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US Issues License for Oil Companies to Operate in Venezuela
General License Covers Activities Including Exporting, Selling, Storing and Refining Oil
The Trump administration issued a general license expanding the ability of oil companies to operate in Venezuela, marking a significant step to ease sanctions under the new U.S.-backed leadership in Caracas.
The license issued by the U.S. Treasury Department Jan. 29 covers a variety of activities that could expedite the movement of Venezuelan crude, including exporting, selling, storing and refining that oil, as long as the work is performed by a U.S. entity. According to an administration official, it does not cover upstream crude production inside the country where currently just one U.S. oil company — Chevron Corp. — operates under a special U.S. license.
The authorization comes after Venezuelan lawmakers approved a historic reform of the country’s hydrocarbons policy, which some U.S. oil executives had described as essential to launch operations there. President Donald Trump has said he expects U.S. energy companies to pour billions into reviving the country’s oil sector, where infrastructure has decayed following years of underinvestment and corruption.
The move reflects the White House’s desire to quickly get Venezuela’s economy moving after the U.S. capture of former President Nicolás Maduro, a person familiar with the matter said.
Yet the full impact of the change could be limited because of restrictions embedded in the license, including a prohibition on transactions with Chinese-tied entities. China had been a major buyer of sanctioned — and therefore steeply discounted — Venezuelan crude before Maduro’s capture.
“This looks like the first obvious and needed step to pave the way for energy companies to do business in Venezuela,” said Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington. “It basically waives the prohibition on working with” Petroleos de Venezuela SA, the country’s state oil company, to handle the country’s crude, he said.
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However, payments to PDVSA still “need to go through U.S.-controlled accounts, and working with Chinese-controlled Venezuelan ventures is off limits,” Seigle said.
The license also specifies that U.S. laws govern contracts and that disputes under them must be resolved within the U.S.
The Treasury Department is also requiring a “detailed report” on transactions in which Venezuelan oil is ultimately sold or sent to other countries — another potential deterrent.
The license covers a range of downstream operations, including loading oil onto tankers as well as exporting, transporting and refining that crude — when carried out by “an established U.S. entity.” It also authorizes “commercially reasonable” payments in the form of physical swaps of crude oil, diluents or refined petroleum products.
The authorization of oil swaps is particularly relevant for Spain’s Repsol SA and Italy’s Eni SpA, as both companies previously used such exchanges to recover payment from PDVSA for purchasing gas they produce at an offshore field.
Even where the general license rules out some transactions, they could still be approved on a case-by-case basis later, Kevin Book, managing director at Washington-based ClearView Energy Partners, said in a note. That could be a pathway for targeted authorizations of oil production by U.S. companies as well as, potentially, crude sales to China, he said.
Trump and Secretary of State Marco Rubio have previously said China would be permitted to buy Venezuelan crude.
The Trump administration plans to indefinitely control future sales of Venezuelan oil and hold the proceeds in U.S. accounts. Trading giants Vitol Group and Trafigura Group have already begun selling Venezuelan crude that’s been stuck in storage because of the US blockade that began in the weeks before Maduro’s capture.
Trump has asserted that the oil sales will benefit both the U.S. and Venezuela. Oil companies will “be bringing back tremendous wealth for Venezuela and for the United States,” Trump said at a meeting of his Cabinet on Jan. 29. “And the oil companies will do fine, too. Venezuela will actually make for themselves more money than they’ve ever made before, and that’s a good thing.”
Venezuelan Acting President Delcy Rodriguez has been courting foreign oil companies with offers of more generous fiscal terms, less red tape and allowing the private sector to control much of the nation’s key industry.
