The US Office of Foreign Assets Control (OFAC) has issued two new general licences, 49 and 50, allowing European oil majors—specifically Shell, Eni, Repsol, and BP—to enter into agreements or transactions with Venezuela and its state oil company, PDVSA. These licences permit companies to resume, continue, or initiate new oil and gas exploration and production activities in the country, representing a step toward normalizing operations.

Company Reactions and Operational Context

While the European majors view the licences as a positive and necessary development, they remain cautious due to a lack of detailed clarity. Shell welcomed the issuance but is reviewing the licences to understand their specific implications for its potential projects, including the offshore Dragon gas field intended to supply Trinidad for LNG production. Eni noted that, as general licences, they do not spell out specific implications; detailed applications, including methods for recovering approximately $3 billion in accrued debt from PDVSA, will require further dialogue with the US Administration. Eni currently produces about 64,000 barrels of oil equivalent per day in Venezuela, mainly gas from the offshore Perla field, a joint venture with Repsol. Repsol, in a similar situation, produces around 45,000 boepd, primarily gas for the domestic market, and has been unable to monetize supplies due to sanctions.

Limitations and Required Clarifications

The licences are seen as an important enabler but lack the detail companies need to fully understand the implications for their specific operations. More clarity is required on the legal framework for new operations or ramping up existing ones. A key ongoing restriction is that US sanctions still bar operators from lifting and monetizing the crude they produce. However, OFAC has taken some steps to address access, having previously allowed US operators to produce, transport, and sell Venezuelan crude, and has now also permitted oilfield services contractors to bring equipment into the country.

Broader Developments and Potential Outcomes

Additional factors are contributing to a changing environment. Large trading companies like Vitol and Trafigura have been able to move Venezuelan cargoes under US licences, with at least one reaching a European refinery. Furthermore, the Venezuela National Assembly recently voted to overhaul its hydrocarbon laws to allow more foreign investment. Collectively, these developments could open the door for European majors to potentially re-establish payment agreements with PDVSA, either in cash or through swap deals. However, any such outcome remains dependent on US political willingness and cooperation from the Venezuelan government.