Rystad Energy believes that though U.S. sanctions are back on Venezuela, there remains room to negotiate with the Nicolas Maduro-led administration through the provision of special licenses.
Senior Vice President at Rystad Energy Jorge León, weighed in on the development, highlighting the nuanced approach taken by the US. He remarked, “Is the ‘maximum pressure’ campaign back, or is there some middle ground this time? We believe it is more of the second.”
Sanctions were reimposed after Maduro failed to fulfill its commitments under the Barbados Agreement, particularly regarding preparations for a fair and internationally monitored presidential election in 2024. Concerns over the fairness of the upcoming elections have been mounting, compounded by obstacles faced by opposition leaders such as Maria Corina Machado. Washington did not renew General License 44, which previously authorized transactions related to Venezuela’s oil and gas industry. While this renders dealings in Venezuelan oil illegal for US-based companies, a 45-day wind-down license has been granted to facilitate the orderly conclusion of existing operations.
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Rystad Energy pointed to notable exceptions. It said Chevron, a major player in Venezuela’s oil sector, retains permission to produce and export volumes to the U.S. under General License 41.
“It is noteworthy that Chevron has already hit 170,000 barrels per day (b/d) of oil production and aims to touch 200,000 b/d by the end of the year. Secondly, the Department explicitly mentions it will consider requests by companies for special licenses to operate in Venezuela beyond the wind-down period. The fate of separate U.S. authorizations previously issued to Repsol, ENI and Maurel & Prom remains to be seen – but with the U.S. seeming quite open to issue special licenses, we can expect some positive news,” he explained.
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While the impact of the sanctions on Venezuelan crude production is expected to be substantial, Rystad Energy’s initial view suggests potential upside if negotiations for specific licenses or a reversal of the sanctions decision materialize.
Rystad Energy said these possibilities gain significance against the backdrop of impending peak summer demand and evolving market dynamics, including challenges in sourcing heavy crude from alternative regions.
