USA Eases Venezuela Oil Sanctions
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas
The U.S. Department of the Treasury announced Wednesday that its Office of Foreign Assets Control (OFAC) has issued four general licenses suspending select sanctions on Venezuela.
In a statement posted on its website, the treasury outlined that the move comes in response to the signing of an electoral roadmap agreement between Venezuela’s Unitary Platform and representatives of Maduro.
The treasury noted in the statement that it has issued a six-month general license temporarily authorizing transactions involving the oil and gas sector in Venezuela. The license will be renewed only if Venezuela meets its commitments under the electoral roadmap as well as other commitments with respect to those who are wrongfully detained, the treasury said in the statement.
The department also revealed in the statement that it has issued a second general license authorizing dealings with Minerven, a Venezuelan state-owned gold mining company, and that it has amended two relevant licenses to remove a secondary trading ban on certain Venezuelan sovereign bonds and PdVSA debt and equity. The ban on trading in the primary Venezuelan bond market remains in place, the treasury said in the statement.
“The United States welcomes the signing of an electoral roadmap agreement between the Unitary Platform and Maduro representatives,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in a treasury statement.
“Consistent with U.S. sanctions policy, in response to these democratic developments, the U.S. Department of the Treasury has issued general licenses authorizing transactions involving Venezuela’s oil and gas sector and gold sector, as well as removing the ban on secondary trading,” he added.
“Treasury is prepared to amend or revoke authorizations at any time, should representatives of Maduro fail to follow through on their commitments. All other restrictions imposed by the United States on Venezuela remain in place, and we will continue to hold bad actors accountable. We stand with the Venezuelan people and support Venezuelan democracy,” Nelson continued.
Reported Deal
In a market update sent to Rigzone on Tuesday, Rystad Energy Senior Oil Market Analyst Sofia Guidi Di Sante stated that a reported deal between the U.S. and Venezuela to ease sanctions on the South American country’s oil industry could pave the way for a medium-term increase in production of 200,000 barrels per day.
“The deal, reported by U.S. media on Monday, would see the U.S. ease sanctions on Venezuela in return for a fair and competitive presidential election in the beleaguered Latin American producer next year,” Di Sante said in the update.
“News of the apparent deal took around $1 off the price of a barrel of Brent crude in early trading on Tuesday. If sanctions are lifted, Venezuelan oil output could increase from 2024,” Di Sante added.
However, the potential expansion is hindered by the prolonged lack of investments in the industry, the Rystad Energy analyst noted in the update.
“In the short term, six months after sanctions are lifted, production could only ramp up by a maximum of 200,000 barrels per day, a relative drop in the ocean on the global stage,” Di Sante said.
“An increase in global oil production would be much needed after a turbulent 2023 for supplies, which saw the reshuffling of trade flows following Russia’s invasion of Ukraine, voluntary production cuts from Saudi Arabia of one million barrels per day until December this year, and the recent outbreak of the Israel-Hamas conflict,” the analyst added.
“Assuming sanctions on Venezuela are lifted, however, it is unlikely that a production boost from the country would be able to bring significant relief to oil markets in the short term,” Di Sante went on to state.
Appetite for Easing Sanctions
The Rystad analyst noted in the update that appetite for easing sanctions on Venezuela had increased following the onset of war in Ukraine and the consequent mounting pressure on global energy supplies.
“The U.S. government started to ease the sanctions under the administration of current President Joe Biden,” Di Sante said in the update.
“In May 2022, oil for debt licenses were issued to Eni and Repsol to support European partners during the energy crisis, which was particularly acute in Europe last winter on account of the war and resulting loss of Russian supplies to the continent,” Di Sante added.
“However, Venezuelan oil volumes received by Europe were modest, with the concession from the U.S. effectively proving only symbolic,” Di Sante stated in the update.
“In November 2022, Chevron received a six-month license from the Treasury authorizing the company to produce petroleum or petroleum products in Venezuela,” the analyst highlighted.
Chevron’s production of Venezuelan crude peaked at almost 100,000 barrels per day in 2016, but this was halved after 2019, Di Sante pointed out in the update.
“The easing of sanctions came after the resumption of political talks in Mexico City, mediated by Norway, between the Maduro government and the opposition, including the faction backed by the U.S. and led by Guaidó,” Di Sante stated in the note.
“The parties signed a broad ‘social accord’ to create a United Nations (UN)-administered fund to provide humanitarian aid to the Venezuelan people; however, the talks stalled,” Di Sante added.
The Rystad analyst said in the update that progress in talks between Venezuela and the U.S. were made earlier this month, “with the Caracas government set to approve a return to Mexico-based negotiations with the country’s political opposition”.
“According to recent informal talks, the deal could allow the Venezuelan government to re-engage with financial institutions and recover around $3 billion of assets frozen in accounts in Europe,” Di Sante added.
In a report sent to Rigzone on October 3, analysts at BMI, a Fitch Solutions company, noted that Biden was exploring options to further ease oil sanctions on Venezuela, “if Caracas progresses plans to hold new presidential elections”.
“That said, we believe the potential further upside to both production and exports is limited,” the analysts said in the report.
White House, Venezuela Production
On Monday, Rigzone asked the White House to confirm if it was looking to ease oil sanctions on Venezuela. At the time of writing, the White House has not yet sent a response commenting on the matter to Rigzone.
Before the sanctions were imposed, Venezuela produced almost three million barrels per day of crude oil, Di Sante highlighted in the Rystad update.
“Production then fell to just above 600,000 barrels per day in 2020, since when output has gradually recovered to 824,000 barrels per day in September this year,” the analyst added.
“In line with the observed marginal increase in production in the last couple of years, crude oil exports have increased since 2022, with flows primarily directed to mainland China, which took 340,000 barrels per day in 2022 as against 200,000 barrels per day the previous year,” Di Sante continued.
“Overall, exports have reached an average of 560,000 barrels per day in 2023 as of August, a 250,000-barrel per day increase since 2021. The latest figures are, however, still shy of the historical pre-embargo export levels above 1.5 million barrels per day,” Di Sante stated.
Venezuela’s crude oil and condensate production came in at 684,000 barrels per day in 2022, according to the Energy Institute’s (EI) first, and the overall 72nd, statistical review of world energy, which was released earlier this year.
That figure marked a 9.1 percent year on year increase and 0.8 percent of total 2022 crude oil and condensate output, the review outlined. Venezuela’s production has dropped 12.4 percent annually from 2012 to 2022, according to the review.
Venezuela’s crude oil and condensate production hit 627,000 barrels per day in 2021, 608,000 barrels per day in 2020, 958,000 barrels per day in 2019, 1.55 million barrels per day in 2018, 2.10 million barrels per day in 2017, 2.46 million barrels per day in 2016, 2.74 million barrels per day in 2015, 2.57 million barrels per day in 2014, 2.56 million barrels per day in 2013, and 2.58 million barrels per day in 2012, the review showed.
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas