BY COLLIN EATON, JOSÉ DE CÓRDOBA AND PATRICIA GARIP

Venezuela Return Brings Chevron Risk

Venezuela Return Brings Chevron Risk
The U.S. government reversed course in late November and cleared the way for Chevron Corp. to pump oil in Venezuela again, but the company’s new license to operate carries considerable risk.

The oil giant will have to partner with an authoritarian regime accused of crimes including human-rights violations, sprawling corruption and statesponsored narcotics trafficking. Days after the U.S. authorized Chevron’s return, the company’s top executive there met with Venezuela’s oil minister, a man the U.S. has accused of drug smuggling. Tareck El Aissami, who denies the U.S. accusations, tweeted congratulations to the company on its coming centennial in Venezuela following the meeting. He said Chevron and Venezuela would soon sign new contracts to boost production. “TIME TO PRODUCE!!” tweeted Mr. El Aissami, for whom the U.S. has offered a reward of up to $10 million for information leading to his capture. Chevron spokesman Ray Fohr said it is normal business practice for its top executives in Venezuela to meet with authorized representatives of the country’s government and national oil company, Petróleos de Venezuela SA, or PdVSA, in relation to U.S.-authorized activities. Mr. El Aissami and Chevron’s country manager, Javier La Rosa, signed multiple contracts on Friday on live television in Caracas. Winning the six-month license culminates Chevron’s yearslong strategy of remaining in the country despite tightening U.S. sanctions and accusations of enabling the regime of Venezuelan President Nicolás Maduro. Chevron’s energetic lobbying campaign helped it win the right to run its oil operations in Venezuela and sell the output, potentially recovering more than $4 billion in debt from PdVSA.

Chevron is the only major Western oil company cleared by the U.S. to resume operations in a country possessing some of the world’s largest oil reserves. Investments in new assets are still prohibited. But as the U.S. oil giant readies crews to boost production of Venezuela’s oil and export cargoes to U.S. refiners, it is further entangling itself in fraught international and domestic politics that pose a risk to its investments. “This isn’t your typical business deal,” said Francisco Monaldi, a director of the Latin America Energy Program at Rice University’s Baker Institute. “It is no doubt risky.” For one thing, the U.S. says the deal hinges on the progress of future negotiations between Mr. Maduro’s government and a coalition of his political opponents to hold free elections within two years. The success of these negotiations, which resumed in late November in Mexico, is far from assured. Last year, Mr. Maduro walked away from similar talks. And this past week, four days after the license was granted, Mr. Maduro railed against the opposition coalition he will be negotiating political terms with, calling them “right-wing coup conspirators, interventionists, pro-gringo terrorists.” The U.S. says renewal of Chevron’s six-month license is contingent on concrete progress in the negotiations, and that it is willing to revoke the license if it isn’t satisfied with the process. Chevron’s gamble might help its oil business. The number of places around the world where it can sink big investments into fossil-fuel development has declined in recent years. Sanctions have cut off Russia to Western oil companies, and Middle Eastern countries increasingly choose their own state-owned producers to develop their reserves. Meanwhile, U.S. shale fields are showing signs of aging, and some investors have soured on mega-offshore projects. Analysts say Latin American countries like Brazil and Guyana will play a central role in the future of the Western companies, even as more of them, especially from Europe, focus on natural gas and renewable energy instead. Some analysts and executives say they believe the issuance of the Chevron license signals the beginning of the end of sanctions barring the Western oil industry from Venezuela. Spain’s Repsol and Italy’s ENI are among non-U.S. companies that are pressing Washington for equal terms, people familiar with the matter said. Venezuela has figured prominently in Chevron’s international operations for almost a century, as the company calculated it had the wherewithal to outlast changing governments in Caracas and Washington alike. It remained there even as many of its peers, including Exxon Mobil Corp. and ConocoPhillips, pulled out when their assets were nationalized, and some European companies exited some assets following strict U.S. sanctions. The logic of Chevron’s bet on staying put in Venezuela is that it will have earlier access to the country’s vast resources if the political clouds clear, said Edward Chow, a former Chevron executive and a senior associate at the Center for Strategic and International Studies.

Dec 5, 2022 15:49
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