Venezuela Signs Deals with Foreign Oil Firms Amid Chevron Departure

Venezuela's state-run oil company has signed deals with foreign service providers, including Chinese firms, after US sanctions forced Chevron to end production. The contracts grant exclusive rights to sell output and depart from the country's long-standing practice. At least one of the companies has decided not to proceed due to lack of US license. The deals are part of President Nicolas Maduro's strategy to maintain oil production and fill the void left by Western majors.

In response to the U.S. sanctions that forced Chevron to end production in Venezuela, the state-run oil company PDVSA has signed deals with foreign service providers, including Chinese firms, to maintain oil output. These contracts grant exclusive rights to sell the output, marking a departure from Venezuela's long-standing practices. At least one of the companies has decided not to proceed due to the lack of a U.S. license. These deals are part of President Nicolas Maduro's strategy to maintain oil production and fill the void left by Western majors.

The U.S. sanctions, which were imposed in February, canceled key licenses for a handful of partners and customers of PDVSA, including Chevron, that had allowed them to export Venezuelan oil under U.S. sanction exemptions. This has significantly reduced Venezuela's oil income, which was around $15 billion in 2024, by approximately 30% [1].

To compensate for this loss, the Venezuelan government has been increasing taxes and public service charges on the private sector. According to business leaders and analysts, these measures are expected to hinder already struggling private enterprises [1]. The industrial guild Conindustria's May survey found that 77% of businesspeople identified taxes as the main business obstacle, with 60% planning little to no increase in production in the coming months [1].

The government has also been conducting more audits and levying significant fines, adding pressure to a private sector already grappling with years of economic crisis, high inflation, and currency controls [1]. While some government officials praise the increase in tax collection, analysts see it as a temporary fix rather than a long-term budgetary strategy [1].

The deals with foreign service providers aim to mitigate the impact of the sanctions. However, the lack of a U.S. license for at least one of the companies indicates the challenges Venezuela faces in securing international partnerships. The contracts grant exclusive rights to sell the output, which could potentially increase PDVSA's revenue and help offset the losses from the U.S. sanctions.

The current economic environment in Venezuela is characterized by high inflation, which is expected to reach 200% by the close of 2025, and outage-prone public services that are no longer subsidized. These factors create a challenging environment for businesses and investors.

References:
[1] https://www.reuters.com/business/energy/venezuela-ramps-ups-taxes-private-sector-chevron-oil-exit-bites-2025-06-02/
[2] https://www.tradingview.com/news/invezz:d68fb1805094b:0-venezuela-shifts-tax-burden-to-private-sector-amid-crumbling-oil-revenues/