Chevron Steers Risky Path to Oil’s Biggest Prize in Venezuela

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The company, for its part, says its Venezuela operations help stabilize the local economy and the entire region, while complying with all US sanctions and laws. People familiar with Chevron’s internal discussions say its executives don’t welcome the increased public scrutiny that comes with the Venezuela position but believe the stay-put strategy is sound given the potential windfall. It also sends a message to other oil-rich governments around the world that Chevron is a partner for the long-term — even in difficult circumstances, they said.

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“We’ve been there through ups and downs, and like many places in the world, we have to take a long view on our presence in countries like this,” Chief Executive Officer Mike Wirth said this month on Bloomberg TV.

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Venezuela’s giant reserves long attracted international oil companies. That changed after Hugo Chavez, a protege of Cuban revolutionary Fidel Castro, won Venezuela’s presidency in 1998. The larger-than-life paratrooper turned socialist icon passed laws requiring the state to own 51% of any joint venture with foreign companies. It amounted to nationalizing the country’s oil industry. ConocoPhillips, then the largest foreign investor in Venezuela, refused the new terms and exited in the early 2000s. Exxon Mobil Corp. did the same. 

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Chevron decided to stay. Ali Moshiri, the company’s Latin America chief at the time, had a close relationship with Chavez and sought to build a partnership rather than leave. At one industry event in the mid-2000s, Chavez noticed Moshiri didn’t have a chair, so he jocularly offered his own. Moshiri accepted after an embrace and a series of back slaps. 

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“You can’t have an attitude of ‘in and out,”’ Moshiri told Bloomberg News in 2005. “We have to go where the oil is.”

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The bet paid off, at least to begin with. Oil prices climbed from $25 a barrel in 1999 to a record high of $146 in 2008, meaning Chevron and Venezuela were sharing a much bigger pie, even if the US company had a smaller slice. The relationship continued under Maduro after Chavez’s death in 2013. 

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Relations between Maduro and the US government, however, steadily worsened. Trump in his first administration placed sanctions on Venezuela’s oil industry, and President Joe Biden maintained them, sparking a period of intense lobbying by Chevron in Washington. Chevron argued that its Venezuelan oil played a critical role in US energy security, because Gulf Coast refineries are set up to run the heavy crudes that  Venezuela produces, people familiar with the lobbying efforts said at the time. Leaving the country would only hand more assets to Maduro while creating a void that Russian and Chinese companies could exploit, they said. 

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Facing a gasoline price spike in 2022 after Russia’s invasion of Ukraine, Biden relaxed sanctions, allowing Chevron to ramp up production. In an effort to save face against a regime with a deteriorating human rights record, the Biden administration’s public waiver expressly forbade Chevron from paying taxes or royalties to any Venezuelan state-owned entities. A secret private license, however, which was revealed by Bloomberg News in March, allowed these payments.

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Venezuela’s oil continued flowing — lowering US gasoline prices — while Chevron’s operations stayed within the law.  The episode underscored how much the US still benefited from Chevron’s presence in Venezuela even as it attempted to raise pressure on Maduro. 

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The Long Game

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Venezuela isn’t the first country in which Chevron has deployed its ‘hang around the oil’ strategy. 

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As Standard Oil of California, it made the first commercial discovery in Saudi Arabia in 1938 and has maintained a production presence there for seven decades, even as most of the kingdom’s oil is now produced by state-controlled Saudi Aramco. Chevron was the first oil major in Kazakhstan after the fall of the Soviet Union and endured technical and political challenges as it built up production to more than 1 million barrels a day over three decades.