OFAC Issues New and Updated General Licenses Authorizing Venezuelan Energy Sector Activities Involving Venezuelan-Origin Oil, Gas, and Petrochemical Activities

The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has continued to progressively expand opportunities to engage in limited commercial activities in the Venezuelan market by issuing a series of new and updated General Licenses (“GLs”). These include conditional authorizations to engage in certain transactions related to Venezuelan-origin oil, gas, and petrochemicals, including certain activities related to Petróleos de Venezuela, S.A. (“PdVSA”), Venezuela’s state-owned oil and gas company.

This is our fifth Legal Update on the evolving US sanctions landscape for Venezuela. In prior updates, we discussed Executive Order 14373, which shields Venezuelan oil revenue held in U.S. Treasury accounts from judicial process; Venezuela’s Transformation of its Hydrocarbons Sector with a New Hydrocarbons Law Amendment, which opens new pathways for private sector participation in the country’s energy industry; GL 46, authorizing established US companies to engage in a broad range of activities involving Venezuelan oil; and GLs 46A, 47, 48, 49, and 50, which significantly expanded the range of permissible activities in the Venezuelan energy sector.

This Legal Update covers recent OFAC authorizations and updates related to Venezuelan-origin oil, gas, and petrochemicals, including OFAC General License 52 (“GL 52”), amended GLs 5V, 46B, 48A, and 49A, 50A and new and updated FAQs described below. OFAC has also published Spanish-language translations of these new GLs and FAQs 1226 through 1244. OFAC has also expanded authorizations related to mining activities in Venezuela, which will be addressed in a subsequent legal update. Taken together, these actions demonstrate continued progress in the relationship between the US and Venezuela and the expansion of potential opportunities to enter the Venezuelan market.

Scope, Conditions, and Limitations of GL 52 (Authorizing Certain Transactions Involving PdVSA)

Scope: GL 52 authorizes “established U.S. entities” to engage in a wide range of energy-related activities involving PdVSA, or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest (“PdVSA Entities”).

FAQ 1245 clarifies the scope of authorized activities, which include:

• Lifting, exportation, reexportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil and petroleum products;

• Provision to Venezuela of diluent, goods, services, and technologies necessary for exploration, development, or production activities in the oil, gas, or petrochemical products sectors;

• Entry into new investment contracts for exploration, development, or production activities in the oil, gas, or petroleum products sectors of Venezuela;

• Formation of new joint ventures or other entities in Venezuela related to such activities; and

• All transactions ordinarily incident and necessary to such activities, including commercial, legal, technical, safety, and environmental due diligence and assessments.

An “established U.S. entity” must have been organized under the laws of the US or any jurisdiction within the US on or before January 29, 2025.

Notably, although GL 52 applies to certain transactions involving PdVSA and PdVSA Entities, these parties continue to be subject to comprehensive US sanctions outside of the detailed terms and conditions of GL 52 and any other applicable authorizations from OFAC.

Conditions: Parties relying on GL 52 must ensure that:

• The contract is governed by the laws of the United States or any jurisdiction within the United States, and any dispute resolution under the contract must occur in the United States; and

• Any payment to a blocked person (including but not limited to the PdVSA or PdVSA Entities) must be made into the US government’s “Foreign Government Deposit Funds” or any other account instructed by the US Department of Treasury. Local taxes, permits, and fees are excluded from this requirement.

Limitations: GL 52 expressly states that it does not authorize any of the following:

• Prohibited Debt and Equity-Related Transactions: Transactions involving bonds or certain other debt of the Government of Venezuela or PdVSA, including to settle such bonds and debt, or related to the sale, transfer, assignment or pledging as collateral by the Government of Venezuela of any equity interest in PdVSA, PdVSA Entities (including PDV Holding, CITGO Holding, CITGO Petroleum Corp.), or any other Government of Venezuela majority-owned entity;

• Prohibited Settlement or Enforcement of Judicial Process: Entering into a settlement agreement or enforcing any lien, judgment, arbitral award, decree, or other order through execution, garnishment, or other judicial process that could alter or affect property or property interests of any person blocked under the Venezuela sanctions regulations, including PdVSA or a PdVSA Entity. FAQ 1246 clarifies that a specific license is still required for any such activities;

• Prohibited SDNs: Transactions involving any SDNs or entities 50% or more owned by SDNs, other than PdVSA or PdVSA Entities;

• Prohibited Payment Terms: Payment terms that are not commercially reasonable, or that involve debt swaps or in-kind payments, or are denominated in digital currency, digital coin, or digital tokens issued by, for, or on behalf of the Government of Venezuela;

• Parties from Prohibited Countries: Transactions with parties located in or organized under the laws of Russia, Iran, North Korea, or Cuba, as well as their owned or controlled entities and joint ventures;

• Chinese-Affiliated Entities: Dealings with any Venezuelan or US entities that are owned or controlled by, or are joint ventures with a person located in or organized under the laws of the People’s Republic of China;

• Unblocking of Blocked Property: Unblocking of property, in keeping with OFAC’s customary practice when issuing authorizations; and

• Blocked Vessels: Transactions involving a blocked vessel.

Reporting Requirements for Non-US Transfers: Parties relying on GL 52 to export, re-export, sell, resell, or supply Venezuelan-origin oil or Venezuelan-origin petrochemical products to countries other than the United States must report details of the transaction to the US Departments of State and Energy 10 days after execution of the first transaction, and every 90 days thereafter for ongoing transactions. Required reporting details include the parties involved; a description of the transactions, including the products, quantities, values, dates of the transactions, and countries of ultimate destination; and any taxes, fees, or other payments provided to the Government of Venezuela.

Amendments: GLs 46B, 48A, 49A and 50A

Additionally, OFAC has expanded the scope of five previously issued GLs. Other than the scope changes, GLs 46B, 48A, 49A and 50A reflect the same conditions and limitations discussed in our prior Legal Update.

• The scope of GL 46A (now GL 46B) was expanded beyond Venezuelan-origin oil to authorize US persons to engage in a broad range of transactions relating to certain Venezuelan-origin petrochemical products as well. The list of covered fertilizer products and fertilizer precursor chemicals is in a new Annex to General License 46B. OFAC also updated the associated FAQs 1226 and 1227 to reflect the GL 46B updates.
• The scope of GL 48 (now GL 48A) was expanded beyond oil- and gas-related activities to authorize US persons to engage in certain activities related to the exploration, development, or production of certain petrochemical products in Venezuela, or for the generation, transmission, storage, or distribution of electricity in Venezuela as well. The list of covered fertilizer products and fertilizer precursor chemicals is in a new Annex to General License 48A. OFAC provided examples of authorized transactions under GL 48 in FAQ 1241, including related insurance and certain maintenance-type services.
• The scope of GL 49 (now GL 49A) was expanded beyond oil and gas to allow US persons to enter into contingent contracts involving certain petrochemical products and electricity sector operations as well. The list of covered fertilizer products and fertilizer precursor chemicals is in a new Annex to General License 49A.
• The scope of GL 50 (now GL 50A) was expanded to add a sixth entity, a French company, to the list of operators authorized to conduct oil or gas operations in Venezuela.
• FAQ 1238 addresses whether OFAC would approve a license for the resale of Venezuelan-Origin Oil to Cuba. OFAC suggests that in accordance with US policy to support the Cuban people, including the Cuban private sector, “OFAC would implement a favorable licensing policy toward specific license applications seeking authorization for the resale of Venezuelan-origin oil for use in Cuba,” subject to the following considerations:
• Consistency with the terms and conditions of GL 46A, though an established US entity would not be necessary and the limitations in GL 46A with respect to Cuba would not apply.
• No transactions involving or for the benefit of persons or entities associated with the Cuban military, intelligence services, or other government institution, including those listed on the U.S. State Department’s Cuba Restricted List or any Cuban-owned financial institutions (together, “excluded parties”). Parties “must implement measures to ensure that no subsequent transactions related to the Venezuelan-origin oil involve or benefit, either directly or indirectly, the excluded parties,” including contractual provisions prohibiting any present or future participation by these excluded parties in transactions involving Venezuelan-origin oil, requirements that transactions involving the sale or resale of Venezuela-origin oil are routed through a US-based financial institution, and requirements that such transactions are not routed through financial institutions associated with excluded parties.
• Compliance with the Export Administration Regulations administered by the US Department of Commerce for the export or reexport of US-origin oil to Cuba, including associated guidance and the conditions of License Exception Support for the Cuban People (SCP), 15 CFR § 740.2.

Conclusion

Although GLs 46B, 48A, 49A, 50A, 52 and other recently released General Licenses provide opportunities for companies to re-engage with the Venezuelan market, companies should carefully review the detailed terms and conditions of each General License and assess potential risks and implications, considering both US sanctions and Venezuelan domestic law. The Government of Venezuela, PDVSA and their owned and controlled entities remain subject to comprehensive US sanctions outside of the authorized scope of the GLs. Therefore, companies should ensure that compliance with the limitations and conditions of any general license they rely upon to engage in Venezuela-related business is embedded throughout the structuring, negotiation and execution of any contemplated transactions. The sanctions landscape continues to evolve and OFAC may issue additional authorizations or guidance.

Mayer Brown is closely monitoring developments and will continue to publish Legal Updates on significant changes. Please contact any of the authors or your usual Mayer Brown contact for further guidance.