International energy majors Chevron and Shell are reportedly close to securing major production arrangements in Venezuela, the largest such moves since the U.S. capture of President Nicolas Maduro in January, according to people familiar with the negotiations. The agreements, still at preliminary stages, would allow the two companies to expand output in high-value Venezuelan basins and represent notable steps toward a restoration effort U.S. President Donald Trump has framed as a potential $100 billion initiative to rebuild the country’s oil sector after decades of mismanagement and underinvestment under Maduro and his predecessor Hugo Chavez.
At the center of Chevron’s potential expansion is Petropiar, the U.S. major’s largest operating project in Venezuela, situated in the vast Orinoco Belt. Two sources with knowledge of the talks said Chevron and Venezuelan energy authorities have agreed on preliminary terms to extend Chevron’s operations into the adjacent Ayacucho 8 area, a large block south of the existing Petropiar footprint that has proven oil resources.
The proposed arrangement would allow Chevron to produce additional extra-heavy crude and increase exports of upgraded heavy oil. The company is seeking a reduced royalty rate for output from the new area, along with the tax and trade incentives the recent legislative changes offer for the development of greenfield oil and gas blocks, the two sources said. PDVSA completed exploration and appraisal work in Ayacucho about two decades ago, but the area remains largely undeveloped, the sources added.
Officials believe Chevron and PDVSA could replicate the well-cluster production system used at Petropiar in Ayacucho 8, enabling a relatively rapid scale-up of output. If completed, the move would create Chevron’s fifth oil area in Venezuela and could make the company the largest private producer in the Orinoco, which holds more than three quarters of the country’s total crude reserves. ConocoPhillips was previously the region’s top foreign producer before it exited Venezuela two decades ago following nationalizations.
A document from PDVSA reviewed by sources indicates that Chevron and PDVSA were producing about 90,000 barrels per day (bpd) of upgraded Hamaca crude and 20,000 bpd of vacuum gasoil at Petropiar last month. Venezuela’s total oil production stands at around 1.05 million bpd, according to the same information.
Shell’s preliminary accords and Monagas North
Shell confirmed it signed a set of preliminary oil and gas agreements with Venezuela last week during the visit of U.S. Interior Secretary Doug Burgum to Caracas. The Venezuelan government did not publicly disclose the exact terms or the fields involved, but an official summary of the accords indicates Shell’s interest in developing the Carito and Pirital fields in Monagas North, a region in eastern Venezuela known for supplies of light and medium crude and natural gas.
Light and medium grades and onshore natural gas in Monagas North are especially valuable to companies that blend heavier Venezuelan crudes to facilitate exports. Shell’s summary email also stated the company signed agreements with engineering firms Vepica and KBR and oil-service company Baker Hughes that "formally articulate Shell’s intent to progress a variety of opportunities with Venezuela," including offshore gas, onshore oil and gas, exploration, local content and workforce development. Shell declined to disclose further field-level details in response to requests.
Monagas North’s onshore infrastructure and proximity to areas with significant gas flaring make it attractive for projects aimed at capturing and processing associated gas. Shell, M&P and other firms have previously outlined plans to reduce flaring by building capture, processing and transport infrastructure, potentially routing gas via Trinidad for export. Independent figures show the Punta de Mata area, which covers Pirital, Carito and the nearby El Furrial field, produced about 94,000 bpd of crude and some 1.03 billion cubic feet per day (bcfd) of gas last month; roughly 350 million cubic feet per day of that gas was flared.
Prior to these preliminary agreements, Shell’s only project in Venezuela was the Dragon offshore development near Trinidad, which the company has struggled to advance after U.S. sanctions on Venezuela’s energy sector in 2019. Shell also sold its stake in the Urdaneta Oeste oilfield to French firm Maurel & Prom in 2018.
Wider partner talks, project reviews and compliance checks
PDVSA and Venezuela’s oil ministry are reported to be in negotiations with roughly a dozen joint venture partners that have signaled willingness to expand operations into neighboring fields, mature areas or greenfield blocks requiring new infrastructure development. Other international companies said to be seeking to broaden their operational footprints in Venezuela include Spain’s Repsol and state-linked M&P. Repsol is the foreign partner with the largest outstanding debt to recover in the country, with more than $5 billion that accumulated under prior sanctions, the firm said last month.
Separately, Chevron and Venezuelan authorities have been negotiating arrangements under which the U.S. company would return two untapped offshore natural gas areas to Venezuela at the Plataforma Deltana project on the maritime boundary with Trinidad and Tobago, with the intention that those blocks could be reoffered for private investment. Terms for how Chevron would surrender those stakes have not been made clear. Sources noted that Chevron is prioritizing oil production over gas in its Venezuelan strategy.
In February, Venezuela began a formal review of all oil and gas projects, starting with production sharing contracts signed under the Maduro administration with lesser-known firms and then moving to joint ventures with larger partners. Government officials have requested documentation from participating companies as part of the review. PDVSA has assumed administration and sales responsibilities for many production sharing contracts while the review is underway, temporarily suspending operations under those arrangements.
Oil ministry officials have informed industry executives the government expects to complete the review by the end of March. They have warned that projects deemed inactive or that fail to meet agreed investment targets could face contract revocation. In parallel, U.S. authorities are conducting their own assessments of company credentials and sanctions compliance before granting clearance for any existing or new partners to operate in Venezuela.
Implications and next steps
The preliminary terms and signed agreements indicate movement toward re-engagement between major international oil companies and Venezuela after an extended period of sanctions and underinvestment. Chevron’s proposed expansion at Ayacucho 8 and Shell’s Carito and Pirital plans would target some of the country’s most strategically valuable hydrocarbon regions. Yet the deals remain subject to the Venezuelan government’s review process and to checks from the U.S. government on sanctions compliance. The final commercial and fiscal terms, along with the outcome of the government’s documentation review, will determine whether these preliminary arrangements translate into sustained production increases.
For now, both the Venezuelan oil ministry and PDVSA did not respond to requests for comment on the ongoing negotiations. Several industry sources familiar with the talks provided the details summarized here.
Summary
- Chevron and Shell are approaching major production agreements in Venezuela, potentially expanding operations in the Orinoco Belt and Monagas North respectively.
- Chevron’s potential extension into Ayacucho 8 would increase its extra-heavy oil output and could make it the largest private producer in the Orinoco; Shell’s preliminary agreements target light and medium crude and gas fields useful for blending and export.
- Venezuela is conducting a broad review of oil and gas projects, and U.S. authorities are vetting companies for sanctions compliance, introducing uncertainty into the finalization of deals.
Key points
- Sector impact - Upstream oil production: Proposed expansions could raise private-sector output in heavy oil and increase blending capacity using light and medium crude and gas.
- Market impact - Exports and processing: Development in Monagas North could reduce flaring and provide gas for blending, affecting export logistics and refining/upgrading operations.
- Policy and investment - Legal framework: Recent reforms to Venezuela’s oil law grant foreign partners more operational autonomy, enabling minority partners to operate and sell oil.
Risks and uncertainties
- Regulatory and contract review risk - Venezuela’s ongoing review of projects could suspend or revoke contracts that are inactive or fail to meet investment commitments, affecting planned expansions.
- Sanctions and compliance risk - The U.S. government is vetting company credentials and sanctions compliance, which could delay or prevent clearance for partners to operate.
- Commercial terms uncertainty - Details such as royalty concessions, tax and trade incentives, and the terms for returning offshore blocks remain unresolved and could affect project economics and feasibility.