ONGC Videsh seeks US nod to operate projects in sanction-hit Venezuela under ‘Chevron model’

Written by Sukalp Sharma

New Delhi | Updated: August 30, 2024 10:34 PM IST

3 min read

The model is referred to as the Chevron model in the oil industry because US major Chevron was the first one to operate in Venezuela through this route. (Wikimedia Commons)

ONGC Videsh (OVL) has sought special approvals from the United States to operate two Venezuelan oil projects in a bid to recover over $500 million in pending dividends and increase production from the projects.

OVL’s Managing Director Rajarshi Gupta said the company wants to operate projects in Venezuela under the so-called “Chevron model”, which allows foreign oil companies to operate in sanction-hit Venezuela after receiving specific approvals from the US. The model is referred to as the Chevron model in the oil industry because US major Chevron was the first one to operate in Venezuela through this route.

Given Washington’s sanctions on the Latin American country’s oil and gas sector, companies cannot use American banking channels, services, and US dollars for these projects, unless they have a specific license from the Office of Foreign Assets Control (OFAC) of the US Department of Treasury. The specific license for this type of operation usually gives foreign companies major control over finances, operations, production, and marketing of oil from Venezuelan projects, despite Venezuela’s state-owned oil major Petróleos de Venezuela, SA (PDVSA) being the majority shareholder.

“You can do some operations subject to a few conditions. We have asked for some clarifications, and we have requested for a specific license to operate in Venezuela. That is in the final stages of consideration to the best of our understanding,” Gupta said Friday in an interaction with journalists, adding that the company was hopeful of receiving the specific license.

According to Gupta, if the OFAC approval comes in, OVL intends to use revenue from the projects to recover its dividends worth over $500 million that are currently stuck in Venezuela, apart from investing further to increase oil output from the two projects, and paying dividends to other project partners. OVL is the overseas investment arm of state-owned energy behemoth Oil and Natural Gas Corporation (ONGC).

The two projects — San Cristobal and Carabobo 1 — currently have a cumulative oil output of 12,000-15,000 barrels per day (bpd). With additional investment and wells, the output can easily be increased to around 30,000 bpd in a year and up to 45,000-50,000 bpd over the subsequent few years, Gupta said. OVL holds a 40 per cent stake in the San Cristobal project and 11 per cent in Carabobo 1. PDVSA is the majority shareholder in both projects.

Sukalp Sharma

Sukalp Sharma is a Senior Assistant Editor with The Indian Express and writes on a host of subjects and sectors, notably energy and aviation. He has over 13 years of experience in journalism with a body of work spanning areas like politics, development, equity markets, corporates, trade, and economic policy. He considers himself an above-average photographer, which goes well with his love for travel. ... Read More

Tags:

ONGC

ONGC Videsh seeks US nod to operate projects in sanction-hit Venezuela under ‘Chevron model’

Given Washington’s sanctions on the Latin American country’s oil and gas sector, companies cannot use American banking channels, services, and US dollars for these projects, unless they have a specific license from the Office of Foreign Assets Control of the US Department of Treasury.