Chevron’s Exit Could Darken Venezuela’s Oil Sector and Economy

The Trump administration’s move to revoke Chevron’s operating license in Venezuela could regress the oil sector into corruption and attract significant discounts in the Asian market. This change threatens Venezuela’s economic recovery, relying heavily on external companies for oversight and transparency. Furthermore, the absence of Chevron’s operations may lead to substantial revenue losses and an increase in illicit oil trading activities.

United States President Donald Trump’s intention to revoke Chevron Corp.’s operating license in Venezuela could revert the country’s oil sector to its previous state of darkness, leading to increasing corruption and steep discounts in the Asian market. Chevron has provided essential transparency in the Venezuelan oil sector following a period of sanctions that lasted during Trump’s first term, helping the country avoid revenue losses that amounted to billions between 2020 and 2022.

The removal of Chevron could have dire consequences, as it would force President Nicolás Maduro’s government to depend on less reputable intermediaries for oil transport. Analyst Geoff Ramsey highlighted the risks associated with the absence of reputable Western energy companies, indicating that Maduro would be compelled to navigate a more clandestine oil export environment. With Trump’s latest announcement, questions arise regarding the future of other international oil companies operating in Venezuela, such as Repsol SA and Maurel & Prom.

A potential cessation of Chevron’s operations could hinder Venezuela’s economic recovery, ultimately exacerbating irregular migration—a challenge the Trump administration seeks to mitigate. The increased oversight from Chevron has not only reduced corruption but also alleviated the nation’s chronic fuel supply issues by facilitating the import of necessary materials independent of PDVSA’s declining output.

Chevron has expressed awareness of the president’s announcement and is evaluating its implications while maintaining compliance with all applicable laws and regulations. Prior sanctions imposed in 2019 prompted Maduro’s regime to unlawfully reroute shipments, leading to considerable financial losses as many vessels failed to deliver cargoes or generate payments to PDVSA.

With over 50 key individuals, including high-ranking officials, detained following corruption acts, Maduro has implemented tighter controls over the oil sector by appointing Vice President Delcy Rodríguez to oversee PDVSA’s operations. The potential withdrawal of Chevron within six months might compel PDVSA to redirect sales towards Asia at approximately 20% lower prices, resulting in a national revenue reduction estimated at up to $3 billion, seriously impacting future production sustainability.

In summary, the revocation of Chevron’s operating license by the Trump administration threatens to plunge Venezuela’s oil sector back into obscurity and corruption. The potential consequences include significant revenue losses, increased reliance on untrustworthy intermediaries, and complications that may exacerbate the country’s economic challenges and migration issues. Ensuring transparency and lawful operations within the oil sector remains critical for Venezuela’s recovery and stability.

Original Source: financialpost.com