President Donald Trump has ordered Chevron to start "winding down" its oil production in Venezuela in the latest increase in pressure against the Maduro government in Caracas.
The AP reports that Chevron has invested some $2.6 billion in field development and equipment in Venezuela over the last hundred years and is to date the only U.S. oil company that Washington has allowed to continue operating in the country.
Yet this may soon end, as Trump seeks to tighten the noose around the Maduro government's neck further. The United States government has granted Chevron a series of exemptions from sanctions against Venezuela. With the current state of the oil industry, however, along with the push for maximum pressure on Caracas, these may end soon. If that happens, the company would be obliged to write down its investments in Venezuela.
Chevron's last extension for its Venezuela operations expires today.
Chevron operates a joint venture with Venezuela's PDVSA in the country that is home to the world's most abundant oil resources. Petroboscan, the joint venture, produced around 200,000 bpd as of October, with Chevron's share of this at 34,000 bpd. The U.S. supermajor holds a 30-percent stake in the venture. In March, the output of Petroboscan fell by more than 50 percent to 50,000 bpd from as much as 120,000 bpd just three months later.
Until recently, Chevron was not so willing to take that asset writeoff on its Venezuelan operations. The company argued that if it leaves the country, it will create a void that will be filled by Russian and Chinese companies, which would, Chevron said, harm U.S. geopolitical interests in Venezuela. Now, the supermajor may be more willing to stop pumping oil in the South American country with oil prices off a cliff and little hope for a quick recovery.
Meanwhile, reports have emerged that the Maduro government is negotiating with the opposition; although details are not available, the fact of the talks suggests that both sides are worried about their survival amid the coronavirus outbreak, which has exacerbated an already dramatic economic and political situation.
By Irina Slav for Oilprice.com
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