Sources say that the US will soon issue a general license for oil extraction in Venezuela

Three sources said that the U.S. is preparing to issue a general license allowing oil and gas companies to operate in Venezuela as soon as 'this week'. Washington aims to encourage increased production in the OPEC country since capturing the president.

Sources said that the Office of Foreign Assets Control of the Treasury would allow companies to explore for and pump crude oil and gas. OFAC has already granted U.S. companies permission to store, refine and sell Venezuelan oil under a general license that was issued last month. On Tuesday, OFAC also issued a license for the sale of U.S. dilutients required to convert Venezuelan crude grades to exportable oil.

"The President's Team is working round the clock to ensure that oil companies are able to invest in Venezuela's infrastructure. When asked about plans for a licence, White House spokesperson Taylor Rogers said to "stay tuned".

Donald Trump has said that the U.S. will control Venezuela's oil revenues and sales indefinitely, since U.S. troops seized Nicolas Maduro during a raid in Caracas in January.

Trump stated that he wanted U.S. oil firms to invest up to $100 billion in order to restore Venezuela's industry to historic production levels. He also said the profits from the investment would be split between Venezuelans and the United States.

Challenges to Investment

Since the government took over assets from foreign companies, including U.S. giants Exxon Mobil & ConocoPhillips in 1998, Venezuela has had a state-controlled oil industry.

Chevron Corp. is the only U.S. energy major to have maintained continuous operations in Venezuela, as a PDVSA partner.

A sweeping reform in Venezuela approved last week will grant autonomy to foreign oil producers while lowering taxes, and encouraging new investment.

Some companies have shown a keen interest in developing Venezuela’s crude reserves. These are believed to be the largest in the entire world. However, the top CEOs of the company have said that they need to have a strong legal framework and a stable environment in order to make any decisions regarding long-term projects.

Venezuela's oil production is now less than one million barrels a day, compared to a peak around three millions bpd. This has been the result of decades of neglect of oilfields, mismanagement, low investment and sanctions.

Oilfield service firms, meanwhile, are clamoring to get licenses for the use of key drilling equipment that is already in place in the country, and to import rigs and other specialized gear. This move, seen as an important first step to reviving output, has been welcomed by many. SLB, Baker Hughes, and Weatherford are U.S. companies that have licenses which do not permit rig expansion or operation.

Baker Hughes, in its report on international drilling rig counts, reported that Venezuela had only two active drilling rigs as of December.

Sources from the company have stated that most of the drilling equipment purchased by PDVSA in recent years, including China, is in dire need of repair.

Washington and Caracas reached an agreement last month for the initial sale of 50 million barrels Venezuelan oil. European trading houses Vitol, and Trafigura will market the supply. Shipping data revealed that Venezuelan oil exports increased to 800,000 barrels per day in January from 498,000 in December. Reporting by Marianna Pararaga in Houston and Jarrett Renshaw in Washington, with editing by Richard Valdmanis & Rosalba o'Brien.

(source: Reuters)