Chevron, Reliance request U.S. unwind some Venezuela oil sanctions

By Lucia Kassai on 1/28/2021

(Bloomberg) --Chevron and Reliance Industries are meeting with U.S. State Department officials to request a rollback of some of the previous administration’s restrictions against Venezuela’s oil industry.

Representatives from the two companies are holding virtual discussions with officials this week, according to people with knowledge of the matter, who asked not to be identified because the information isn’t public. High on the agenda: reinstating transactions known as oil swaps that would allow companies to receive Venezuelan crude in exchange for supplying diesel, one person said.

The U.S. imposed sanctions on Petroleos de Venezuela SA in early 2019, in an effort to dislodge President Nicolas Maduro from power by depriving his government of oil revenue. While some companies were still allowed to engage in limited dealings with the South American country, the swaps were nixed last October, said one of the people.

Indian refiner Reliance is seeking to revive those swaps. Meanwhile, Chevron, for now, wants to build goodwill and remind officials of its commitment to remain in Venezuela, another person said. The oil giant currently has until June to wind down operations.

The U.S. can’t ban international companies from buying Venezuelan oil. It can, however, financially squeeze them by prohibiting them from doing business with American companies if they ignore sanctions. Reliance and Chevron requested meetings with the State Department even though some of the key decisionmakers, including assistant secretaries to U.S. Secretary of State Antony Blinken, have yet to be confirmed by the U.S. Senate.

Ray Fohr, a spokesperson for Chevron, said the company is in regular conversations with multiple agencies within the U.S. government to make sure laws are understood. Reliance and the State Department did not immediately respond to an email seeking comment.

Venezuela is barely able to produce its own refined products because of widespread mechanical failures at refineries. Reliance is basing its request to resume oil swaps on the argument that the operations do not provide cash to the Venezuelan government but rather help lessen the humanitarian crisis there, one person said. Diesel is used in power generation, public transportation, agriculture and to deliver food and medicine.

The resumption of oil swaps could allow Venezuela to boost oil production, said Scott Modell, managing director at Rapidan Energy Advisors LLC. Output, which is currently at between 400,000 and 500,000 barrels a day, could hit 750,000 barrels day if the Biden administration eases some of the sanctions, he said.

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