Spain’s Repsol Gets US License to Expand Venezuela Operations, Double Output

Key Takeaway

• Repsol received a US Treasury license to continue and expand its operations in Venezuela, including new joint ventures with PDVSA.
• The expansion includes La Ceiba and Tomoporo fields, expected to double Petroquiriquire's output to 20,000 barrels per day.
• US sanctions push for fairer elections; up to 50 individual license requests from energy firms are under review.

Repsol's License Renewal

Spanish energy company Repsol SA has received a license from the US Treasury Department to continue its operations in Venezuela beyond May 31, according to sources familiar with the matter. This development comes as oil firms operating in Venezuela have been seeking permits from the US Treasury following the reimposition of sanctions by Washington last month. The license allows Repsol to maintain and expand its oil and gas business in the country, where it has several joint ventures with Venezuela's state oil company, Petroleos de Venezuela SA (PDVSA).

Repsol recently signed an agreement with PDVSA to add two large onshore fields, La Ceiba and Tomoporo, to one of their joint projects. These fields are expected to produce 20,000 barrels of oil per day, doubling the current output of the Petroquiriquire joint venture. The expansion, approved by Venezuela's National Assembly, aims to tap into the more than 5 billion barrels of oil in place in these areas.

US Sanctions and Political Context

The US has been using sanctions as a tool to push for fairer presidential elections in Venezuela, scheduled for July. Last year, Washington temporarily lifted restrictions on Venezuela's gold and oil sectors after President Nicolás Maduro's government and the opposition reached an agreement on electoral guarantees in Barbados. However, the reimposition of sanctions has led oil firms to seek individual licenses to continue their operations.

A US official mentioned that Washington is currently reviewing up to 50 individual license requests for energy businesses in Venezuela. The broad authorization that previously allowed Venezuela to export oil and receive investments expired in April. The US Treasury Department and the White House National Security Council did not immediately respond to requests for comment on the matter.

Repsol's Joint Ventures and Contributions

Repsol has three joint ventures with PDVSA, one of which includes Italy's Eni SpA. These ventures have been crucial in maintaining oil production in Venezuela, a country that has faced decades of mismanagement in its state-owned companies and the impact of US sanctions. The Spanish driller has also been instrumental in delivering fuel and refined products to PDVSA, helping to alleviate years of gasoline shortages in the country.

The US State Department has previously acknowledged that European companies with operations in Venezuela, including Repsol and Eni, could recover pending debt and joint venture dividends by taking and refining Venezuelan oil. This arrangement has been vital for these companies to continue their operations and investments in the region.

Management Quotes

• Josu Jon Imaz, CEO of Repsol:

  "In the next few months the assets are expected to produce 20,000 barrels a day, doubling what the European major currently produces in one of its three ventures."