The decision by the Biden administration to open talks to temporarily lift sanctions against Venezuela raises the possibility that production may finally recover in the world’s largest oil reserves.
The easing of sanctions could revive the long-awaited drilling projects of Chevron Corp., the only American oil company with operations in Venezuela, as well as those of European firms, such as Eni SpA, Repsol SA and Maurel & Prom.
“Venezuela could add 200,000 barrels per day by 2025 and reach 1 million barrels per day as a result of successful negotiations and new licensing,” said Francisco Monaldi, a Latin American energy policy researcher at the Baker Institute of Public Policy at Rice University.
Chevron plans to start drilling new wells in 2024 and could reach 200,000 barrels per day of production by the end of this year, according to a person familiar with the matter.
The sanctions, largely implemented under former US President Donald Trump, have exacerbated Venezuela’s years-long economic and humanitarian crisis by hampering oil sales. Venezuela has about 300 billion barrels of proven crude oil reserves, surpassing Saudi Arabia for the top spot in the world. But the South American nation’s oil industry is in tatters after years of mismanagement and sanctions, causing output to drop to a 50-year low of about 750,000 barrels per day.
There are reasons to be pessimistic. Talks on sanctions depend on Venezuelan President Nicolás Maduro agreeing to hold a competitive presidential vote in 2024 and release political prisoners. In the past, it has shown little willingness to do so. It’s also unclear whether the temporary lifting of restrictions will give the oil industry enough breathing room to stage a meaningful rebound.
Although constrained by sanctions, Chevron more than doubled its production to 135,000 barrels a day in May from October, a month before the US Treasury issued a license allowing the company to sign new operating agreements with Petroleos de Venezuela SA, the state oil company.
Maurel & Prom and Eni declined to comment, citing pending negotiations with PDVSA. Representatives of the other oil companies could not immediately be reached for comment.
