Caracas, Washington in talks to export Venezuelan oil to US, sources say

• Deal would redirect Venezuelan oil exports to US from China
• Exports would stem further cuts to Venezuelan output
• Chevron only US firm currently authorized to export Venezuelan oil
• Talks focus on possible sale terms, US licenses for PDVSA partners
• US Interior Secretary says US Gulf refiners would take advantage

By Marianna Parraga and Erin Banco

HOUSTON/WASHINGTON, Jan 6 (Reuters) - Government officials in Caracas and Washington are discussing exporting Venezuelan crude to refiners in the United States, five government, industry and shipping sources told Reuters on Tuesday, a deal that could divert supplies away from China while helping state company PDVSA avoid deeper output cuts.

The talks are the first sign that the Venezuelan government is responding to President Donald Trump's demand that they open up to U.S. oil companies or risk more military intervention. Trump has said he wants interim President Delcy Rodriguez to give the U.S. and private companies "total access" to Venezuela's oil industry.

Venezuela has millions of barrels of oil loaded on tankers and in storage tanks that it has been unable to ship due to a blockade on exports imposed by Trump since mid-December.

The blockade was part of rising U.S. pressure on the government of Venezuelan President Nicolas Maduro that culminated in U.S. forces capturing him this weekend. Top Venezuelan officials have called Maduro's capture a kidnapping and accused the U.S. of trying to steal the country's vast oil reserves.

A potential deal to sell the trapped crude to the U.S. could initially require reallocating cargoes originally bound for China, two sources said. The Asian country has been Venezuela's top buyer in the last decade and especially since the United States imposed sanctions on companies involved in oil trade with Venezuela in 2020.

"Trump wants this to happen early so he can say it is a big win," said one of the oil industry sources.

The White House, Venezuelan government officials and PDVSA did not immediately comment.

CHEVRON IN CONTROL OF VENEZUELAN OIL FLOWS TO US

The supply would increase the volume of Venezuelan oil exported to the U.S., a flow that is currently controlled entirely by Chevron CVX.N, PDVSA's main joint venture partner, under a U.S. authorization.

Chevron, which has been exporting between 100,000 and 150,000 barrels per day (bpd) of Venezuelan oil to the U.S., is the only company that has been loading and shipping crude without interruption from the South American country in recent weeks under the blockade.

It was not immediately clear how sanctioned PDVSA would receive money from oil sales. Sanctions mean the company is excluded from the global financial system, its bank accounts are frozen and it is blocked from executing transactions in U.S. dollars.

Rodriguez, sworn in as interim president on Monday, is herself under U.S. sanctions imposed in 2018 for undermining democracy.

TALKS INVOLVE POSSIBLE AUCTIONS WITH US BUYERS

The officials have been in talks this week about possible sales mechanisms, including auctions to allow interested U.S. buyers to bid for cargoes, and issuing U.S. licenses to PDVSA's business partners that could lead to supply contracts, two sources said.

Those licenses have in the past allowed PDVSA's joint venture partners and customers, including Chevron, India's Reliance RELI.NS, China National Petroleum Corporation (CNPC) and European Eni ENI.MI and Repsol REP.MC, to have access to Venezuelan oil to refine or to resell to third parties.

This week, some of those companies have begun making preparations for receiving Venezuelan cargoes again, two sources said.

The U.S. and Venezuela have also discussed if Venezuelan oil can be used in the U.S. Strategic Petroleum Reserve in the future, one of the sources said.

INCREASED OIL FLOWS WOULD BE 'GREAT NEWS'

U.S. Interior Secretary Doug Burgum said on Tuesday that an increased flow of Venezuelan heavy oil to the U.S. Gulf would be "great news" for job security, future gasoline prices in the U.S. and for Venezuela.

"Venezuela has an opportunity now to actually have capital come in and rebuild their economy and take advantage," he told Fox News, when asked about this story on the talks between the governments on oil exports. "With American technology, American partnership, Venezuela can be transformed."

U.S. refineries on the Gulf Coast can process Venezuela's heavy crude grades and were importing some 500,000 barrels per day (bpd) before Washington first imposed energy sanctions on Venezuela.

PDVSA has already had to cut production due to the embargo, because it is running out of storage for the oil. If PDVSA does not find a way to export oil soon, it would have to cut production more, one of the sources said.

Oil traders reacted to news of the talks on Tuesday. Differentials for some heavy oil grades in the U.S. Gulf slipped around 50 cents per barrel on Tuesday on the prospect of more Venezuelan supplies.