- Chevron’s shares have fallen sharply over the last two days after U.S. crude futures on Monday fell into negative territory for the first time in history.
- Trump seeks to stifle trade in Venezuelan crude and remove Maduro’s grip on power
Trumps Law Of Power
Trump's administration on Tuesday gave Chevron Corp (CVX.N), the last major U.S. oil company still operating in Venezuela an ultimatum until Dec. 1 to “wind down” its business in the OPEC member-nation.
Trump's Administration turned the heat on socialist President Nicolas Maduro, as the U.S. Treasury Department imposed tight new restrictions on Chevron’s joint ventures with Venezuelan state-run oil company PDVSA, which could pave the way for the California-based company’s departure.
Chevron’s operating license exempting it from sanctions on Venezuela’s vital oil sector was due to expire on Wednesday.
The action targets what some Trump administration officials say is a key financial lifeline for Maduro as Washington seeks to stifle trade in Venezuelan crude and remove his grip on power.
Chevron and other U.S. oil companies have plunged amid a coronavirus-induced supply glut which threatens to tilt the once-booming U.S. oil industry into bankruptcy.
Treasury’s announcement will give a land mark of over seven months to wind down operations in Venezuela , where it has been active for about a century.
Treasury said Chevron, under a much more restrictive temporary license, would be allowed only to conduct transactions with PDVSA “necessary for the limited maintenance of essential operations in Venezuela or the wind-down of operations” by the beginning of December.
How is this a setback for Chevron?
Chevron holds stakes in four oil and gas joint ventures with PDVSA. Those include two of Venezuela’s largest oil fields - Petroboscan in western Zulia state and Petropiar in the Orionoco oil belt - which together produce around a quarter of the country’s total crude output.
Chevron last month canceled service contracts and procurement processes at the two joint ventures, a move the company attributed to falling crude prices.
The company said its share of output at its joint ventures dropped 16% in 2019 to 35,000 barrels per day, mirroring the decline in crude output across the country.
Chevron would be barred from the drilling, sale and transport of Venezuelan oil, infrastructure work except for safety reasons and any financial transactions with PDVSA. Treasury stopped short of formally ordering Chevron out of Venezuela, but will allow so little activity there that it might be untenable to stay.
How does this benefit Trump’s administration?
Trump aides have argued that Chevron staying in Venezuela was helping Maduro keep his grip on power.
The Trump administration has waged a “maximum pressure” campaign of sanctions and diplomatic measures in an effort to oust Maduro, whose 2018 re-election was considered a sham by most Western countries.
Venezuela’s oil exports have dropped by one-third since the United States and dozens of other countries recognized opposition leader Juan Guaido as the country’s legitimate interim president in January of last year.
But Maduro remains in power, backed by Venezuela’s military as well as Russia, China, and Cuba. Some U.S. officials have said this has been a growing source of frustration for President Donald Trump.