European oil companies are pressing Venezuelan President Nicolás Maduro for greater control over their operations in Venezuela, after US driller Chevron Corp. he renegotiated his contract last year.
Italy’s Eni SpA and Spain’s Repsol SA are reviewing draft contracts after holding a series of meetings with senior government officials in which they asked for operational control of oil and gas companies held jointly with the company state energy company PDVSA, according to sources familiar with the matter who asked not to be named because the information is private.
Chevron received a similar deal last year, raising analysts’ expectations that Venezuela would give other energy companies greater control over joint ventures. Eni, Repsol and French company Maurel et Prom have the capacity to pump an additional 50,000 to 80,000 barrels a day if they ramp up operations in the South American country, according to Francisco Monaldi, professor of energy economics at the Baker Institute for Public Policy from Rice University.
While even an additional 80,000 barrels per day would do little to immediately impact global energy markets, the move would be the latest sign of an advanced political agenda in the nation. Maduro used the Chevron deal to ask the US to ease more sanctions on the country’s beleaguered oil industry. It would also add to Venezuela’s efforts to increase production in an industry responsible for the vast majority of its exports. The country’s current output of about 690,000 barrels a day is about a third of what it was five years ago, according to OPEC.
Eni declined to comment. Repsol did not respond to a request for comment. Venezuela’s oil ministry office and Petroleos de Venezuela SA did not respond to a request for comment. Eni and Repsol have oil and gas companies in Venezuela. Cardon IV, a jointly managed offshore company, supplies natural gas to most of western Venezuela. On the oil side, both have three companies associated with PDVSA.
Latin America, home to a fifth of the world’s oil reserves, has largely lost its potential to profit from rising oil prices in recent years amid a potent combination of mismanagement, financial limited and political missteps. Venezuela has also faced the hurdle of economic sanctions. Increased production would help bolster the region’s economies, which face some of the world’s worst wealth inequality, while helping boost tight global energy supplies.
If European oil companies are granted more control from the Venezuelan government, it is unclear whether the companies would need additional permission from the US Treasury to avoid secondary sanctions before increasing production.
Eni and Repsol began negotiations with Venezuelan officials, including Vice President Delcy Rodríguez, in mid-2022. But negotiations have gained momentum more recently, the people said. The Venezuelan government has demanded that, in exchange for greater control over oil fields, companies invest in gas projects.
Venezuela’s production has suffered since the US hit the country with sanctions in 2019. Eni and Repsol’s businesses have also declined. Both companies have an exemption from the US Treasury Department that allows them to take oil shipments from PDVSA to offset 2022 sales of a natural gas project to supply the domestic market. In a recent move, they agreed to a swap deal to load 4 million barrels of Venezuelan oil through March to continue the deal reached with Maduro to offset PDVSA’s debt.
In November, the US Treasury eased some restrictions on Chevron, allowing the company to produce and export Venezuelan oil. With more control over its operations, Chevron has increased its production to 90,000 barrels a day from 50,000 barrels a day, helping it recover some of PDVSA’s debt.
The US government’s decision came as President Joe Biden called on US oil companies to increase production to combat rising gasoline prices that have been burdened by consumers.
