Venezuelan Oil Sale Licenses Give Vitol and Trafigura a Share in Trade Exceeding 200 Million Barrels
Key Facts
The U.S. Department of Energy confirmed that Secretary Chris Wright called John Addison on January 5 to discuss Venezuela, and Addison said they discussed whether Vitol wanted to take on sales of Venezuelan crude. Within days of the call, Vitol and rival Trafigura received special licenses to market the oil, Reuters reported. The timing of the licenses raised questions about the choice of the two companies in a process that did not involve a competitive tender. The U.S. administration defended bypassing a tender, saying swift action was necessary to support Venezuela's economy and services. It also linked the need for speed to making financing available for debt restructuring.
The Department of Energy said Vitol was selected because it is the world's largest energy and commodities trader, and denied that Vance and Wright had discussed Venezuelan oil sales. The department said Wright called Addison to discuss Venezuela, while Addison said the call included the company's interest in selling the crude. The two accounts place the call in the context of the oil-marketing arrangements that followed, while the department denied any discussion of sales between Vance and Wright. The issue is sensitive because of Addison's political ties to Vance and because a company Addison works for received a special license days later. The department, however, cited Vitol's global scale as the basis for its selection.
Reuters estimates indicate traders' profit margins could reach about $3 to $3.50 per barrel, equivalent to 3.5% to 4%. Energy finance professor Tom Singh estimated profit in that range for each barrel sold; this is an estimate of commercial returns, not a financial disclosure by Vitol or Trafigura. U.S. government data cited by Reuters show that Venezuela's crude exports exceeded 200 million barrels during the year through the date of the report. The volume of exports makes the margin estimates equivalent to profits of hundreds of millions of dollars, according to Reuters. The article did not provide publicly disclosed financial terms for the licenses or the value of profits realized by the companies.
In the context of the political ties, a source told Reuters that Vance and Addison met in Montana on December 27 and discussed Venezuela. But Addison and Vance's office denied that the meeting took place, while flight records reviewed by the agency showed their two aircraft at Bozeman Airport on the same day. The account of the meeting remains denied by both sides, while flight records establish that the two aircraft were at the airport at the same time. The contribution was to the political committee, not directly to Vance.
Political scrutiny extended to Congress, where Robert Garcia, the top Democrat on the House Oversight Committee, sent Vitol and Trafigura a letter in January asking about the circumstances in which they obtained the licenses. The companies told Reuters they had no advance knowledge of the U.S. military operation. The Department of Energy, meanwhile, said the U.S. government had begun marketing Venezuelan crude in global markets. The department said proceeds from the sales would first be deposited in accounts under U.S. control. An executive order issued on January 9 prohibits attachment or judicial proceedings against specified Venezuelan funds deposited in Treasury accounts unless a license or authorization is issued.
In March, the U.S. Treasury Department issued a general license allowing Venezuela's state oil company PDVSA to sell oil directly to U.S. companies and in global markets, according to the Associated Press. The license included restrictions barring transactions involving Venezuelan debt or bonds. This subsequent framework followed the special licenses Vitol and Trafigura received after the January call. Permission for direct sales establishes a broader regulatory route for marketing Venezuelan oil, while the financial restrictions in the license remain in place. Lawmakers' questions about how the special licenses were granted remain part of the scrutiny of the sales arrangements.