US Issues License For Oil Companies To Operate In Venezuela

The Trump administration issued a general licence expanding the ability of oil companies to operate in Venezuela, marking a significant step to ease sanctions under the new US-backed leadership in Caracas. 

The licence issued by the US Treasury Department Thursday covers a variety of activities that could expedite the movement of Venezuelan crude, including exporting, selling, storing, and refining that oil. as long as they are performed by a US entity. According to an administration official, it does not, however, cover upstream crude production inside the country, where currently just one US oil company—Chevron Corp.—operates under a special US licence.

The authorisation comes after Venezuelan lawmakers approved a historic reform of the country's hydrocarbons policy, which some US oil executives had described as essential to launch operations there. President Donald Trump has said he expects US energy companies to pour billions into reviving the country's oil sector, where infrastructure has decayed amid years of underinvestment and corruption.

The move reflects the White House's desire to quickly get Venezuela's economy moving after the US capture of former President Nicolas Maduro, a person familiar with the matter said.

Yet the shift's full impact could be limited because of restrictions embedded in the licence, including a prohibition on transactions with Chinese-tied entities. China has been a major buyer of sanctioned—and therefore steeply discounted—Venezuelan crude before Maduro's capture.

This looks like the first obvious and needed step to pave the way for energy companies to do business in Venezuela," said Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington. "It basically waives the prohibition on working with" PDVSA, Venezuela's state oil company, to handle the country's crude.

Still, payments to PDVSA "need to go through US-controlled accounts, and working with Chinese-controlled Venezuelan ventures is off limits."

The licence also specifies that US laws govern contracts and that disputes under them must be resolved within the United States. And the Treasury Department is also requiring a "detailed report" on transactions in which Venezuelan oil ultimately is sold or sent to other countries—another potential deterrent. 

The licence covers a range of mid and downstream operations, including loading oil onto tankers as well as exporting, transporting and refining that crude - when carried out by "an established US entity." It also authorises "commercially reasonable" payments in the form of physical swaps of crude oil, diluents or refined petroleum products.

The Trump administration plans to indefinitely control future sales of Venezuelan oil and hold the proceeds in US accounts. The trading giants Vitol Group and Trafigura Group have already begun selling Venezuelan crude that's been stuck in storage because of the US blockade that began in the weeks before Maduro's capture.

Venezuela Acting President Delcy Rodriguez has been courting foreign oil companies with offers of more generous fiscal terms, less red tape and allowing the private sector to control much of the nation's key industry.