CheChee gets expanded U.S. license to resume oil production in Venezuela

WASHINGTON HOUSTON Reuters -- Chevron Corp was granted an expanded U.S. license allowing the second-largest U.S. oil company to resume production in Venezuela and import the South American country's crude into the United States.

The decision allows Chevron to revive existing oil projects in the U.S. sanctioned country and bring new oil supplies to refiners in the United States. It restricts cash payments to Venezuela, which could reduce the amount of oil available to Chevron.

U.S. officials said that license terms are designed to prevent Venezuelan state-owned oil firm PDVSA from receiving proceeds from Chevron's Venezuelan petroleum sales. The license will be renewed for six months and will be automatically renewed monthly, according to the U.S. Treasury.

A Chevron spokesman said the company was reviewing the license terms and declined immediate comment.

On the same day that Venezuela and opposition leaders began a political dialogue in Mexico City, the license was issued by the U.S. to ask the United Nations to oversee a fund to provide food, health care and infrastructure to Venezuelans.

Chevron is able to recover some of the billions of dollars owed by the PDVSA through the oil sales because of the terms barring it from helping the OPEC develop new oilfields. The license is subject to the United States' right to revoke or rescind it at any time.

The U.S. Treasury Department said this action reflects the longstanding U.S. policy to provide targeted sanctions based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy.

The authorization could provide limited new supplies of crude to a market that is struggling to replace Russian barrels that were shunned by Western buyers over its invasion of Ukraine. Chevron and other U.S. oil refiners could benefit from the supply of Venezuela's heavy crude flowing to their U.S. Gulf Coast processing plants.

Analysts cautioned that Venezuelan President Nicolas Maduro is likely to bristle at the restrictions included in the license, including the lack of cash payments that his administration sought. Proceeds from Venezuela's oil sales would go into a humanitarian fund rather than PDVSA, as a result of the proceeds from Chevron's oil sales.

There is not a big incentive in the short term for Venezuela, said Francisco Monaldi, an expert on Latin American energy policy at Rice University's Baker Institute for Public Policy. Depending on how the talks go in Mexico City, the terms could be relaxed over time.

We'll see how Maduro's government reacts to it and how many cargoes will be assigned to Chevron after, Monaldi said.