(Bloomberg) -- Chevron Corp (NYSE:CVX). appears to be laying the groundwork to leave Venezuela in the event that the U.S. declines to extend a waiver allowing it to continue operating in the country.
Over the past year, the San Ramon, California-based company updated some of its contracts with partners in the South American country to allow for the possibility of early termination, according to people with knowledge of the matter. Under the new terms, Chevron would incur no penalties for early termination and all payments due would be prorated up to the date of notification.
The new provisions come as the U.S. continues tightening sanctions against Venezuela in a bid to oust President Nicolas Maduro. Chevron, the last American company producing oil in the country, faces the October 25 expiration of a special waiver allowing it do business there. Some of Chevron’s long-term contracts were updated at the end of 2018, while other agreements were modified after the company obtained the sanctions waiver in July.
A Chevron spokesman Ray Fohr said the company is hopeful that its license to operate will be renewed in October. “Chevron is not preparing to leave Venezuela,” he said by email. “Our technical service agreements are reviewed and changed regularly for business circumstances and to be in compliance with all applicable laws and regulations.”
If the U.S. government declines to extend Chevron’s waiver, the decision would put an end to the oil major’s 100-year history in the country, a story that started in the 1920s and survived a number of military coups and civil unrest. While Exxon Mobil Corp (NYSE:XOM)., Royal Dutch Shell (LON:RDSa) Plc and ConocoPhillips (NYSE:COP) pulled out of Venezuela, Chevron reaffirmed its commitment to the country.
The company has applied its expertise in extracting heavy oil from California oil fields to its projects in South America and over the years has expanded its footprint by building a facility to pre-process sludgy Venezuelan oil into refinery-ready grades.
Chevron warned in August that developments in the crisis-torn South American nation could hurt its earnings.
“Future events related to the company’s activities in Venezuela may result in significant impacts on the company’s results of operation in future periods,” Chevron said in a filing with the U.S. Securities and Exchange Commission. The language had evolved from the company’s previous quarterly filing, when it said developments in the country could lead to “increased business disruption and volatility in the associated financial results.”
Chevron has about 330 direct employees in Venezuela, according to a person familiar with the company affairs. Venezuela accounted for only 1% of the company’s global crude oil output in 2018, or 42,000 barrels daily. The Petroboscan and Petropiar ventures are currently active, while the Petroindependencia and Petroindependiente projects are shut amid lack of parts and a humanitarian crisis in Venezuela.
(Updates with Chevron statement in fourth paragraph.)
