Petrobras sends production team to Venezuela despite looming oil sanctions

Fabiola Zerpa and Mariana Durao, Bloomberg March 10, 2024

(Bloomberg) – Brazilian state-controlled oil giant Petrobras sent a team of production specialists to Venezuela at the request of Nicolás Maduro, whose administration is welcoming oil majors despite U.S. sanctions threats on its oil industry.

The Petrobras delegation visited oil fields in Lake Maracaibo this week in what people familiar with the matter described as a courtesy trip. Maracaibo is a key production region for Venezuela and an opportunity for the country to resuscitate the linchpin of its economy after years of underinvestment.

While Maduro has been backsliding on his promise towards free and fair elections, major oil companies are betting that the Biden administration— facing a tough reelection campaign against Donald Trump—will probably refrain from imposing the stiffest penalties related to energy to keep down global oil and US gasoline prices.

Venezuela’s Oil Minister Pedro Tellechea has recently announced visits from Algeria’s Sonatrach SpA, Bolivia’s YPFB and Petroleos Mexicanos’ officials to Caracas. Many of Petroleos de Venezuela’s fields have gone idle during the past decade amid sanctions, mismanagement and a collapse of what was once one of Latin America’s top economies.

PDVSA and Petrobras press officials did not respond to requests for comment.

The U.S. eased sanctions on Venezuela’s oil industry this year as part of a deal towards free and fair elections. Then Maduro’s administration banned the opposition’s leading candidate from running in a move that could prompt the U.S. to bring back some sanctions.

Petrobras entered Venezuela during an oil opening earlier this century but hasn’t been active there for years. The company is planning to increase investments to expand abroad at a time in which it hasn’t had much success exploring in Brazil.

It is also paying less in dividend, a move that has disappointed investors and prompted a share selloff.

While geopolitical risks remain a hurdle for any potential investments in Venezuela, oil majors reentering the nation have done so under conditions that offer more operational control to foreign partners, including procurement and financial decisions.

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