Venezuela has more oil reserves than Saudi Arabia. After the US eased sanctions, oil companies poured into the country to seek opportunities — risking the sanctions being reinstated at any time.
Executives from many oil companies around the world are flocking to Venezuela, hoping to take advantage of the US easing of sanctions — although the reinstatement of sanctions may come as fast as an unexpected relaxation.
Last month, the US Biden administration decided to ease sanctions for six months, providing permits to allow oil companies to operate relatively freely in Venezuela. This decision came as a surprise to many industry insiders. A number of international oil companies have sent representatives to Venezuela, including Royal Dutch Shell (RDS.A.N), Spanish Repsol, Hungary, Molniert, Hungary, Maha Energy, Sweden's Maha Energy, Trinidad and Tobago National Gas Company, and Bolivian National Gas Company.
People familiar with the matter said that in recent weeks, these foreign oil executives met with the National Petroleum Corporation of Venezuela (PDVSA) and government officials responsible for promoting international investment. People familiar with the matter also said that these companies are usually either trying to rewrite contracts, obtain rights to use oil and gas fields, or go to Venezuela to collect debts. In any case, they are actually betting that the US government will not re-impose restrictions on oil and gas companies operating in Venezuela.
Venezuela cooperates with more than 40 foreign and local oil companies, some of which have suspended their activities due to difficult business conditions. The government is now seeking to replace suspended businesses with companies willing to make new investments and production.
The government's target production is 1 million b/d, currently around 750,000 to 800,000 barrels. The country has reserves of around 300 billion barrels, more than Saudi Arabia. Asdrúbal Oliveros (Asdrúbal Oliveros), head of Caracas-based consulting firm Ecoanalitica, said that if the US extends the license for another six months after the license expires in March, the country may achieve this goal by the end of next year.
There is a risk of sanctions being reinstated at any time
The condition for Washington to ease some of the sanctions is that Maduro's government has made significant progress in holding fair elections by the end of November, including formulating procedures for unqualified candidates to vote next year. Maduro has yet to do this, so it also poses the risk of a “quick resumption of sanctions.” The US is likely to re-impose strict restrictions on the Venezuelan oil industry, making it almost impossible for foreign drillers to operate there.
US Assistant Secretary of State for Western Hemisphere Affairs Brian Nichols said this month: “If they don't take the agreed steps, we will cancel the license granted.” However, the US may be reluctant to re-impose sanctions because the recovery of the Venezuelan oil industry will help offset the impact of last year's sanctions on Russia on the international oil market, and its strong economic performance will also help curb immigration into the US.
According to reports, on the evening of November 27, Venezuelan President Nicolas Maduro said in a live television broadcast that America's high-pressure sanctions are like unconventional weapons, causing huge damage to its economy and society, demanding that “the US must lift the sanctions and stop extortion.”