New York — Roughly two days before a waiver which allowed Chevron and four US oil services companies to continue working in Venezuela's oil sector is set to expire, the Trump administration is no closer to determining whether to extend it, sources told S&P Global Platts.
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If the waiver is allowed to expire Saturday, Venezuelan oil output is expected to decline from already historic lows and Russian and Chinese firms could take over segments of the country's oil sector currently operated by US companies.
Administration officials are still strongly considering allowing the waiver to expire as part of its "maximum pressure" campaign on the Maduro regime, an option that has been viewed as more likely in recent weeks, according to sources familiar with the administration discussions.
"We are considering facts on the ground and are in close contact with the private sector entities concerned about the expiration [of the waiver] which allows Chevron and other US oil field service providers to engage in certain activities related to their operations in Venezuela," a State Department spokesman said Thursday.
US policy analysts still see an extension, possibly of two or three months, as the more likely outcome, although they concede that the waiver's expiration on Saturday may be just as likely.
"I could see it going either way, but in the end Trump's thinking is that he doesn't want to hurt US companies," said Neil Bhatiya, an associate fellow with the Center for a New American Security.
"We think an extension remains more likely than not, potentially for a shorter interval than the original six months, but we would caution that future extensions could prove increasingly problematic," analysts with ClearView Energy Partners wrote in a recent note.
Venezuelan President Nicolas Maduro has threatened to nationalize Chevron and other US assets if the waiver is lifted, likely transferring them to Russian and Chinese firms. That would leave the US "without commercial bridgeheads to a new government after a transition," ClearView analysts wrote.
The waiver, a general license issued by the US Treasury Department on January 28 as the administration unveiled its most punitive sanctions on Venezuela's oil sector, allowed Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International, to continue certain work with PDVSA.
Spokesmen for those companies have declined to comment on their discussions with the Trump administration.
"Chevron operations in Venezuela continue in compliance with all applicable laws and regulations," Ray Fohr, a Chevron spokesman, told Platts this week. "We remain focused on our base business operations and our social investment efforts, which help strengthen local communities through education, health and economic development programs. Chevron's legacy in Venezuela dates to the 1920s, when we began exploring for oil. As everywhere else, we take a long-term approach in our investment."
Chevron currently works with PDVSA on four joint-venture operations in western and eastern Venezuela, including three heavy or extra-heavy crude oil projects, according to the company's website. Chevron's biggest project is Petropiar in the Orinoco Belt which had an average net production of 26,000 b/d of liquids in 2018, according to the website.
According to a May 2 filing with the US Securities and Exchange Commission, Chevron's Q1 2019 net oil equivalent production in Venezuela averaged 40,000 b/d.
The potential end of waivers is expected to further erode Venezuelan oil output, according to the US Energy Information Administration.
Venezuelan oil production averaged 760,000 b/d in June, according to the latest Platts OPEC survey, 680,000 b/d below its June 2018 output and 1.64 million b/d below its output in June 2015.
As US sanctions have prevented imports of light crude and heavy naphtha into Venezuela, PDVSA is bracing for another fall in crude production and exports in August, according to an internal report viewed by Platts Wednesday.
Still, S&P Global Platts Analytics said Thursday it expects Venezuelan crude output to decline to 750,000 b/d by Q4 2020, up from a previous forecast of 700,000 b/d, after data indicated that output may have stabilized between 800,000 and 900,000 b/d in Q2.
On April 28, the US prohibited transactions between non-US firms and PDVSA involving the US financial system, essentially banning the use of US dollars in all transactions with PDVSA.
In March, Treasury extended a waiver for PDVSA's US marketing and refining arm, Citgo, by 18 months to buy crude and to wind down contracts and transactions with parent company PDVSA.
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