Chevron, Shell Closing in on First Big Oil Production Deals in Venezuela Since US Captured Maduro

International oil majors Chevron and Shell are closing in on the first big oil production deals with Venezuela since the U.S. capture of President Nicolas Maduro in January, five sources close to the negotiations told Reuters.
The deals would allow both companies to boost production in coveted oil regions in the South American country, the biggest steps to date toward what U.S. President Donald Trump has said would be a $100 billion effort to rebuild Venezuela’s oil industry after decades of mismanagement and underinvestment under Maduro and his predecessor Hugo Chavez. Venezuela’s National Assembly in late January approved a sweeping reform of the country’s main oil law. It now grants foreign companies autonomy to operate, export and sell Venezuelan oil even when they are minority partners of state-owned oil company PDVSA.
Chevron and Venezuela’s energy authorities have agreed on preliminary terms to expand Chevron’s largest oil project, Petropiar, in the vast Orinoco Belt, two of the sources said.
Venezuela’s oil ministry, PDVSA and Chevron did not reply to requests for comment. The deal would give Chevron the rights to produce from the Ayacucho 8 area located south of the Petropiar project area, the two sources added, a large block with proven oil resources. This would allow Chevron to make a substantial increase in the extra-heavy oil it produces and exports. Chevron aims to secure a reduced royalty rate for the new area and other tax and trade incentives offered to companies under the new legislation to develop greenfield oil and gas areas, according to the two sources. PDVSA completed exploration and appraisal in Ayacucho about two decades ago but it remains largely undeveloped. Chevron and PDVSA could extend their well-cluster production system in Petropiar to Ayacucho 8, allowing them to boost output relatively quickly, the sources added. The project would be Chevron’s fifth oil area in Venezuela. The project could turn Chevron into the biggest private producer in the Orinoco, which holds over three quarters of the country’s total crude reserves. Rival U.S. company ConocoPhillips used to be that region’s top foreign producer before it left Venezuela two decades ago following a wave of nationalizations.
Chevron and PDVSA were producing around 90,000 barrels per day (bpd) of upgraded Hamaca crude and 20,000 bpd of vacuum gasoil at Petropiar last month, according to a PDVSA document seen by Reuters. Venezuela’s total production is around 1.05 million bpd.