Quick overview

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Chevron and Shell move closer to securing rights to develop oil- and gas-rich areas as they seek to expand production. The potential deals come amid growing pressure on the global hydrocarbons market.

Chevron and Shell are close to signing the first major oil production agreements with Venezuela since the United States captured former leader Nicolás Maduro on January 3. The partnerships would allow the oil majors to explore highly sought-after areas within the country, at a time when tensions in the Middle East are disrupting global energy trade.

The talks follow a sweeping reform of Venezuela’s main hydrocarbons law, approved by the National Assembly in late January. The legislation grants foreign companies greater autonomy to operate, export, and sell Venezuelan crude—even if they hold minority stakes in the state-owned oil company PDVSA.

In February, Venezuela launched a review of all oil and gas projects in the country. Officials from the Ministry of Petroleum warned energy executives that contracts could be revoked for projects that remain inactive or fail to meet investment commitments.

Chevron and Shell move toward an agreement

Chevron and Venezuelan energy authorities have agreed on terms to expand the company’s largest project in the country, Petropiar, located in the Orinoco Belt. The deal would also grant production rights over the Ayacucho 8 block, south of the existing project area. If finalized, it would become Chevron’s fifth oil block in Venezuela and could make the company the largest private producer in the Orinoco region, which holds more than three-quarters of the country’s crude reserves.

Last month, Chevron and PDVSA produced roughly 90,000 barrels per day of upgraded Hamaca crude and 20,000 barrels per day of vacuum gas oil at the Petropiar facility.

Meanwhile, Shell is also advancing preliminary oil and gas agreements during the visit of U.S. Interior Secretary Doug Burgum to Caracas. According to Reuters, the company is seeking to develop the Carito and Pirital fields in the northern Monagas region, a prized area in eastern Venezuela.

These fields can produce light and medium crude as well as natural gas—both valuable resources that are relatively scarce in Venezuela’s heavily weighted portfolio of extra-heavy oil.

The Punta de Mata area, which includes Pirital, Carito, and the nearby El Furrial field, produced around 94,000 barrels per day of crude and about 1.03 billion cubic feet of natural gas per day last month, according to independent estimates. Of that volume, roughly 350 million cubic feet per day was flared.