Chevron, Shell Near First Major Oil Deals in Venezuela

Chevron and Shell Near Major Oil Production Deals in Venezuela After Oil Law Reform​

Chevron and Shell are reportedly close to securing the first major oil production agreements in Venezuela since the United States captured President Nicolas Maduro in January. According to five sources familiar with the negotiations, the deals could allow the two global energy companies to expand production in key oil regions of the South American nation.

The developments come amid broader efforts to revive Venezuela’s oil sector, which has suffered decades of underinvestment and operational decline.

Venezuela Reforms Oil Law to Attract Foreign Investment​

In late January, Venezuela’s National Assembly approved a sweeping reform to the country’s main oil law. The new framework allows foreign companies to operate, export and sell Venezuelan oil even when they hold minority stakes in projects alongside state-owned oil company PDVSA.

The legislative change has opened the door for international oil firms to increase participation in the country’s energy sector and expand existing projects.

Chevron Plans Expansion in the Orinoco Belt​

Sources indicated that Chevron and Venezuelan energy authorities have reached preliminary agreements to expand Chevron’s largest oil venture in the country, the Petropiar project located in the vast Orinoco Belt.

Under the proposed arrangement, Chevron would obtain rights to produce crude from the Ayacucho 8 block, situated south of the Petropiar project area. The block contains proven oil resources and could significantly increase Chevron’s production of extra heavy crude.

Chevron is also seeking a reduced royalty rate along with tax and trade incentives that are available under the newly approved legislation for companies developing greenfield oil and gas projects.

Although PDVSA conducted exploration and appraisal activities in Ayacucho roughly two decades ago, the area has remained largely undeveloped.

Chevron and PDVSA may extend the existing well cluster production system used in Petropiar into the Ayacucho 8 block. This approach could allow production to ramp up relatively quickly. If the project moves forward, it would represent Chevron’s fifth oil development area in Venezuela.

Currently, Chevron and PDVSA produce about 90,000 barrels per day of upgraded Hamaca crude and 20,000 barrels per day of vacuum gasoil at Petropiar, according to a PDVSA document. Venezuela’s total crude production stands at around 1.05 million barrels per day.

The expansion could position Chevron as the largest private oil producer in the Orinoco region, which holds more than three quarters of Venezuela’s crude reserves.

Shell Advances Oil and Gas Agreements​

Shell has also moved forward with preliminary oil and gas agreements with the Venezuelan government. These agreements were signed last week during a visit to Caracas by US Interior Secretary Doug Burgum.

While the Venezuelan government has not publicly disclosed the specific details, an official summary document indicates that Shell aims to develop the Carito and Pirital fields located in the Monagas North region in eastern Venezuela.

These fields are among the few areas in the country capable of producing light and medium crude as well as natural gas. Such resources are particularly valuable for blending with Venezuela’s heavy oil to facilitate exports.

Shell confirmed signing several agreements with the government involving engineering firms Vepica and KBR as well as oil services company Baker Hughes. The agreements outline Shell’s intention to explore opportunities in offshore gas, onshore oil and gas, exploration projects, local workforce development and industrial partnerships.

Focus on Gas Development and Reduced Flaring​

Monagas North is also aligned with Shell’s broader strategy centered on natural gas development. The region is located near existing onshore gas infrastructure and includes areas with some of the highest gas flaring levels in Venezuela.

Energy companies including Shell and Maurel & Prom have previously designed plans to reduce gas flaring by building infrastructure to capture, process and transport the gas for export. One possible route for exports could involve transportation through Trinidad.

The Punta de Mata area, which includes the Pirital and Carito fields as well as the nearby El Furrial field, produced approximately 94,000 barrels per day of crude and about 1.03 billion cubic feet per day of natural gas last month. Around 350 million cubic feet per day of gas from the area was flared.

Shell’s only project in Venezuela before these agreements was the Dragon offshore gas development near Trinidad. The project has faced delays after the United States imposed sanctions on Venezuela’s energy sector in 2019.

Broader Talks With Global Energy Companies​

PDVSA and Venezuela’s oil ministry are also holding discussions with roughly a dozen joint venture partners interested in expanding operations into nearby fields, mature production areas or undeveloped greenfield blocks.

Among the companies seeking to increase their operations are Spain’s Repsol and France-based Maurel & Prom. Repsol has previously stated that it has more than $5 billion in outstanding debt to recover in Venezuela that accumulated during the period of sanctions.

Chevron is also negotiating with the Venezuelan government to return two undeveloped offshore natural gas areas linked to the Plataforma Deltana project along the maritime border with Trinidad and Tobago. These blocks could later be offered to private investors.

Government Review of Oil and Gas Projects Underway​

Meanwhile, Venezuela began a comprehensive review of all oil and gas projects in February. The review initially focused on production sharing contracts signed by the Maduro administration with lesser known companies and has recently expanded to include joint ventures with larger international partners.

As part of the review process, the government has asked companies to submit documentation related to their projects.

During the review, PDVSA has temporarily taken over administration and oil sales for several production sharing contracts.

Officials from the oil ministry have informed industry executives that the review process is expected to conclude by the end of March. Projects that remain inactive or fail to meet investment commitments could face contract cancellations.

At the same time, the US government is conducting checks on company credentials and sanctions compliance before approving any new or existing partnerships related to Venezuela’s energy sector.