VENEZEULA Trends and Developments Contributed by: Maryna Pogibko, Rafat A Rizvi and Mykhailo Grydzhuk, Amadeus
fully rehabilitated – essentially running before it can walk. Such conditions create opportunities, but only for participants willing to factor into their pricing the real costs of operating in a system still affected by outages, maintenance backlogs and infrastructure weakness. The early beneficiaries are likely to be parties that already have trading capability, refinery access, pro- ject execution experience and a high tolerance for jurisdictional complexity. OFAC’s Annex to GL 50A expressly names BP, Chevron, Eni, Maurel & Prom, Repsol and Shell as the companies benefiting from that broader authorisation. Chevron remains the mar- ket leader in Venezuela, but media reports indicate that Repsol is seeking to expand its presence aggres- sively. Three practical entry routes Trading and offtake The first route is cargo-based participation. OFAC FAQ 1227 states that GL 46B “authorises activities that are ordinarily incident and necessary to the lifting (which refers to the physical loading and removal of oil from a terminal, storage facility, or production site for delivery to a buyer), exportation, re-exportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil and petro- chemical products by an established U.S. entity”. The authorisation expressly covers logistics, marine insurance, shipping preparation, certain downstream activities, repairs necessary to load vessels, and the financing of cargos or receivables. This confirms that Venezuela’s reopening is not lim- ited to upstream investors. It also includes traders, commodity finance participants, logistics providers and downstream refiners, provided the transactions fall within the licence’s conditions. In addition, OFAC FAQ 1235 states that once a transaction with the gov- ernment of Venezuela, PdVSA or a PdVSA entity has been completed under the licence ‒ and the interests of any blocked entity are fully terminated ‒ the oil can be freely sold, resold and traded by downstream pur- chasers, including by non US entities. This is a highly significant commercial point. It means the US framework does not stop at the first point of
export; it is designed to produce legally transferable barrels in the downstream market once the sanctioned nexus has been addressed. For traders and refiners, that creates a pathway not only into cargo origination, but also into subsequent resale and processing. Services , equipment and operational support The second route is operational support. OFAC FAQ 1241 states that GL 48: “authorises the provision of goods, technology, software, or services from the United States or by a U.S. person for the explora- tion, development, or production of oil or gas in Ven- ezuela”. OFAC’s examples include insurance, main- tenance, refurbishment, spare parts, exploration and interpretation software, well stimulation products and payment processing for the underlying authorised transactions. This route is commercially underappreciated. The cur- rent reopening is likely to generate substantial demand not only for capital, but also for equipment, field ser- vices, maintenance capability, software, engineering support and supply-chain coordination. Given the state of Venezuela’s oil and gas infrastructure, many of the early commercially viable opportunities may lie in enabling production and export, rather than simply owning reserves in the ground. GL 47 also matters in this regard. OFAC FAQ 1240 defines diluent as “light hydrocarbon liquid, such as natural gas condensate, naphtha, or light crude oil, that is added to heavy crude oil or bitumen to reduce its viscosity and density in order to transport, export, store, or process more easily”. In a country whose oil base is heavily weighted toward extra-heavy crude, diluents are an integral part of the operating back- bone. New investment and project participation The third route is project-level participation. GL 49A authorises negotiations of and entry into contingent contracts for new investment in oil, gas, petrochemical or electricity sector operations in Venezuela, provided actual performance remains expressly contingent on separate OFAC authorisation. The licence in note 1 to paragraph (a) makes it clear that “contingent con- tracts” include bids, proposals, binding memoranda of understanding, executory agreements and similar
576 CHAMBERS.COM
Powered by FlippingBook