The U.S. government is working to issue as early as this week a general license allowing companies to produce oil and gas in Venezuela, as Washington seeks to encourage expanded output in the OPEC nation since capturing its president, three sources close to the matter told Reuters.
The move by the Treasury’s Office of Foreign Assets Control would authorize companies to explore and pump for crude oil and natural gas, the sources said. OFAC already authorized U.S. companies to load, sell, transport, store and refine Venezuelan oil last month in a first general license.
“The president’s team is working around the clock to ensure oil companies are able to make investments in Venezuela’s oil infrastructure. Stay tuned,” said White House spokeswoman Taylor Rogers when asked about the plans for a license.
President Donald Trump has said the U.S. intends to control Venezuela’s oil sales and revenues indefinitely since U.S. forces seized Nicolas Maduro in a raid on Caracas on January 3.
Trump said he wants U.S. oil firms to eventually invest $100 billion to restore Venezuela’s energy industry to its historic output peaks and that the profits would be split between Venezuelans, the United States and companies.
CHALLENGES TO INVESTMENT
Venezuela’s oil industry has been state-controlled for two decades, since the government expropriated assets of foreign companies including U.S. giants Exxon Mobil and ConocoPhillips.
Chevron Corp is the only U.S. major that retained continuous operations in the country, as a partner of state energy company PDVSA.
However, a sweeping reform approved in Venezuela last week is set to grant autonomy for foreign oil producers, while lowering taxes and encouraging fresh investment.
While some companies have expressed significant interest in developing Venezuela’s crude reserves, believed to be the largest in the world, top CEOs have warned they would need to see strong legal frameworks and a stable political environment before making decisions about any long-term projects.
Venezuela’s current oil output of less than 1 million barrels per day (bpd) is down sharply from a peak of about 3 million bpd after decades of oilfield neglect, mismanagement, underinvestment and sanctions.
Oilfield service companies, meanwhile, have been clamoring for licenses to use key drilling equipment already in the country and to bring in rigs and specialized gear – moves that are seen as a crucial first step to revitalizing output. U.S. firms SLB, Baker Hughes and Weatherford have existing licenses that do not allow rig operation or expansion.
Venezuela in December only had two active drilling rigs, according to Baker Hughes’ report on international rig count.
Most drilling equipment bought by PDVSA from countries including China in recent years is in need of major repairs, company sources have said.
In the meantime, Washington and Caracas agreed last month to an initial deal to sell 50 million barrels of Venezuelan oil, with European trading houses Vitol and Trafigura marketing the supply. Venezuelan oil exports rose to some 800,000 bpd in January, from 498,000 bpd in December, shipping data showed.
(Reporting by Marianna Parraga in Houston, Jarrett Renshaw and Valerie Volcovici in Washington; editing by Richard Valdmanis and Rosalba O’Brien)