Chevron wants to boost Venezuela’s oil production to speed debt recovery – sources

Chevron Corp’s revamped oil operations in Venezuela will begin a new phase next month, boosting production with the aim of accelerating its plan to repay the OPEC member’s total $3 billion debt by the end of 2025, four officials said. case.

Washington granted the US oil company an automatic six-month license renewal in November to resume largely dormant operations in Venezuela and resume crude oil exports to the United States, exempted from sanctions against the South American country.

In support of its license application, Chevron last year signed an oil-credit swap with Venezuela’s state-owned PDVSA.

Under the deal, Chevron aims to recover about $750 million in unpaid debt and dividends by the end of the year, and another $3 billion due by the end of 2025, one of the people said. So far, Chevron has collected about $220 million, the source said.

The plan shows that both Chevron and PTVSA get what they want from the deal: royalties from Venezuelan oil flowing to the United States and OPEC countries, employee benefits and the prospect of future profits.

Chevron this year restarted crude oil production at four of its joint ventures with PDVSA, exporting an average of 102,500 barrels per day (bpd), taking a role in supply chain management and appointing new managers to the ventures’ boards.

The first exports quickly depleted the oil reserves of ventures built up over the years. Chevron plans to continue increasing production of heavy crude at oil fields in eastern and western Venezuela that are part of its Petropier and Petroboscan projects, the sources said.

More efficient operations

In the second phase, Chevron aims to increase crude oil production to 160,000 bpd this year and about 200,000 bpd by 2024, one of the people said.

To boost exports, the oil company has proposed helping Venezuela explore a navigation channel on Lake Maracaibo that would allow larger tankers to pass through, three of the people said.

Chevron has asked PDVSA to allocate dedicated storage tanks to its joint ventures to improve the handling of imported diluted and crude oil from Venezuela’s largest producing region, the Orinoco Belt.

To motivate the employees of their joint ventures, Chevron and PDVSA have agreed to provide meal and personal care bonuses for employees and improve their health insurance.

Venezuela’s oil ministry and PDVSA did not respond to a request for comment. Chevron said it continues to do business “in compliance with all applicable laws and regulations, as well as the U.S. Foreign Assets Control sanctions framework.”

According to sources, more concrete job and investment plans will have to wait.

At the PetroPierre joint venture, an upgrading facility that converts Orinoco’s heavy crude to exportable grades is in urgent need of repairs. But a new drilling program with major maintenance on the installation and long delays is not expected in the short term, the people said.

“They will work well,” said one.

Chevron CEO Michael Wirth said last month the company’s output in Venezuela is expected to reach 150,000 bpd under significant new investment and existing license terms.

Golden ticket

Chevron’s license broke a four-year US embargo on Venezuelan oil exports to the US designed to oust President Nicolás Maduro.

The license prohibits payments to Maduro’s government, which has helped Venezuela stabilize its currency by injecting US dollars into its economy and benefiting US Gulf Coast refineries that receive oil.

Under the terms of the loan-for-oil swap, sales proceeds have been going into the companies’ offshore bank accounts since January, Reuters has learned.

Of that, one part will go to debt service, a second to taxes and royalties from currency exchange transactions by banks in Venezuela, and a third to operating expenses, the sources said.

Because the license is automatically renewed every month for six months, Chevron faced fewer policy changes compared to the system until 2020, which required full renewal of the terms at the expiration of each license.

The license will continue to be renewed until sources in Washington, Houston and Caracas decide to revoke the license or change its terms.