Venezuela reaches agreements with half a dozen international oil companies after the end of sanctions

The lifting of energy sanctions on Venezuela has been made possible by the Barbados agreements, meaning that Caracas can hold talks with half a dozen multinationals with the aim of restoring its oil production. This comes in a context in which Venezuelan crude might be needed to stabilize global supply, and the United States’ in particular.

In return for the concessions it offered, the U.S. expected Nicolás Maduro’s government to commit to organizing free and verifiable presidential elections. There must be no vetoes on potential candidates, and an amnesty for the more than 300 political prisoners in the country. So far there has been no response from Caracas.

The president of Petróleos de Venezuela (PDVSA) Pedro Tellechea has welcomed international capital. In addition to Spain’s Repsol and Italy’s Eni, which have been working with Venezuela on gas projects for some time, the French company Maurel & Prom has announced that it is resuming its operations in Lake Maracaibo. China Petroleum and Indian Oil are already carrying out work in Miraflores. There are talks with Trinidad about the joint exploitation of the Dragon campus, run by Shell. Mitsubishi wants to resume the Metanol de Oriente petrochemical project, Metor. Caracas has confirmed joint oil and gas projects with the Colombian Ecopetrol, and there is also talk of Petrobras and the Indian conglomerate Reliance. PDVSA has enormous debts with some of these companies.

Just as, or perhaps more importantly, international contractors Halliburton, Baker, and Hughes and Schlumberger are also returning to Venezuelan fields. Some private Venezuelan companies, such as Suelopetrol, expressed their willingness to invest in wells and presented to the executive their proposals to increase the production of light crude oil.

The end of sanctions and the normalization of direct contracts, agreed with the United States, allows the Venezuelan treasury to sell its crude oil without the enormous discount, sometimes up to 40 percent, that it previously had to make via complex offshore transactions. It was a circumstance that led to a loss of assets, and which was later aggravated by the corruption of its senior officers linked to the president of Petróleos de Venezuela himself, Tarek El Assami, in the famous PDVSA-Crypto case.

Far from its historical averages, calculated at 3,000,000 barrels per day, Venezuela is currently laboriously producing 800,000 with the help of the special license to Chevron. Experts estimate that, if all this movement is completed, crude oil production could increase by about 300,000 barrels per day in 2024, finally reaching 1,200,000 barrels per day, with expectations to continue growing.

In a period of high oil prices, state income would bounce back strongly by directing sales (without a discount) towards the United States. Venezuela would have a real opportunity to grow its economy after the historic crash of 2018 and a sluggish performance in 2023.

All this movement, which demands expensive investments, is made knowing that the differences between Caracas and Washington persist, and that there is a particularly critical obstacle between them. Maduro’s government is opposed to accepting María Corina Machado, who is currently topping all the opinion polls, as a candidate in next year’s presidential elections.

Juan González, the United States Department of State’s special advisor for the region, has declared that Venezuela is not complying with its commitments. He has reported that more political prisoners have not been released and that there are still unconstitutional vetoes on opposition political leaders, compromising the outlook for free elections. González added that Venezuela had an “ultimatum,” and that the United States government will wait until November 30 for a gesture from Nicolás Maduro. Otherwise, the United States will resume its sanctions policy.

Jorge Rodríguez, head of the Chavista delegation in Barbados, responded that Venezuela “does not accept ultimatums from anyone” and accused the Venezuelan opposition and the United States of being the ones who have not complied with what was signed. Although there is discretion on the subject, the feeling is growing among certain sources that these investments are made knowingly of this circumstance, and even independently of it.

Luis Oliveros, an economist specializing in international trade and petroleum, who is also an academic at the Metropolitan University in Caracas, does not believe there will be a return to sanctions, despite what González stated. “You have to read the ultimatum well. What they propose is that there must be signs, a roadmap, not an immediate solution. I don’t think the immediate return of sanctions is on the cards. These companies are agreeing to invest a lot of money with the Venezuelan state. A much more crucial date may be April, once the license deadlines have expired,” he says.

Venezuela would still be in a position to offer a political gesture to the United States. “Russia has made a significant approach to Venezuela in all areas in those years, including oil. The demands of the war in Ukraine are preventing them from working with their allies,” comments the economist, analyst, and academic Víctor Álvarez, who is convinced that Washington wants to get closer to Caracas. “The United States is toughening sanctions on Russia, but is freeing Venezuela from several of them. Without sanctions, PDVSA puts nearly 4 billion additional dollars in its coffers by selling directly to the United States without a discount. The White House is intending to distance the current occupants of the Miraflores Palace from Russian financial aid.”

Alvarez also thinks that the United States needs to incorporate crude oil into its markets to relieve energy pressure. “The Biden administration needs to avoid the electoral cost that could result from a disproportionate increase in fuel prices, or in other words, a price shock. Venezuelan oil can meet that objective and stabilize supply. In addition, it opens the U.S. market to Venezuelan crude oil, bringing it back to Western markets,” he concludes.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition