Analysts have warned that the possible reinstatement of US oil sanctions on Venezuela in the coming month could impede the OPEC-member nation’s progress in crude oil production, erasing the modest gains it has made in recent years.
In January, Washington announced its intention to allow a temporary license granted to Venezuela last year to expire. This move was tied to demands for a fair presidential election involving international observation and the participation of an opposition-chosen candidate.
Following the initial imposition of oil sanctions on Venezuela in 2019, the US granted a license in October, enabling the state oil company PDVSA to resume crude exports to select customers, alleviate price discounts, and gradually increase oil output to 783,000 barrels per day (bpd) in the previous year, up from 569,000 bpd in 2020.
Francisco Monaldi, an expert on Latin American energy policy at Rice University’s Baker Institute, indicated that production is projected to see minimal growth until 2026, with a decline expected thereafter if oil sanctions are fully reinstated. However, the extension or partial renewal of the temporary license could drive output to slightly exceed 1 million bpd by 2025, as per a forecast by consultancy Rystad Energy presented at a Harvard University conference by Monaldi.
Monaldi highlighted the possibility of a scenario where the October-granted US license 44 might be renewed partially if Venezuelan President Nicolas Maduro complies with the electoral conditions outlined in the Barbados agreement.
The fate of other authorizations granted by Washington since 2022 to companies such as Chevron, Eni, Repsol, and Maurel & Prom remains uncertain. Monaldi suggested that if these individual licenses persist, production may experience a decline but not a collapse.
Despite a pact signed in Barbados between Maduro and the opposition setting conditions for a forthcoming presidential election, progress has been limited. Chevron’s Vice President of Midstream, Colin Parfitt, acknowledged ongoing risks related to licenses in Venezuela. Nevertheless, the company intends to sustain its Venezuelan oil production and exports to the US as long as the license remains valid.
Parfitt noted that Chevron lacks long-term incentives to invest in Venezuela under the current license terms, indicating that any potential production increase will be constrained by this factor.