Chevron employees arrested as Venezuela clampdown escalates

By Kevin Crowley and Lucia Kassai on 4/18/2018

HOUSTON (Bloomberg) -- Two employees of Chevron Corp., one of the few majors still helping Venezuela’s collapsing oil industry, were arrested there on Monday as President Nicolas Maduro ratchets up his crackdown on alleged corruption.

Chevron’s presence in the troubled South American nation can be traced back to the 1920s. The San Ramon, California-based oil giant operates Venezuela’s second-largest upgrader, a plant that converts tar-like, extra-heavy crude into lighter oils for refineries. It also participates in five production projects in the country, including four jointly with state-run Petroleos de Venezuela, or PDVSA.

Graft accusations, which Maduro’s opponents say are politically motivated, have spurred more than 60 arrests, including of two former oil ministers. Employees of foreign oil companies, though, have largely been spared.

“Chevron has been one of the more steadfast participants in Venezuela, having stuck around through some of the most challenging times over the past two years,” said Mara Roberts Duque, a BMI Research analyst based in New York. “These arrests will likely encourage them to turn away from Venezuela in a more definitive manner.”

In August, Chevron, France’s Total and Spain’s Repsol pulled foreign workers from oil fields in Venezuela due to safety concerns amid protests against the government of Maduro. The move accelerated the decline in the production of oil, the commodity that accounts for about 95% of Venezuela’s export revenues.

Chevron is working towards the release of the two employees and abides by local and U.S. laws, the company said in a statement. It didn’t identify the employees or their positions.

“We have contacted the local authorities to understand the basis of the detention and to ensure the safety and well-being of these employees,” Chevron said in an emailed statement. “Our legal team is evaluating the situation and working towards the timely release of these employees.”

Oil production in the country, which has been plagued by a humanitarian crisis and skyrocketing inflation, slumped by a third from a year earlier in March, to 1.509 MMbpd, according to OPEC data. In 2017, Chevron’s net output in the country averaged 52,000 bopd and 15 MMcfgd.

“It definitely marks an escalation” of the government’s efforts to reassert control over its oil industry, said Reggie Thompson, a Latin America analyst for Texas-based advisory firm Stratfor. “But it’s too early to tell what motivated the arrests.”

One possibility is that Maduro’s government is using “U.S. related entities as bargaining chips with the U.S. government” as a pushback against sanctions ahead of national elections on May 20, Thompson said.

In January, Venezuela’s government ordered the arrest of seven managers at a Chevron joint venture and some at another venture partly owned by Norway’s Statoil and Total.

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