The U.S. is preparing to prioritize issuing limited licenses to operate in Venezuela to companies with existing oil production and assets over those seeking to enter the sanctioned OPEC nation for the first time, two people close to the discussions said.
The move appears designed to encourage companies that have projects frozen because of U.S. sanctions, such as Italy’s Eni (ENI.MI), opens new tab and Spain’s Repsol (REP.MC), opens new tab, to expand operations, recoup pending debt and add oil to global markets.
It will, however, avoid licensing firms with no prior investments in the country, putting a cap on how much revenue Venezuela could collect from its oil industry.
Some companies with long-standing energy projects in Venezuela, including U.S.-based Chevron (CVX.N), opens new tab and France’s Maurel & Prom (MAUP.PA), opens new tab, have authorizations to expand oil and gas production in the OPEC-member nation. Trinidad & Tobago and Shell (SHEL.L), opens new tab also last year received a U.S. license to develop a gas field with Venezuela.
Other firms such as India’s Reliance Industries (RELI.NS), opens new tab and customers of state firm PDVSA (PDVSA.UL) with no assets in the country have been hoping to gain U.S. approvals.
The U.S. Treasury Department last month said it would offer some individual authorizations to companies to operate in the South American nation after it did not renew a broad license that had eased oil and gas trade restrictions. The sanctions resumption came after the U.S. decided Venezuela had not fully met its promises to secure a competitive presidential election.
A Treasury spokesperson said the department would not comment on specific licenses as its evaluation process and criteria are not public.
Treasury “generally relies on foreign policy guidance from the U.S. Department of State and take into consideration the national security interests of the United States,” the spokesperson said. The State Department declined to comment.
PDVSA did not immediately comment.
OPTIMISM FADES
Venezuela’s Oil Minister Pedro Tellechea had said the proposed U.S. authorizations would allow many foreign firms to expand joint ventures with PDVSA, while new partners could start fresh projects seeking capital.
But the limited U.S. exemptions under consideration will cut the opportunity for Caracas to use partners of PDVSA to expand the nation’s crude production in the near term. Venezuela’s oil exports climbed to about 900,000 barrels per day in March, before the U.S. decided not to renew the election-linked license.
Venezuela’s Vice President Delcy Rodriguez on Tuesday slammed the impact of U.S. sanctions in the last five years, which she said have cut billions of dollars from Venezuela’s GDP.
“It is an international embarrassment that in the 21st century … the aim is to subjugate countries through the mechanism of economic sanctions,” she said during a conference in Caracas.
President Nicolas Maduro could press for specific U.S. licenses for the oil and gas industries if he believes they are key to attracting new investment, or expanding cash-providing businesses, one of the people familiar with the matter said.
The guidance being prepared by Washington mainly will seek to help foreign companies recover pending debt and dividends in Venezuela, which in the last five years has affected many U.S., European and Asian firms.
The proposal would appear to exclude companies with no prior investment in Venezuela that have signed agreements with PDVSA to form new joint ventures, according to the people.
Late last year, PDVSA drafted a list of 17 potential joint ventures to be formed or expanded. The list included newcomers and long-time investors such as Repsol and Chevron.
Some U.S. and European companies have held exemptions to the sanction regime on Venezuela through so-called “comfort letters” issued by the State Department or specific licenses.
