Venezuelan oil industry
Venezuela is an oil-rich country. According to the latest information, oil reserves in Venezuela are the largest in the world. Oil industry played a crucial role in the local economy for decades. However, when Hugo Chavez became the President of Venezuela, he nationalized most of the companies in the country. In 1999 years Chavez came to power country since then oil companies one by one left Venezuela. In 2013 his successor Nicolas Maduro became the president. For the last several years, the country with the biggest proven oil reserves is experiencing a severe economic crisis. Also, the Venezuelan oil industry is in trouble. People struggle to afford the bare necessities.
As mentioned above the oil industry in Venezuela is in a tough situation. Equipment used in oil production is becoming obsolete, and mismanagement is making the problem even worse for the industry. Frequent blackouts hurt the oil sector. For example, the main oil refinery complex CRP was forced to stop working for a certain period due to the blackout. This complex has the processing capacity of 955,000 barrels per day. This incident happened in July. Another problem is that more than 3 million people left the country, including the employees of the oil companies.
U.S. sanctions and Venezuelan oil industry
In this situation, every oil rig, as well as oil refineries, are essential to maintain the same level of daily production. Most of the European and U.S. companies stopped working in the country due to various reasons. At the moment, Russian Rosneft and Chinese NCPC continue to work with the Venezuelan government. However, there is one American company which is still present in the country, and this company is Chevron.
One of the biggest oil companies in the world decided to continue its operations in Venezuela. The U.S. imposed sanctions on government as well as private organizations which work with the Maduro’s government. The U.S. made one exemption from its sanctions list and gave permission to Chevron to stay in the country. However, there is a problem with this waiver, and the issue is that it will expire on July 27.
There are several options for the future of Chevron in Venezuela. First one is that Trump administration will offer another waiver to the company. Officials in the White House can’t agree on this topic as some of them wants this waiver to expire. Others, on the contrary, argue that Chevron should continue to operate in the country. The second option is not the best solution for Chevron. Venezuelan government threatened to seize its property and to sell it to Russian or Chinese companies.
At the moment, Chevron’s daily oil production in Venezuela is 40,000 barrels per day. This is not a huge amount, but we should take into consideration that overall daily production in the country is 200,000 bpd. Thus, Chevron is playing an important role in the Venezuelan oil industry.
It is a tricky situation. At the one hand, the decision not to renew the waiver will strengthen the sanctions. On the other hand, Chevron is reluctant to lose its assets in Venezuela. Also, it is important to mention that by continuing to operate in the country, the U.S. will have an opportunity to influence the Venezuelan government. In this case, it is a good idea to offer a waiver to Chevron.
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