US Government Grants Limited Production Resumption Permit
Preparing for Possible Additional Production Cuts by Middle Eastern Oil Producers
[Asia Economy Reporter Hyunwoo Lee] U.S. oil company Chevron is reportedly preparing to make its first shipment of Venezuelan crude oil to the United States starting next month. With oil production, previously banned as a sanction against Venezuela's dictatorship, now being permitted on a limited basis, attention is focused on whether this could contribute to stabilizing international oil prices.
On the 29th (local time), Bloomberg News cited sources saying, "Chevron negotiated a production resumption agreement with Venezuela's state-owned oil company this week, and the contract is expected to be signed over the weekend," adding, "According to the agreement, Chevron will transport about 1 million barrels of Venezuelan crude oil to U.S. refining facilities by the end of December."
This contract gained momentum after the U.S. Office of Foreign Assets Control (OFAC) issued Chevron a six-month license on the 26th, allowing partial resumption of oil production in Venezuela. The U.S. government has imposed economic sanctions on Venezuela since 2020 in response to the dictatorship of Nicol?s Maduro and the crackdown on protesters, and Chevron had halted local production following these sanctions.
Before the sanctions, Chevron jointly produced about 160,000 barrels of oil per day with Venezuela's state-owned oil company. However, due to neglect of major oil facilities over two years, current production at these fields has sharply declined to about 50,000 barrels per day.
If Chevron resumes oil production in Venezuela, it is expected to contribute to stabilizing international oil prices, which have been on a long-term upward trend since the Ukraine war. Venezuela produced up to 3.2 million barrels per day in the early 2000s, but production sharply declined after U.S. sanctions began in 2020 and Western companies ceased production. Currently, production is estimated at about 680,000 barrels per day.
However, it is anticipated that significant time will be required for equipment repairs and management normalization, making it difficult for production volumes sufficient to immediately stabilize U.S. and global oil prices to materialize. Francisco Monaldi, a Venezuela energy policy expert at the Baker Institute in Houston, Texas, pointed out, "With this sanction easing, Chevron's local Venezuelan oil production could increase from 50,000 barrels per day to 80,000?100,000 barrels within a few months," adding, "However, to reach pre-sanction levels of 160,000?200,000 barrels per day, substantial investment over about two years will be necessary."
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