Venezuela's oil ministry has suspended 19 oil production-sharing contracts with private companies signed under the administration of president Nicolas Maduro, four sources with knowledge of the move told Reuters on Thursday.
The suspension has had no impact on the country's oil and gas output so far, the sources said. State oil giant PDVSA is selling the crude produced under the contracts while they are suspended, they added.
Caracas and Washington would review the contracts and may recommend revoking some of them, the sources said. The Venezuelan and US governments are reviewing the credentials of the companies that signed them, the sources added. Some of the companies are little-known and the deals were signed while Venezuela was under US sanctions.
The contracts under review include projects that recently began producing oil in challenging areas such as Lake Maracaibo, big ventures that aim to expand output in the Orinoco Belt, Venezuela's main oil region, and small mature oilfields.
Maduro's administration had little success securing investment through the production-sharing contract model as large oil players rejected a return to Venezuela after expropriations or avoided doing business with it due to US sanctions.
The players that took on production-sharing contracts included Chinese, US, South American and Venezuelan firms, as well as some companies registered in tax haven countries, and some obtained contracts in multiple areas, according to a list seen by Reuters.
Some of the companies also outsourced the oilfields to contractors, two of the sources said.
The United States captured Maduro in January and took control of Venezuela's oil exports and sales. Since then, the US Treasury Department has issued general licenses that allow companies to trade Venezuela's oil and to operate in the country's oil and gas sectors, but require specific clearance by the Treasury's Office of Foreign Assets Control.
Venezuela's National Assembly passed a reform to the country's hydrocarbon law in late January to facilitate foreign investment in the dilapidated oil industry. Under the reformed law, the government has six months to review existing contracts.
Venezuela's ministries of oil and communications and the White House did not immediately reply to a request for comment.
The ministry and PDVSA are separately in talks with many of Venezuela's traditional joint-venture partners, including Chevron, Repsol, and Maurel & Prom, to allow them to expand the oilfields already assigned to their projects, which could contribute to increased crude and gas output.
Oil sales under US-Venezuela deal expected to reach $2 billion by end of February, US says
Sales under a flagship oil supply agreement between Venezuela and the US are expected to reach $2 billion by the end of this month, US Secretary of Energy Chris Wright told reporters in Texas on Thursday.
Since Maduro's capture, trading houses Vitol and Trafigura have been marketing and trading the lion's share of the OPEC country's oil under the pact, while partners of Venezuela's state oil company PDVSA, particularly Chevron, are boosting output and shipments.
Earlier in February, Wright projected that oil sales from the country would reach $5 billion within a few months.
The export increase is already returning Venezuela's crude and fuel to markets that had not seen it arriving for months or years.
More customers in Asia and Europe are negotiating deals to import soon, with 40 million barrels expected to have been sold by the end of February at about $50 per barrel, Wright said. The pact's initial sales target was between 30 million and 50 million barrels, Trump had said.
"Most of that oil will go here to the US Gulf Coast, but it'll go to India, it'll go to Asia, it's going to Europe," Wright said. "Every barrel you produce will be sold, so the question is just where."
Chinese independent refineries that were previously importing sanctioned oil can now buy Venezuelan crude on the open market, Wright said. Trump has said oil cargoes will only be sold at fair market prices.
Wright also said that millions of barrels of Venezuelan oil currently in floating storage in Venezuelan waters are in the process of being sold.
Maduro moves to dismiss US criminal case, citing dispute over legal fees
Maduro asked a judge on Thursday to throw out his US drug trafficking case, accusing the US government of interfering with his defense by blocking the Venezuelan government from paying his legal fees.
Maduro and his wife, Cilia Flores, both pleaded not guilty on January 5 to drug trafficking charges that could land them in a US prison for decades. They are jailed in New York awaiting trial.
Maduro's defense lawyer Barry Pollack previously told US District Judge Alvin Hellerstein, who is overseeing the case, that the Treasury Department on January 9 granted an exception to US financial sanctions on Venezuela so that the South American country's government could pay Maduro's fees, but revoked that permission hours later without explanation.
In Thursday's motion, Pollack argued the move interfered with Maduro's right to counsel under the Sixth Amendment to the US Constitution and requires dismissal of the charges. Pollack said he could not continue representing Maduro without funding from the Venezuelan government.
A spokesman for the Manhattan US Attorney’s office, which brought the charges, did not immediately respond to a request for comment.