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The impact of the collapse of US oil 2:17
New York (CNN Business) - The Trump administration has ordered the Chevron company to stop oil production in Venezuela, taking another blow to the century-old relationship of the US oil giant with the crisis-ravaged OPEC nation.
The directive, which was issued Tuesday night, requires Chevron to "close" its Venezuelan operation by December 1.
Chevron, the last remaining US oil producer in Venezuela, had previously received licenses from the Treasury Department to keep production activities alive with the national oil company PDVSA, which was sanctioned by President Donald Trump.
The order will have limited impact on Chevron's finances, but represents a setback for a company that has spent decades pouring resources into Venezuela. And it will only accelerate the historic collapse of Venezuela's oil industry.
Despite having more oil reserves than any other nation on the planet, Venezuela's production has exploded due to mismanagement of power cuts, a humanitarian crisis and harsh sanctions imposed by the United States.
"We remain committed to the integrity of our joint venture assets, the safety and well-being of our employees and their families, and the company's social and humanitarian programs during these difficult times," Chevron spokesman Ray Fohr said in a statement.
Chevron's ties to Venezuela date back to 1921
The Trump administration is not forcing Chevron to leave Venezuela, at least not immediately. As part of Tuesday's announcement, the Treasury Department renewed a license that gives the company permission to maintain a more limited presence in the country.
Chevron said it will still be allowed "to perform limited maintenance on essential operations in the country."
"Chevron will continue to comply with applicable laws and regulations regarding the activities it is authorized to carry out in Venezuela," said Fohr.
In addition to Chevron, the Trump administration's liquidation order applies to four oil service providers: Halliburton, Schlumberger, Baker Hughes, and Weatherford International.
Chevron, which started oil exploration activities in Venezuela in 1921, employs some 8,000 people in the country along with its joint venture partners. The company has five onshore and offshore production projects there.
"Our legacy in Venezuela dates back to the 1920s and since then, we have been proud to be part of local communities, contributing to their economic and social development," said Fohr.
The company will not be able to export oil or produce oil from Venezuela under the order of the Trump administration. Chevron produced only about 35,000 barrels of oil in Venezuela per day in 2019, less than 2% of Chevron's total oil production of 1.9 million barrels per day.
"Venezuela has been a useless appendage to Chevron's asset base for many years due to the crisis there," said Paul Molchanov, energy analyst at Raymond James.
Chevron and other oil companies have recently reduced their expenses and production worldwide to combat the historical drop in prices. Oil demand has evaporated during the coronavirus pandemic, causing an epic oversupply that made US oil prices negative this week for the first time in its history.
Chevron and the four oil service providers are likely to request a license renewal after December 1 to allow them to maintain their limited presence in Venezuela.
American companies have fled Venezuela for years as the nation has fallen into chaos, both politically and economically.
ExxonMobil and ConocoPhillips left Venezuela more than a decade ago, after President Hugo Chávez nationalized the foreign-run oil fields.
Pepsi canceled its business in Venezuela in 2015 and suffered a loss of $ 1.4 billion. Mondelez, Bridgestone, Colgate and Kimberly-Clark also closed their operations in Venezuela.