Chevron keeps Venezuelan Oil flowing despite rising US pressure

Key takeaways

• CVX loaded cargoes on Searuby and Minerva Astra, with one shipment set to export 1 million barrels.
• CVX operates under a U.S. license and says its Venezuela exports comply fully with U.S. sanctions frameworks.
• CVX operates as Venezuela's output fell to 860,000 bpd in November amid sanctions and aging infrastructure.

Chevron Corporation (CVX - Free Report) , one of the world's largest oil and gas companies, has remained resilient in its operations in Venezuela, despite escalating geopolitical tensions and ongoing U.S. sanctions. Recently, the company completed loading its cargo onto the vessel Searuby and is currently loading another shipment onto the Minerva Astra, which is set to export a substantial 1 million barrels of crude oil, according to Bloomberg. This move comes just a day after U.S. President Donald Trump accused Venezuela of using oil revenues to finance illegal activities, including drug trafficking and terrorism.

Chevron’s strategic Oil export from Venezuela

CVX’s decision to continue its oil export operations from Venezuela is a significant development in the global oil and energy industry. The company holds a U.S. license that permits it to extract and export crude from Venezuela, which is home to some of the largest oil reserves in the world. Despite the challenges posed by the political landscape and the activation of a naval blockade by the Trump administration, CVX has reaffirmed its commitment to maintaining operations without disruption.

While Venezuela’s oil output has been experiencing a steady decline, CVX’s operations continue to function smoothly. According to Bloomberg tanker tracking, the company is actively transporting Venezuelan crude, indicating its ability to circumvent the growing challenges posed by U.S. sanctions and the blockade. Chevron has made it clear that all its operations are in full compliance with U.S. regulations and sanction frameworks.

Venezuela’s declining crude production

The International Energy Agency (“IEA”) has recently reported a sharp decline in Venezuela's crude production, estimating output at just 860,000 barrels per day in November, a significant drop from over 1 million barrels per day in September. This decrease can be attributed to several factors, including the tightening of U.S. sanctions and the country’s continued struggles with its oil infrastructure and financing. Venezuela’s oil industry, once a global powerhouse, has struggled to maintain production levels due to aging infrastructure, financial difficulties and a lack of sufficient foreign investment.

The U.S. sanctions, which aim to limit Venezuela’s ability to sell oil on the international market, have contributed significantly to the drop in production. The blockade imposed by the United States has made it more difficult for Venezuela to export oil, as sanctions prevent companies from engaging in transactions that benefit the Venezuelan government.

CVX’s compliance with US sanctions and legal frameworks

Chevron has made it clear that its operations in Venezuela are fully compliant with U.S. laws and the sanction frameworks designed to limit Venezuelan oil exports. In an official statement, the company emphasized that its activities are in strict accordance with both U.S. regulations and international laws. This has allowed CVX to continue operating in Venezuela without facing legal repercussions or sanctions.

One key aspect of CVX’s strategy has been its ability to cross the complex web of international regulations while ensuring that it remains within the limits of legal compliance. By adhering to these frameworks, CVX has been able to maintain a foothold in Venezuela’s oil industry, despite the restrictions placed on the country’s other oil companies.

Impact of US Naval blockade on Venezuela’s Oil exports

The activation of a U.S. naval blockade has been a game-changer in the geopolitical landscape surrounding Venezuela’s oil exports. The Trump administration’s decision to block sanctioned vessels from entering and leaving Venezuelan ports has added significant pressure to the country’s already strained oil sector.

Following the interception of the supertanker Skipper, the United States has ramped up its efforts to prevent Venezuela from conducting oil transactions with foreign nations. Since the blockade was enforced, multiple tankers have been forced to turn away from Venezuelan waters, highlighting the challenges that oil companies face in attempting to navigate the region. These ghost ships, which are vessels avoiding detection by U.S. authorities, add to the growing uncertainty surrounding Venezuela’s oil exports.

However, CVX’s vessels are not subject to the same sanctions as those operated by other oil companies. This distinction allows CVX to continue its shipments of Venezuelan crude without facing the same level of scrutiny or disruption that other companies have experienced. As a result, CVX has been able to maintain a steady flow of crude oil out of the country, despite the challenges posed by the blockade and U.S. sanctions.

The role of Russian naphtha in Venezuela’s Oil production

An additional layer of complexity is introduced by the shortage of Russian naphtha, a key ingredient used by Venezuela’s state-owned oil company, PDVSA, to dilute its heavy crude oil. Naphtha is critical for transforming Venezuela’s tar-like heavy crude into a more easily transportable product. However, the ongoing political tensions and sanctions have made it more difficult for PDVSA to obtain naphtha from its usual suppliers, including Russia.

The shortage of naphtha has caused disruptions in Venezuela’s oil production, as it has become increasingly difficult for PDVSA to process its crude oil. At least one tanker carrying Russian naphtha recently turned away from Venezuela due to the naval blockade, further exacerbating the country's production issues. As a result, Venezuela’s oil industry confronts a twofold challenge, with declining production caused by internal factors and external limitations, including insufficient access to necessary resources, compounding the crisis.

Looking ahead: The future of Venezuela’s Oil industry

Despite the ongoing challenges, the future of Venezuela’s oil industry remains uncertain but full of potential. As CVX continues to operate in the country, its ability to cross the complex geopolitical environment may serve as a model for other companies looking to engage with Venezuela’s oil industry.

Venezuela’s vast oil reserves offer significant opportunities for exploration and extraction. However, the country must overcome the hurdles of declining production, inadequate infrastructure and the impact of U.S. sanctions. In the short term, the nation’s oil output is expected to continue its decline, but in the long term, there may be opportunities for recovery if Venezuela can attract international investment and find ways to circumvent the sanctions that have plagued its oil sector for years.

CVX’s strategic approach to operating in Venezuela, while navigating the legal and political complexities, positions the company as a key player in the future of the country’s oil industry. However, the evolving geopolitical landscape will undoubtedly shape the future trajectory of both Venezuela’s oil production and CVX’s continued involvement in the country.

CVX's Zacks rank and key picks

Currently, CVX has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like USA Compression Partners (USAC - Free Report) and Oceaneering International (OII - Free Report) , sporting a Zacks Rank #1 (Strong Buy) each, and Patterson-UTI Energy (

PTEN - Free Report) , which carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

USA Compression Partners is valued at $2.78 billion. The company is a leading provider of natural gas compression services in the United States. USA Compression Partners specializes in the design, operation and maintenance of compression equipment for the energy sector, focusing on helping customers optimize their natural gas infrastructure.

Oceaneering International is valued at $2.36 billion. The company is a global provider of engineered services and products to the offshore energy, aerospace and defense industries. OII specializes in underwater robotics, remotely operated vehicles and subsea engineering solutions for offshore oil and gas exploration and production.

Patterson-UTI Energy is valued at $2.21 billion. The company is a leading provider of drilling and pressure pumping services to the oil and natural gas exploration and production industry in North America. Patterson-UTI Energy offers a wide range of services, including land-based drilling rigs, pressure pumping and other energy-related solutions, primarily focused on the U.S. shale oil and gas markets.