By Marianna Parraga and Deisy Buitrago
HOUSTON/CARACAS (Reuters) – Venezuela’s loss of a key U.S. license that allowed it to export oil to markets around the world and secure investment is expected to impact the volume and quality of its crude sales and fuel, while sparking a flurry of requests for individual Agreement Authorizations in the United States.
US officials had warned that, absent progress from President Nicolas Maduro’s administration in implementing an election roadmap agreed last year, the US would not renew License 44, which has eased sanctions since October policies in force in the last five years.
On Wednesday, Treasury gave companies 45 days to close out pending transactions, particularly crude and fuel sales, through a more restrictive license.
It also said it would process specific authorization requests for business with Venezuela, a commitment that Venezuelan officials have said they expect the United States to honor. Many companies have been waiting for years for Washington to approve energy deals involving Venezuela.
But the Treasury also explained that “starting new businesses, including new investments previously authorized under License 44, will not be considered a liquidation activity”, raising questions about the type of transactions permitted.
Authorizations previously granted to oil companies included Chevron (NYSE:), Repsol (OTC:) and Eni have not been withdrawn, which ensures Venezuelan oil flows to the United States and Europe.
POLITICAL MOVES
The withdrawal of the most significant element of US sanctions relief marks a major step back from President Joe Biden’s policy of re-engagement with Maduro.
However, it stops short of a return to the “maximum pressure” campaign led by former President Donald Trump and could change depending on progress towards the election in the coming months.
Venezuela’s opposition is negotiating to choose its candidate for the July 28 presidential election, after both the winner of the primary and her alternate were barred from registering.
The license had allowed Venezuelan state company PDVSA to expand exports to pre-pandemic levels, improve cash flow and secure imports of diluents and fuel for the domestic market.
Under a separate authorization, about a fifth of Venezuelan exports are now sent by Chevron to US-based PDVSA, and the company has started talks to expand one of its joint venture areas.
More expansion projects are expected to get the green light from Venezuelan authorities before the 45-day closure period, Oil Minister Pedro Tellechea said on Wednesday.
RUN TO GET GOODS
In March, PDVSA oil exports rose to around 900,000 barrels per day (bpd), the highest level in four years, as customers rushed to complete purchases before the deadline. But the backlog of oil tankers waiting to load at Venezuelan ports has not decreased significantly, shipping data has shown.
The six weeks given by the United States to complete transactions may not be enough to fully resolve the bottleneck, forcing some oil importers to apply for specific licenses, traders said.
With the previous license and separate authorizations, Venezuela’s crude production increased to 874,000 bpd in March and two operational drilling rigs were added.
Without the license, PDVSA would again have to resort to little-known middlemen to sell its oil at discount prices, especially in Asia, unless sufficient individual authorizations are issued by the United States, experts said.
PDVSA’s finances, eroded by five years of sanctions, will also take a fresh hit, limiting access to the hard currency needed to afford everything from labor to contracts.