The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has significantly expanded authorizations for U.S. persons engaging in oil-related activities in Venezuela. This move signals a broader U.S. strategy to relax certain sanctions, fostering increased commercial engagement with Venezuela’s energy industry following political shifts.
OFAC has issued a series of General Licenses (GLs) that modify and expand upon previous authorizations. These new GLs, including GL 46A, GL 48, GL 49, GL 50A, and GL 30B, collectively permit a broader scope of transactions related to Venezuela’s energy sector. This includes authorization for established U.S. energy companies to engage in activities such as extracting, transporting, selling, exporting, and refining Venezuelan-origin oil. Additionally, licenses now permit the supply of specified goods, services, technology, and software crucial for oil and gas exploration, development, and production in Venezuela. The negotiation and entry into oil and gas investment contracts are also authorized, contingent upon separate OFAC licensing.
Specific General Licenses Detailed
- GL 46A: An amended version of GL 46, it broadly authorizes established U.S. energy companies to conduct transactions involving Venezuelan-origin oil. Payments to blocked persons must generally be made into a Foreign Government Deposit Funds account, though routine local taxes, permits, and fees are exempt.
- GL 48: This license authorizes transactions necessary for the provision of goods, technology, software, and services for oil and gas exploration, development, or production in Venezuela. It focuses on infrastructure support and services rather than the direct sale of Venezuelan oil.
- GL 49: This GL permits the negotiation and entry into contingent contracts for new investments in Venezuela’s oil or gas sector, provided any such contract is expressly contingent upon separate OFAC authorization.
- GL 50A: This license authorizes transactions related to the oil or gas sector operations in Venezuela for specific listed entities, superseding the previous GL 50.
- GL 30B: Replacing GL 30A, this license authorizes certain transactions related to the operations or use of ports and airports in Venezuela.
Conditions and Limitations
Despite the expanded authorizations, several conditions and limitations apply. Transactions involving persons located in or organized under the laws of Russia, Iran, North Korea, Cuba, or China, and their associated entities, are generally prohibited. Contracts with the Venezuelan government or PdVSA must specify U.S. law as governing and U.S.-based dispute resolution. Monetary payments to blocked persons, excluding local taxes, permits, and fees, must often be deposited into designated accounts. Furthermore, these GLs do not authorize the formation of new joint ventures for exploration or production under GL 48, nor do they authorize transactions related to the exportation or reexportation of diluents under GL 48.
Reporting Requirements and Future Outlook
Parties transacting under these GLs are subject to reporting requirements, necessitating the submission of details about the nature of the transaction, parties involved, and payments made to the Venezuelan government to relevant U.S. departments. OFAC may continue to issue additional guidance and FAQs as its approach to Venezuela evolves. Companies seeking to operate under these GLs must maintain careful transaction structuring and robust compliance measures, as the regulatory environment remains dynamic.