Threat of Venezuelan Oil Ban Pits Oil Boss Hamm Against Refiners

Last year, Valero took in roughly 54 million barrels from Venezuela while Phillips 66 and Chevron imported 46 million barrels and 33 million barrels, respectively. And while companies are already working to pare their dependence on Venezuelan crude, that is a heavier lift at some refineries. For instance, Venezuelan oil accounted for 43 percent of Chevron’s Pascagoula refinery’s capacity last month, according to U.S. Customs data compiled by Bloomberg. It represented 62 percent at Valero’s St. Charles facility.

Refiners have made direct appeals to administration officials and are courting Gulf Coast lawmakers, asking them to amplify their concerns with the White House. Those efforts paid off Thursday when the U.S. senators from Texas and Louisiana sent a letter to Trump arguing crude sanctions would be self defeating.

Sanctions targeting the oil sector would increase the likelihood of a disorderly default, hastening Russian consolidation of Venezuelan and Citgo oil assets, while diverting Venezuelan crude to China, harming the global competitiveness of U.S. businesses and raising costs for consumers, they said.

Asked about Chevron’s lobbying on the issue, a spokesman said the company "engages with the administration and Congress to provide our perspectives on complex energy issues to help shape an effective and responsible U.S. energy policy."

Phillips 66 declined to comment. Representatives of PBF and Valero didn’t respond to requests for comment.

Oilfield service providers also have been discouraging the Trump administration from imposing sanctions that limit their business in the country, including contracts with the state-owned oil company Petróleos de Venezuela SA, or PDVSA. That option had been presented by some refiners as an alternative to throttling down Venezuelan crude imports.

Excluding U.S. companies from working in Venezuela doesn’t help further democracy there, the oilfield service firms argue; instead, it blocks their ability to recoup debt and gives competitors a chance to gain a foothold in the market.

The world’s four biggest oil service providers -- Schlumberger Ltd.; GE’s Baker Hughes; Halliburton Co., and Weatherford International Plc -- have kept a presence in Venezuela in order to work for some large, integrated oil companies, James West, an analyst at Evercore-ISI, wrote Thursday in an email. None of the companies give specifics for how many wells they are drilling or the size of their crews there.

Hamm is advocating that the Trump administration also cut off Venezuela’s access to light sweet, U.S. oil -- like the kind flowing from Texas and North Dakota, where his Continental Resources is pulling crude from the Bakken formation. Venezuela blends U.S. light oil with its heavy crude before shipping the mixture to foreign refiners. 

Hamm said his recommendation has been conveyed to the White House, though he did not elaborate on how.

Oil companies are still reeling from their last lobbying fight -- a battle to weaken possible sanctions in legislation targeting Russia. The industry scored a partial win, when lawmakers agreed to set a threshold for Russian involvement high enough to remove the threat to some U.S. oil company projects around the world.

The threat of more sector-based regional sanctions is a disturbing trend, lobbyists said.

Citgo has made overtures to the Trump administration. It contributed $500,000 in December to the incoming president’s inaugural committee, according to Federal Election Commission records. The company didn’t contribute to inaugurations in 2005, 2009 or 2013.

Citgo has hired three lobbying shops, including Avenue Strategies, the firm co-founded by former Trump campaign manager Corey Lewandowski, paying it $80,000 from April to June. Lewandowski, who was not a registered lobbyist for Citgo, left Avenue Strategies in May. Two other veterans of the Trump campaign, senior adviser Barry Bennett and Arkansas state chairman Bud Cummins, represent the company.

They list the potential impact of "energy and foreign policy restrictions" on its client as a specific issue, and are lobbying the Treasury Department and the White House. Neither Bennett nor Cummins returned phone calls seeking comment.

With assistance from David Wethe. To contact the reporters on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net; Bill Allison in Washington at ballison14@bloomberg.net; Meenal Vamburkar in New York at mvamburkar@bloomberg.net. To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Michael B. Marois.


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Copyright 2017 Bloomberg News.

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