US Treasury extends Venezuela wind-down for US oil services companies to Nov. 19

Six-month waivers have been extended since 2019

Oil services companies may not drill or sell oil

S&P Global sees Venezuela crude output at 750,000 b/d by Q1 2024

Four US oil services companies may continue to wind down operations in Venezuela and engage in certain limited work with Venezuela’s state-owned oil company PDVSA through Nov. 19, the US Treasury Department said May 23.

The department extended a waiver, known as General License 8, that was otherwise set to expire May 26. It allows Halliburton, Schlumberger, Baker Hughes and Weatherford International to complete transactions and activities necessary for the safety and preservation of assets in Venezuela.

Permitted activities include those tied to ensuring the safety of personnel and integrity of operations; participating in shareholder and board of director meetings; and paying invoices, local taxes, utility services and salaries for employees and contractors in Venezuela. The companies may also perform work to wind down operations, contracts and other agreements involving PDVSA.

The license does not allow any drilling, processing, transport or sales of Venezuelan crude or petroleum products by those companies, nor does it allow them to design, construct, repair or improve any wells or other infrastructure in Venezuela.

The license is the latest in a string of extensions since a waiver was initially issued after the Trump administration imposed sanctions on PDVSA in January 2019. Those sanctions cut off flows of Venezuelan crude to US Gulf Coast refiners and others.

Modest sanctions relief

The Biden administration in November authorized Chevron to resume limited extraction activities through its four joint ventures with PDVSA after talks restarted between the ruling Venezuelan government led by President Nicolás Maduro and the US-backed opposition and other humanitarian steps were taken.

General License 41 allows Chevron to drill in Venezuela and sell and export the oil and petroleum products produced by its JVs to the US. Chevron’s exports to the US resumed in January.

PDVSA has set a goal of increasing its oil output to 1 million b/d by August. The country’s new oil output recovery plan seeks to further raise crude production to 1.17 million b/d by December by recovering infrastructure and rehabilitating wells.

Venezuelan oil production started plunging from around 2.5 million b/d at the end of 2015 due to mismanagement of the country’s vast oil resources, widespread power outages and US sanctions.

Venezuela had three rigs running in 2022, according to the OPEC Monthly Oil Market Report, compared with 54 in 2015.

Lack of payment from PDVSA saw a number of companies end operations in the country. For instance, Schlumberger in 2016 paralyzed six rigs on Lake Maracaibo, an area of oil production in western Venezuela, while Argentina-based San Antonio Internacional suspended drilling at eight of its 16 platforms in Venezuela and Peru-based Petrex halted drilling at 28 projects that same year.

The latest Platts OPEC+ survey by S&P Global Commodity Insights put Venezuela’s April output at 710,000 b/d, while the US Energy Information Administration estimated it at 740,000 b/d.

S&P Global analysts have said that they expect the modest US sanctions relief from the license for Chevron to allow for modest growth to 750,000 b/d by Q1 2024.