US Talks With Venezuela Offer Faint Hope for Tattered Oil Fields

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The Biden administration’s decision to open talks to temporarily lift sanctions against Venezuela raises the prospect that production may finally rebound in the world’s largest oil reserves.

Easing sanctions could revive long-awaited drilling projects by Chevron Corp., the only US oil company with operations in Venezuela, as well as those by European firms, including Eni SpA, Repsol SA and Maurel & Prom.

“Venezuela could add 200,000 barrels a day by 2025 and reach 1 million barrels per day as a result of successful negotiations and new issuing of licenses,” said Francisco Monaldi, a fellow in Latin American energy policy at Rice University’s Baker Institute for Public Policy.

Chevron plans to start drilling new wells in 2024 and could reach 200,000 barrels a day of output by the end of that year, according to a person familiar with the matter.

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The sanctions, largely put in place under former US President Donald Trump, have exacerbated Venezuela’s years-long economic and humanitarian crisis by hindering oil sales. Venezuela has about 300 billion barrels of proven crude reserves, edging out 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 production to drop to a 50-year low of about 750,000 barrels per day.

Reasons remain to be pessimistic. The sanctions talks hinge on Venezuela President Nicolás Maduro agreeing to hold a competitive presidential vote in 2024 and free political prisoners. In the past, he’s shown little willingness to do so. It’s also unclear whether lifting restrictions temporarily would offer the oil industry enough breathing room to stage a meaningful rebound.

Though limited by sanctions, Chevron more than doubled its output to 135,000 barrels a day in May compared to October, a month before the US Treasury issued a license allowing the company to sign new operational 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.