and Perija. It was not mentioned in PDVSA's statement if Rosneft's possible return to Venezuela was discussed during this meeting.

During Chevron's recent investors' day, Chief Executive Officer Mike Wirth said the company's oil production across its joint ventures in Venezuela was slightly higher than 90,000 barrels per day (BBL/d). Chevron, the last U.S. major operating in Venezuela, was granted a license by the U.S. government to rekindle its operations in the country, despite sanctions. Since then, Chevron said that its production has increased from 50,000 BBL/d.

Wirth acknowledged Chevron is keeping an eye on Venezuela's political outlook, as it likely will influence the next steps in U.S. policy: "We have got questions about elections coming up, and other things. I would expect us to go slow, and we'll update you as we move along, but I wouldn't think of that as a real growth part of the portfolio until we've seen some more progress."

Since late last year, the U.S. has been easing some sanctions on Venezuela by allowing European giants Eni SpA (Rome, Italy) and Repsol S.A. (Madrid, Spain) to import Venezuelan oil, Chevron to restart operations, and Trinidad and Tobago to resume operations at Venezuela's offshore Dragon field.

But that trend might be coming to an end. Last week, Jose Fernandez, the U.S. Under Secretary for Economic Growth, Energy and the Environment, told Reuters during the CERAWeek conference, "I can categorically say that we don't have any plans to liberalize further on Venezuela. ... In this moment, there are no plans to ease the sanctions more."

Any further U.S. action on Venezuela could depend on negotiations between the government and the opposition in Mexico, and the presidential elections expected to take place next year.

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