Chevron - Shell Eyes Venezuela's Big Fields

The size of the oil reserves in Venezuela makes Chevron - Shell interested in entering. (Photo: Pixabay/RJA1988)

JAKARTA - Chevron and Shell are said to be closer to a major deal to increase oil production in Venezuela. If realized, this is the most significant step since the United States arrested President Nicolas Maduro in January, as well as a sign that Venezuela's oil industry is beginning to open up again to foreign players.

Citing Reuters on Wednesday, March 11, the opportunity arose after the Venezuelan National Assembly in late January amended the country's oil law. The new rules give foreign companies more room to manage, export, and sell Venezuelan oil, even if they are only minority partners of PDVSA, the state oil company.

Chevron is said to have agreed to initial terms to expand the Petropiar project in the Orinoco Belt. From this project, the US company has the opportunity to enter Ayacucho 8, a large block south of Petropiar whose oil reserves have been mapped. The additional area is important because it can encourage an increase in the production and export of Chevron's extra-heavy oil from Venezuela.

Reuters also reported that Chevron was seeking lower royalties as well as other tax and trade incentives opened up through the new rules. If the plan goes ahead, Chevron could expand the Petropiar production system to Ayacucho 8 and accelerate output growth. This move also has the potential to make Chevron the largest private producer in the Orinoco, an area that holds more than three-quarters of Venezuela's crude reserves.

Based on PDVSA documents seen by Reuters, Chevron and PDVSA last month produced about 90 thousand barrels per day of upgraded Hamaca crude oil, as well as 20 thousand barrels per day of vacuum gasoil at Petropiar. Total Venezuelan production currently stands at around 1.05 million barrels per day.

Shell is moving on the other side. Reuters said the company had signed an oil and gas preliminary agreement with Venezuela and was targeting the Carito and Pirital fields in North Monagas. These areas include the few areas of Venezuela that can still produce light oil, medium oil, and natural gas, commodities needed to mix heavy oil to make it easier to export.

However, the opportunity is not entirely smooth. The Venezuelan government is reviewing all oil and gas projects, while the US government is also examining the company's track record and compliance with sanctions before giving approval. Therefore, even though business opportunities are beginning to open up, the fate of the Venezuelan oil industry remains inseparable from the political tug-of-war, investment interests, and the shadow of sanctions.