Energy market observers warn the impact on Chevron (NYSE:CVX) could be significant if Venezuela’s President Maduro follows through on his threats to annex the disputed Essequibo oil-rich region from neighboring Guyana, Bloomberg reported Thursday.
The Biden administration reiterated its “unwavering support” for Guyana’s sovereignty and said it will conduct flight operations within Guyana that “build upon routine engagement.”
If Maduro’s threats become more than mere saber rattling, the U.S. likely would reinstate sanctions and revoke a special license that allowed Chevron (CVX) to resume operating in Venezuela, analysts said.
Oilfields off the Guyana coast that Chevron has bought into via its planned takeover of Hess (HES), which partners with Exxon Mobil (XOM) in Guyana, also could be in jeopardy because of Maduro’s threat, but according to Bloomberg, analysts see Venezuela taking over the offshore operations as unlikely due in part to major logistical challenges it is unequipped to handle.
The dispute comes ahead of a presidential election next year, with polls showing Maduro’s top challenger in the lead, which is why many analysts see the Essequibo threat as political bluster meant to lift nationalist fervor.
“We believe the referendum served as a demonstration of support for Maduro’s policies and an attempt to build a unification sentiment among voters,” Wood Mackenzie analyst Luiz Hayum told Bloomberg, but “we we believe there’s a very low chance that it will escalate into a wide armed conflict.”
Despite the tensions in the area, oil prices have remained at their lowest levels in five months.