US oil major Chevron is in preliminary talks with the Venezuelan Government as it seeks to gain more control over the country’s oil and gas assets, Bloomberg reported.

The talks between Chevron’s Venezuela unit and the state-owned oil company Petroleos de Venezuela (PDVSA) come as the country looks to increase production to two million barrels per day, the news agency reported, citing two people familiar with the matter.

One scenario under consideration in the talks involves PDVSA having the financial control in joint ventures (JVs) with Chevron while the operational aspects, such as accounting, payment to service providers, and technical decisions, would be handed over to the US firm.

In return, Chevron will raise its revenues from the JVs, and cut those sales from the debt of more than $3bn owed by the state-owned oil company.

The debts are associated with the previous investments made by Chevron and the sales it could not register because of the US sanctions imposed on the South American country. 

An agreement would only be possible if Chevron receives a special waiver from the US Treasury that will enable it to enter into more formal discussions.

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By GlobalData

The other scenario under discussion involves the transfer of majority stakes in the JVs by PDVSA to the US firm if the US eases sanctions on Venezuela’s oil industry.

Amendments have to be made to Venezuelan legislation for this scenario to materialise.

In 2020, the US imposed sanctions banning US firms from investing and undertaking financial dealings with the Venezuelan Government or its agencies.  

Chevron spokesman Ray Fohr told Bloomberg: “We continue to conduct our businesses in compliance with the current sanctions framework, provided by the US Office of Foreign Assets Control.”

Chevron and PDVSA jointly operate four oil fields which produced approximately 200,000 barrels per day before the US sanctions. These fields now produce approximately 140,000 barrels per day, according to the publication.

Chevron owns an estimated 25% to 39% stake in the four JVs and is being operated under a treasury license to produce the minimum required to protect employees and preserve assets.

As per the current Venezuelan law, overseas firms cannot own more than 49.9% of assets.

As the licence is due to expire in June 2022, Chevron is seeking a renewal from the US Treasury and considering selling its Venezuelan production to the US.

Following US economic sanctions, which were first imposed in Venezuela in 2017, several foreign firms such as France’s TotalEnergies and Norway’s Equinor have exited in recent years, citing the country’s deteriorating conditions.

The country considers foreign companies such as Chevron to be critical in boosting its production capacity.

Last month, Chevron announced its earnings of $5.1bn in the fourth quarter of 2021.