European oil companies are pressing Venezuelan President Nicolas Maduro for greater control of their operations in Venezuela, after U.S. driller Chevron Corp. renegotiated its contract last year.
Italy’s Eni SpA and Spain’s Repsol SA are reviewing drafts of contracts after holding a series of meetings with high-ranking members of government in which they asked for operational control at oil and gas ventures jointly held with state energy company PDVSA, according to people familiar with the matter who asked not be named because the information is private.
Chevron received a similar deal last year, raising expectations from analysts that Venezuela would give other energy companies broader control over joint ventures. Eni, Repsol and French company Maurel et Prom have the capacity to pump an additional 50,000 to 80,000 bpd if they increase operations in the South American country, according to Francisco Monaldi, lecturer in energy economics at Rice University’s Baker Institute for Public Policy.
While even an extra 80,0000 bpd would do little to immediately impact global energy markets, the move would be the latest sign of an advancing political agenda in the nation. Maduro used the Chevron deal to call on the U.S. to ease more sanctions on the country’s beleaguered oil industry.
It would also add to Venezuela’s efforts to increase oil production in an industry responsible for the vast majority of its exports. The country’s current output of around 690,000 bpd is roughly one-third of what it was five years ago, according to OPEC.
Eni declined to comment. Repsol didn’t reply to request for comment. Venezuela’s oil ministry office and Petroleos de Venezuela SA didn’t reply to a request for comment.
Venezuela has faced the hurdle of economic sanctions. Increasing oil output would help to shore up the region’s economies, which deal with some of the worst wealth inequality in the world, while also helping to boost tight global energy supplies.
If the European oil companies are granted more control from the Venezuelan government, it isn’t clear if the companies would need an additional permission from the U.S. Treasury to avoid secondary sanctions before increasing production.
Eni and Repsol began negotiations with Venezuelan officials, including Vice President Delcy Rodriguez, in mid-2022. But the negotiations have taken on momentum more recently, according to the people. The Venezuelan government has requested that in exchange for more control at oil fields, the companies make investments in gas projects.
Venezuela’s oil and gas production has suffered since the U.S. slapped the country with sanctions in 2019. Eni and Repsol ventures have also decreased. Both companies hold a waiver from U.S. Treasury Department that lets them take oil shipments from PDVSA to offset 2022’s sales from a natural gas project to supply the domestic market.
In a recent move, they agreed to a swap deal to load 4 million barrels of Venezuelan oil through March to continue an agreement reached with Maduro to offset PDVSA debt.
In November, the U.S. Treasury eased some restrictions on Chevron, allowing the firm to produce and export Venezuelan oil. With more control over its operations, Chevron has raised its oil production to 90,000 bpd from 50,000 bpd, helping it recoup part of the debt owed by PDVSA.
The move from the U.S. government came as President Joe Biden asked American oil companies to boost oil production in order to combat higher gasoline prices that have burdened consumers.