US extends Venezuela wind-down for Chevron, oil service companies to Dec. 1

The Biden administration has given Chevron and four other US oil service companies until Dec.1 to wind down operations in Venezuela.

The June 1 action by the Treasury Department extends a previous six-month waiver that was set to expire June 3.

It allows Chevron, Halliburton, Schlumberger, Baker Hughes and Weatherford International to continue certain limited work with Venezuela's state PDVSA outside of US sanctions. It was the latest in a string of extensions since a waiver was initially issued under the Trump administration in January 2019.

The waiver, known as General License 8, had been extended on the argument that the presence of US companies would be necessary to prevent the collapse of Venezuela's oil sector and ease an expected recovery once President Nicolás Maduro is forced out of power. However, Maduro still refuses to be ousted and Venezuela's oil production has further depleted to minimal levels. Some within the former Trump administration pushed to end to the waiver to increase pressure on Maduro.

S&P Global Platts Analytics expects Venezuela to produce around 500,000 b/d from May to September, although a new Chinese consumption tax of $30/b on imports of bitumen blend could put some of those volumes at risk.

Platts Analytics sees Venezuelan output rising to 800,000 b/d by the end of 2022 if the Biden administration eases sanctions on humanitarian grounds, such as allowing a restart of crude-for-diesel swaps that were banned last year.

"But absent sanctions relief, the Chinese tax change could make a fall to mid-2020 volumes of 300,000 b/d more likely," said Paul Sheldon, chief geopolitical adviser.

Venezuelan oil production started plunging from around 2.5 million b/d at the end of 2015 as a result of mismanagement of the country's vast oil resources, widespread power outages and US sanctions. The Trump administration sanctioned PDVSA in January 2019.

The latest Platts OPEC survey put Venezuela's April output at 510,000 b/d, while the Energy Information Administration estimated it at 490,000 b/d.