The US Treasury's Office of Foreign Assets Control (OFAC) has issued two new general licenses authorizing five major international oil companies—BP, Shell, Chevron, Eni, and Repsol—to negotiate and sign contracts with Venezuela and its state-owned oil company, PDVSA. This permission extends to investments in oil and gas operations, including new exploration, development, production, the expansion of existing operations, and the formation of new joint ventures.

Context and Conditions of the Licenses

The licenses mandate that any oil contracts with Venezuela must be governed by US laws. Furthermore, OFAC continues to prohibit businesses based in Russia, Iran, North Korea, Cuba, and China from negotiating oil deals with the country. This move is part of a series of sanctions rollbacks by OFAC following the ouster of President Nicolas Maduro, including earlier permissions for US operators to produce and sell Venezuelan crude and for oilfield services contractors to bring equipment into the country.

Background and Company Positions

The US policy shift aligns with recent changes in Venezuela's own hydrocarbon laws, revised to attract more foreign investment. The 2019 US sanctions on Venezuela's oil industry, enacted during the Trump administration, led many companies to leave or curtail operations. Chevron remained as the only US-based operator, while Eni and Repsol also maintained their presence. BP and Shell have been engaged in negotiations with the US regarding offshore gas developments in waters near Trinidad & Tobago, specifically concerning Shell's Dragon field and BP's Manakin-Cocuina field.

Notably, other majors with historical ties to Venezuela, ExxonMobil and ConocoPhillips, were not named in the new OFAC licenses. Both companies exited Venezuela in 2007 after asset seizures during a nationalization wave. ExxonMobil's CEO has expressed skepticism, calling the country "uninvestable" without security guarantees, while ConocoPhillips is focused on resolving a debt dispute with Citgo Petroleum.

Industry Outlook and Potential

Company leadership has expressed varying levels of interest. Chevron executives are notably enthusiastic about the potential to increase Venezuelan oil production within approximately two years. Shell's CEO has stated openness to opportunities. The regime change has also spurred significant interest from oilfield services contractors like SLB and Halliburton. Venezuela's appeal is underpinned by its massive resource base, holding the world's largest proven crude oil reserves, estimated at roughly 303 billion barrels.