New OFAC General Licenses further expand Venezuela oil and gas authorizations

This series of GLs now authorize a wide swath of new activities in Venezuela’s oil and gas sector while maintaining several key conditions. The State Department has indicated that additional authorizations may be issued stating, “t]hese general licenses invite American and other aligned companies to play a constructive role in supporting economic recovery and responsible investment. Additional authorizations may also be issued as necessary in furtherance of President Trump’s vision.” Such additional authorizations may take the form of additional GLs or specific licenses, which are not generally made public. 

Most significantly for oil and gas operators, GL 50 authorizes operational activities, including production, in Venezuela’s oil and gas sectors, for now only for companies specifically listed within the GL’s Annex—for now, including BP, Chevron, Eni, Repsol, and Shell. Companies not on the list which seek to operate projects in the Venezuelan oil and gas sector may pursue analogous authorizations by way of a specific license. 

GL 50 maintains the central conditions found throughout the new Venezuela general licensing framework, requiring:

1. Contracts with the Government of Venezuela, Petróleos de Venezuela, S.A. (PdVSA), or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest (collectively, PdVSA Entities) to be governed by US law and any dispute resolution must occur in the United States.
2. Any payments to PdVSA Entities be made into a US designated and controlled account.
3. Reporting of all transactions to the State Department and the Department of Energy. 

GL 50 does not authorize:

1. Commercially unreasonable payment terms, debt swaps, or payments in digital currencies;
2. Transactions with Russian, Iranian, North Korean, Cuban, or Chinese entities (US adversarial and sanctioned countries);
3. The unblocking of property under the Venezuela Sanctions Regulations (VSR);
4. Transactions with sanctioned vessels.

Accompanying GL 50 are GLs 49, 48, 46A, and 30B which further open Venezuela’s oil and gas sector to new investment and growth. 

GL 49 - Authorizing Negotiations of and Entry Into Contingent Contracts for Certain Investment in Venezuela.

GL 49 authorizes transactions ordinarily incident and necessary to the negotiation of and entry into contingent contracts for new investment in oil or gas sector operations in Venezuela with PdVSA entities. Most importantly, to perform under any newly negotiated contracts, US companies operating under GL 49 must seek separate authorization from OFAC.

This authorization specifically includes negotiating and entering into contingent contracts to:

• Engage in new oil or gas exploration, development, or production activities in Venezuela; 
• Expand existing operations in Venezuela; 
• Form new joint ventures or other entities in Venezuela related to the foregoing activities; 
• Transactions involving prefatory steps for such activities, such as conducting commercial, legal, technical, safety, and environmental due diligence and assessments.

The License does not authorize transactions with US adversarial and sanctioned countries, the unblocking of property under the VSR, or transactions with sanctioned vessels. 

GL 48 - Authorizing the Supply of Certain Items and Services to Venezuela

GL 48 authorizes transactions ordinarily incident and necessary to the provision from the United States or by a US person of goods, technology, software, or services for the exploration, development, or production of oil or gas in Venezuela are authorized. Similar to GL 50, GL 48 contains the US law, US controlled account, and reporting provisions. It also contains similar limitations to GL 50 concerning payment terms, debt swaps, transactions with entities in sanctioned and adversarial jurisdictions, and transactions with sanctioned vessels. 

 Notably, GL 48 further prohibits:

• The formation of new joint ventures or other entities in Venezuela to explore or produce oil or gas. (Note, however, that GL 49 authorizes the negotiating of and entering into “contingent contracts” to engage and form new joint ventures.)
• Any transactions or dealings related to the exportation or reexportation of diluents, directly or indirectly, to Venezuela. However, US-origin diluent exports are permitted under GL 47, and diluent-crude swaps are allowed under GL 46A.

GL 46A - Authorizing Certain Activities Involving Venezuelan-Origin Oil:

GL 46A updates GL 46. Whereas GL 46 required all payments to the GoV, PdVSA, or related entities to go into a US controlled account. GL 46A allows payments for “local taxes, permits, or fees” to go directly to the GoV or related entities. All other provisions in GL 46A remain the same.

GL 30B - Authorizing Certain Transactions Necessary to Port and Airport Operations:

Under GL 30B, all transactions with the GoV, ordinarily incident and necessary to operations or use of ports and airports in Venezuela are authorized. This includes transactions with the Instituto Nacional de los Espacios Acuaticos (INEA), the Venezuelan port authority. The only change in GL 30B is to remove its prohibition on transactions or activities related to the exportation or reexportation of diluents, directly or indirectly, to Venezuela, consistent with GL 47 and 46A. 

Conclusion: 

While the updated Venezuela general licensing framework covers an expansive scope of new activity, the framework maintains important conditions, most significant among them are the (1) requirement for payments to be placed into a US designated and controlled account and (2) US law contracting requirement. Companies seeking to explore opportunities in Venezuela’s oil and gas sector must still navigate a complex landscape of legal, political, and other risks, although recent adjustments to the US sanctions framework have created a more permissive environment for a range of activities.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.