Is Venezuela's oil sector revival over?

Washington this month revoked a license that temporarily eased sanctions on Venezuela's hydrocarbons sector after President Nicolás Maduro's failure to meet election commitments.

The US Treasury Department ordered oil and gas companies to "wind down" their operations in the OPEC member country within 45 days but said new licenses could be issued on a case-by-case basis.

José Chalhoub, a consultant for Venergy Global and Orinoco Research, tells BNamericas what this means for Venezuela and the oil companies operating there.

BNamericas: Does the US decision dash Venezuela's plans to revive its long-suffering oil and gas industry?

Chalhoub: It was more or less expected. A door has closed but different windows have opened. Behind the legalities there are still opportunities that can be taken through special licenses and permissions issued by Washington.

There will still be opportunities. It's not convenient for the US to have different countries sanctioned considering how the global market is faring and how OPEC is continuing with its production cuts.

Having said that, many people, myself included, were expecting this. Now companies have 45 days to leave the country or apply for an individual license. The opposition will also be able to use this time to pick a candidate and get a final deal [to participate in July's presidential election]. That is what Washington is pushing for.

BNamericas: We know that the decision doesn't impact Chevron's ability to produce Venezuelan oil and export it to the US. But what will it mean for European companies with a presence in the country, such as Repsol, Eni and Maurel & Prom? Will they request individual licenses to continue operating there? And will Washington oblige?

Chalhoub: We have seen that Repsol just signed a new agreement with [Venezuelan state oil company] PDVSA to expand exploration through their Petroquiriquire joint venture. So the intentions of both companies are clear. 

One of the first companies to explore light oil in Venezuela was Repsol in the state of Zulia. The company has had an important presence in Venezuela for many years and there is no doubt it will look to continue its operations in the country. I think Eni will too. 

BNamericas: Do you believe the US will accept their requests?

Chalhoub: Yes, I think so. I think preference will be given to European companies that already have a presence in Venezuela. Apart from Repsol and Eni, there is Maurel & Prom. 

And of course, Shell, BP and [Trinidad & Tobago's] NGC are other companies that will be hoping to advance with their plans to develop vast gas resources off Venezuela's coast. 

We'll know more how this situation will play out in the coming weeks and months, but the expectation is that the US will approve licenses for these projects as this would be in everyone's best interests.

BNamericas: Are oil and gas companies less optimistic now about Venezuela than they were when sanctions were eased in October?

Chalhoub: I think the optimism remains. For Chevron, production increases have been slow coming, but there has been a recovery. According to OPEC's last report, production fell but overall there has been a positive trend [since Chevron resumed operations in the country in late 2022].

[National] production has risen from around 500,000b/d to more than 800,000b/d. Venezuela is an attractive prospect for Chevron and other companies. And I think it's clear that Venezuela is interested in having those companies present in the country.