Trump Administration Moves Closer To Opening Venezuela To More Us Oil Producers

The Trump administration moved Tuesday to allow U.S. oil companies to rehabilitate their existing oil drills, pipelines and other assets in Venezuela while the country remains under U.S. sanction.

The latest general license from Treasury’s Office of Foreign Assets Control, shared first with POLITICO, marks a crucial step in President Donald Trump’s efforts to entice international oil companies to invest in Venezuela after the U.S. military captured Venezuelan President Nicolás Maduro in January. It will allow companies to start setting the stage for U.S. oil producers to operate in a country whose oilfields have not seen major new investment in decades.

Major oil companies have been reluctant to heed Trump’s call, however, given the country’s ramshackle oil infrastructure and uncertain politics.

Tuesday’s license authorizes “transactions for the maintenance of oil or gas operations in Venezuela, including the refurbishment or repair of items used for oil or gas exploration, development, or production activities.”

It also covers shipping and logistics services, giving companies legal cover to work with government-run port operators in Venezuela. Companies are still waiting for Treasury to offer a license to actually explore for and produce crude oil.

Treasury in recent weeks has also issued licenses for the trading of Venezuelan oil and the import of U.S. chemicals used to thin out Venezuela’s thick and heavy crude enough to transport.

Monday’s license contains similar restrictions to the previous two licenses, including a prohibition on working with entities tied to Russia, Iran, North Korea, China and Cuba. Any monetary payments to sanctioned entities must be paid into U.S.-controlled accounts set up to handle proceeds from Venezuelan crude sales.

The license also notes it does not authorize the “formation of new joint ventures or other entities in Venezuela to explore or produce oil or gas.”

POLITICO reported last week that Treasury would soon issue additional licenses authorizing companies to take steps to produce more oil in the country holding the world’s largest crude reserves, after years of being mostly shut out by U.S. sanctions.

Chevron is the only U.S. oil producer still operating in Venezuela after Exxon and others exited in the mid-2000s, following former President Hugo Chávez’s seizure of foreign oil company assets.

Eric Smith, a professor of practice at Tulane University and associate director of the Tulane Energy Institute, said the OFAC license will immediately benefit oilfield service companies, which have been eager to expand their operations to kick-start Venezuela’s recovery.

“A general license would certainly provide support to Halliburton and some of the other big service companies,” Smith said.

Smith said he would also expect some of the companies already operating in Venezuela, such as Chevron and Spain’s Repsol, to use the general license to “optimize” their existing investments. That would allow them to marginally increase production without risking a large amount of additional capital, he said.