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.