Washington in November issued a six-month, automatically renewing license to the U.S. oil company to revive largely dormant operations in Venezuela and resume crude exports to the U.S. under an exemption to sanctions on the South American country.
To back up its license application, Chevron last year signed an oil-for-debt swap with Venezuela's state-run PDVSA.
Under the deal, Chevron aims to recover some $750 million in unpaid debts and dividends by year-end, and all $3 billion outstanding by the end of 2025, one of the people said. So far, it has recovered some $220 million, the source said.
The plan shows both Chevron and PDVSA are getting what they wanted from the agreement: Venezuelan oil flowing to the U.S. and the OPEC nation getting royalties, worker benefits and a chance for future profits.
Chevron this year has reactivated crude output at its four joint ventures with PDVSA, exported an average 102,500 barrels per day (bpd), taken a role in procuring supplies and appointed new managers to the ventures' boards.
The initial exports have rapidly drained the ventures' oil inventories, which had built up for years. Chevron plans to continue pushing up heavy crude output mainly at oilfields in eastern and western Venezuela belonging to its Petropiar and Petroboscan projects, according to the sources.
MORE EFFICIENT OPERATIONS
In the second phase, Chevron plans to drive crude production to up to 160,000 bpd this year and about 200,000 bpd in 2024, one of the people said.
To optimize exports, the oil major has proposed to help Venezuela prepare a study on dredging Lake Maracaibo's navigation channel, which would let it load larger tankers, three of the people said.
Chevron also has asked PDVSA to assign it dedicated storage tanks for its joint ventures to improve handling of imported diluents and crude from the Orinoco Belt, Venezuela's largest producing region.
To motivate their joint venture workers, Chevron and PDVSA have agreed to pay bonuses for food and personal care to the staff, and improve their health insurance coverage, they added.
Venezuela's oil ministry and PDVSA did not reply to a request for comment. Chevron said it continues to conduct business "in compliance with all laws and regulations, as well as the sanctions framework provided by the U.S. Office of Foreign Assets Control."
More robust work and investment plans will have to wait, according to the sources.
At the Petropiar joint venture, urgent repairs are needed to its crude upgrader, which converts the Orinoco heavy crude into exportable grades. But major maintenance at the facility and a long-delayed new drilling plan are not expected in the short term, the people said.
"They will continue doing well workover only," one person said.
Chevron CEO Michael Wirth last month said the company's output in Venezuela was expected to reach 150,000 bpd this year without significant new investment and under existing license terms.
GOLDEN TICKET
Chevron's license broke a four-year U.S. prohibition on Venezuelan oil exports to the United States designed to oust President Nicolas Maduro.
Even though the license bans any cash payments to Maduro's administration, it has helped Venezuela stabilize its currency by injecting U.S. dollars into its economy and benefited U.S. Gulf Coast refiners receiving the oil.
According to the oil-for-debt swap's terms, sales proceeds since January are going to the ventures' foreign bank accounts, Reuters has learned.
From there, one portion goes to debt repayment, a second to taxes and royalties through foreign currency exchange transactions by banks in Venezuela, and a third covers operational expenses, the sources said.
Because the license automatically renews every month for six more months, Chevron has dealt with fewer policy changes compared with the system it had until 2020, which required a full renewal of terms at every license's expiration.
The license will keep renewing unless the U.S. decides to rescind it or changes its terms, sources in Washington, Houston and Caracas said.
