U.S. orders Chevron to 'wind down' Venezuela operations by Dec 1U.S. orders Chevron to 'wind down' Venezuela operations by Dec 1
Chevron oil exploration drilling site near Midland

By Matt Spetalnick and Daphne Psaledakis

WASHINGTON (Reuters) – The Trump administration on Tuesday gave Chevron Corp, the last major U.S. oil company still operating in Venezuela, until Dec. 1 to “wind down” its business in the OPEC member-nation and allowed it to conduct only limited operations there until then.

Ratcheting up pressure on socialist President Nicolas Maduro, the U.S. Treasury Department imposed new restrictions on Chevron’s joint ventures with Venezuela’s state-run oil company PDVSA, paving the way for the California-based company’s departure.

Chevron has had a special U.S. operating license exempting it from sanctions on Venezuela’s vital oil sector since last January but the latest three-month waiver was due to expire on Wednesday.

The U.S. action targets what some Trump administration officials say is a key financial lifeline for Maduro as Washington seeks to stifle trade in Venezuelan crude and remove his grip on power.

Chevron and other U.S. oil companies are being squeezed amid a coronavirus-induced supply glut. The collapse in oil prices has threatened to tilt the once-booming U.S. oil industry into bankruptcy. Chevron’s shares have declined sharply since Monday.

The decision was made after a fierce debate in the administration, with some officials arguing the United States needed to keep a corporate beachhead in the crisis-hit country while more hawkish Trump aides said staying in Venezuela was helping Maduro keep his grip on power, according to people familiar with the matter.

The Treasury’s announcement appeared to mark a partial compromise between the two camps by setting an end point for Chevron’s decades-old presence but giving it more than seven months to bring it to a close.

Treasury said Chevron, under a new, more restrictive license, would only be allowed to conduct transactions with PDVSA “necessary for the limited maintenance of essential operations in Venezuela or the wind down of operations” by the beginning of December. It would be barred from drilling or transporting oil and other activities during that time.

The announcement also covered oilfield service firms Baker Hughes Co, Halliburton Co, Schlumberger NV, and Weatherford International, which had regularly received U.S. permission to remain in the country. The four services firms have already largely ceased operations in Venezuela, however.

Chevron, which has said its decades-old role in Venezuela was a “positive” and should be allowed to continue, did not immediately respond to a request for comment.

‘MAXIMUM PRESSURE’

The Trump administration has waged a “maximum pressure” campaign of sanctions and diplomatic measures in an effort to oust Maduro, whose 2018 re-election was considered a sham by most Western countries.

Venezuela’s oil exports have dropped by one-third since the United States and dozens of other countries recognized opposition leader Juan Guaido as the country’s legitimate interim president in January of last year.

But Maduro remains in power, backed by Venezuela’s military as well as Russia, China and Cuba. Some U.S. officials have said this has been a growing source of frustration for President Donald Trump.

Washington has ramped up sanctions on Venezuela in recent months. The Treasury recently blacklisted two trading units of Russia’s oil giant Rosneft, for conducting business with PDVSA. Rosneft accused Washington of double standards for allowing U.S. companies to continue working in Venezuela.

Chevron’s waiver allowed it to continue producing oil in collaboration with PDVSA and also trade cargoes of Venezuelan crude in international markets.

Some U.S. officials justified the waiver extensions as a way to help Venezuela safeguard its crumbling oil infrastructure for a future democratic government. They also argued that Russia could fill the void if Chevron pulled out.

Chevron holds stakes in four oil and gas joint ventures with PDVSA. Those include two of Venezuela’s largest oil fields – Petroboscan in western Zulia state and Petropiar in the Orionoco oil belt – which together produce around a quarter of the country’s total crude output.

Chevron last month canceled service contracts and procurement processes at the two joint ventures, a move the company attributed to falling crude prices. The company said its share of output at its joint ventures dropped 16% in 2019 to 35,000 bpd, mirroring the decline in crude output across the country.

(Reporting by Daphne Psaledakis and Matt Spetalnick; additional reporting by Timothy Gardner, Humeyra Pamuk and Luc Cohen; Editing by Sonya Hepinstall)