Chevron Steers Path to Oil's Biggest Prize in Venezuela
It Remains the Only Global Oil Company With Access to Venezuela’s Immense Crude Reserves
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For almost two decades, oil giant Chevron Corp.’s stubborn persistence in Venezuela looked like folly:withbillion-dollar investments constantly under threat from the tug-of-war between Caracas and Washington.
Now, however, that strategy has placed the world’s biggest petroleumprize within Chevron’s reach.
As tensions mount between Venezuela and the U.S., Chevron remains the only global oil company with access to the country’s immense crude reserves —the largest known. Should President Donald Trump, who has deployed a fleet of warships to the Venezuelan coast, attack and overthrow the government, no company would be better positioned to help rebuildthe country’s battered oil industry. Should Trump and Venezuelan President Nicolás Maduro strike a deal, the country would need to export as much oil as possible to generate cash —again benefiting Chevron.
The Houston company’s unique position carries big risks—not least to its people —if hostilities break out.Chevron could still find itself shut out of the country by either Maduro or Trump, a fate that has befallen multipleforeign oil companies in Venezuela over the years.
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But both Trump and Maduro have reasonto see Chevron as a useful ally, and neither side has moved to haltthe company’s operations during the current standoff. As ofDec. 18, Chevron was preparing to export 1 million barrels of Venezuelan crude, according to Bloomberg tanker tracking—aday after Trump labeled the country’s government a “foreign terrorist organization.”Chevron produces about 200,000 barrels a day from multiple joint ventures with Venezuela’s nationaloil companyand exports its share of production to U.S. refineries on the Gulf Coast.
“These are very tough waters to navigate,” said Francisco Monaldi, director of Latin American energy policy at Rice University in Houston. “But Chevron is a very attractive partner for Venezuela and the U.S. government. It a very strong strategic position in almost any possible scenario.”
The situation for most of the Venezuelan oil industry is bleak.
Trump’s blockade in the southern Caribbean means state-owned Petróleos de Venezuela SA can no longer export crude through its shadow fleet of “ghost vessels” to China and may have to start shutting in wellswithin 10 days. Acyberattackhit Venezuela’s main export terminal in December, while air travel in and out of the country has largely halted aftersignal jammingand U.S. warningsof heightened military activity.
Successive U.S. administrations have slapped sanctions on Venezuela, as Maduro tightened his grip on power. But Chevron, which started exploring for oil there in 1923, has obtainedspecial licensesto circumvent sanctions. And while the Venezuelan government arrested (and later released) two Chevron employees in a2018 probeof alleged corruption, Maduro often praisesthe company, saying he wants it tostay for “another 100 years.”
A Unique Arrangement
It’s an unusualarrangement that racks up enemies in both Caracas and Washington.American critics, whoat times have included Secretary of State Marco Rubio, accuse the company of funneling billions of dollars to a brutal, corruptregime. Some hardliners within Venezuela’s ruling party, meanwhile,see Chevron as a symbol of U.S. imperialism and want to end foreign influence over their country’s biggest industry.
The company, for its part, says its Venezuela operations help stabilize the local economy and the entire region, while complying with all U.S. sanctions and laws. People familiar with Chevron’s internal discussions say its executivesdon't welcome the increased public scrutiny that comes with the Venezuela position but believe the stay-put strategy is sound given the potential windfall. It also sends a message to other oil-rich governments around the world that Chevronis a partner for the long term — even in difficult circumstances, they said.
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“We’ve been there through ups and downs, and like many places in the world, we have to take a long view on our presence in countries like this,”CEO Mike Wirth said this month on Bloomberg TV.
Venezuela’s giant reserves long attracted international oil companies. That changed afterHugo Chavez, a protegeof Cuban revolutionary Fidel Castro, won Venezuela’s presidency in 1998. The larger-than-life paratrooperturned socialist iconpassed laws requiringthe state to own 51% of any joint venture with foreign companies. It amounted to nationalizingthe country’s oil industry. ConocoPhillips, then the largest foreign investor in Venezuela, refused the new terms and exited in the early 2000s. Exxon Mobil Corp. did the same.
Chevron decided to stay. Ali Moshiri, the company’s Latin America chief at the time, had a close relationship with Chavez and sought to build a partnership rather than leave. At one industry event in the mid-2000s, Chavez noticed Moshiri didn’t have a chair,so he jocularly offered his own. Moshiri accepted after an embrace and a series of back slaps.
“You can’t have an attitude of ‘in and out, ' " MoshiritoldBloomberg News in 2005. “We have to go where the oil is.”
Chevron does business in the country through joint ventures with state-owned company Petroleos de Venezuela S.A., commonly known as PDVSA. (JHVEPhoto/Getty Images)
The bet paid off, at least to begin with. Oil prices climbed from $25 a barrel in 1999 to a record high of $146 in 2008, meaning Chevron and Venezuela were sharinga much bigger pie, even if the U.S. company had a smaller slice. The relationship continued under Maduro afterChavez’s death in 2013.
Relations between Ѳܰand the U.S. government, however, steadily worsened. Trump in his first administration placed sanctions on Venezuela’s oil industry, and President Joe Biden maintained them, sparking a period of intense lobbying by Chevron in Washington.Chevron argued that its Venezuelan oil played a critical role in U.S. energy security,because Gulf Coast refineries areset up to run the heavy crudes that Venezuela produces, people familiar with the lobbying efforts said at the time. Leaving the country would only hand more assets to Maduro while creating a void that Russian and Chinese companies could exploit, they said.
Facing a gasoline price spike in 2022 after Russia’s invasion of Ukraine, Biden relaxed sanctions, allowing Chevron to ramp up production. In an effort to save face against a regime with a deteriorating human rights record, the Biden administration’s public waiver expressly forbade Chevron from paying taxes or royalties to any Venezuelan state-owned entities. Asecret private license, however, which was revealed by Bloomberg News in March, allowed these payments.
Venezuela’s oil continuedflowing —loweringU.S. gasoline prices —while Chevron’s operations stayed within the law. The episode underscored how much the U.S. still benefited from Chevron’s presence in Venezuela even as it attempted to raise pressure on Maduro.
The Long Game
Venezuela isn’tthe first country in whichChevron has deployed its ‘hang around the oil’ strategy.
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As Standard Oil of California, it made the first commercial discovery in Saudi Arabia in 1938 and has maintained a production presence there for seven decades, even as most of the kingdom’s oil is now produced by state-controlled Saudi Aramco. Chevron was the first oil major in Kazakhstan after the fall of the Soviet Union and endured technical and political challenges as it built up production to more than 1 million barrels a day over three decades.
But the strategy is not without costs. It exposes Chevron to disruptions from conflicts around the world. Meanwhile, critics pillorythe companyfor partnering with anti-democratic governments that use oil money to suppress human rights. That includes Venezuela.
“Companies like Chevron are actually providing billions of dollars of money into the regime’s coffers,” Rubiosaidin January. “And the regime kept none of the promises that they made.”
While Trump and Rubio have refrained from saying they want to oust Maduro, they have steadily ratcheted up pressure on him. And weakoil prices,now trading near their lowest level in four years, have allowed the U.S. to act more aggressively, according Carlos Bellorin, an executive vice president at Welligence Energy Analytics.
Trump“can afford to disrupt Venezuelan flows with far less risk of a price spike, especially one that would hit U.S. gasoline prices,” he said.Blockading sanctioned oil tankers in the south Caribbean helps Trump remove a key source of revenue from Maduro, whose government has become adept at using “dark fleet”vessels that turn off or spoof their transponder signals to export oil despitesanctions.
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If there were regime change in Venezuela, it’s unlikely Chevron would be only oil major interested in the country. Exxon would look at any potential opportunity but wouldbe cautious because its assets there have been expropriated in the past, CEO Darren Woods said in aninterviewlast month.
“I wouldn’t put it on the list or take it off the list,” Woods said. “We’d have to see what the circumstances are at the time.”
Chevron CEO Wirth, in contrast, remainssteadfast that the company will be staying, despite the difficulties.
“We don’t choose where the resource is,” he said at the Wall Street JournalCEO Council Summitearlier this month. “If we left every time we had a disagreement with the government, we would be leaving everywhere —including this country.”
