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Amid tightening supply of heavy oil on global markets Chevron is asking the Trump administration for sanction relief in Venezuela so it could continue doing business there, Bloomberg reports quoting sources close to the company, noting that the U.S. supermajor is currently operating under sanction waivers that expire in late July and is hoping for an extension.
Chevron, together with Venezuela’s PDVSA, operates the Petroboscan joint venture, in which it holds a 39-percent stake. Like PDVSA’s other JVs, Petroboscan suffered production outages earlier this year after a series of blackouts hit Venezuela. The country’s total oil production has fallen sharply—averaging 768,000 bpd in April—and it will fall by another 300,000-400,000 bpd if Washington refuses to extend Chevron’s and others’ sanction waivers, according to an energy analyst who spoke to Bloomberg.
“The Trump administration will have to reconcile that volume with the value of maintaining a strong U.S. foothold in the country,” David Voght from IPD Latin America said.
The United States slapped new sanctions on Caracas in January, after the inauguration of Nicolas Maduro for a second term as president. The U.S. decried the elections as illegitimate and threw its support behind opposition leader Juan Guaido. Despite Guaido’s active efforts to undermine the incumbent government with the help of Washington, Maduro has proved hard to remove despite continuing protests and Guaido’s takeover of Citgo, Venezuela’s U.S. business.
As one of the few major suppliers of heavy crude, Venezuela has become the main contributor to a shortage of this sort of crude that has seen many refineries—including ones in Asia and the U.S. Gulf Coast—take a hit on margins. The tightening supply of heavy crude also saw some heavy grades trade at a premium to lighter crudes in a reversal of the traditional price differences, which are in favor of light crude.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.