The Pentagon has acquired a significant ownership stake in an unnamed private oil company that controls larger oil reserves. exxon mobilIf President Donald Trump’s Venezuela deal is successful, it will become a global portfolio of.
The deal comes eight months after Washington ousted former Venezuelan President Nicolás Maduro in a military raid and brought in a remaining government led by interim President Delcy Rodríguez.
The Rodriguez government awarded Barbados-based North American Blue Energy Partners a century-old interest in 17 oil fields in Venezuela. NABEP CEO Alejandro Betancourt is a controversial figure who is under investigation for his past business operations.
NABEP, in turn, gave the Defense Department Strategic Capital Office a 35% stake at no cost to U.S. taxpayers, according to deal details released by the White House this week.
The Trump administration has acquired corporate stock at a pace unprecedented, especially by a Republican administration, except during major crises such as the World Wars, the Great Depression, and recessions. They argue that such agreements are necessary to secure resources essential to national security.
But Tyler Priest, an oil industry historian at the University of Iowa, said it’s difficult to find historical precedent for the U.S. government taking direct ownership of an oil company, let alone a company operating oil fields in a foreign country.
The deal would give the United States control of the majority of Venezuela’s 65 billion barrels of proven oil reserves, according to the White House. This is about 20% of the 303 billion barrels the country is thought to hold.
Patrick Rutti, director of global intelligence at Enverus, said if the White House statistics are accurate, NABEP would become the world’s second-largest oil company in terms of proven reserves after Saudi Aramco. That would be about four times Exxon’s reserves, Ratti said.
Priest said the agreement with Venezuela appears to be unprecedented. The United States considered taking direct control of Saudi Arabia’s oil interests during World War II, but backed away due to industry opposition, he said. Congress attempted to create a federal oil corporation in 1976, but the vote was narrowly defeated.
“In a country known for its rampant corruption, the U.S. government’s involvement with shady business interests only raises all sorts of red flags,” Priest said.
“State-owned enterprise”
In addition to the DoD stock, the State Department has the right to purchase 20% of NABEP’s oil production at cost of production rather than market price. The U.S. distributor also has a right of first refusal for the remaining 80% of NABEP’s production.
The U.S. government also has the ability to veto appointments to NABEP’s board of directors, and a majority of the board must be U.S. citizens. Your contract with NABEP is governed by the laws of the United States and is subject to the jurisdiction of the courts.
“This is truly a state-owned enterprise,” said Scott Linthicum, an expert on international trade law at the Cato Institute. “De facto control of 100% of production at cost, that’s ownership.”
The oil purchased by the United States on favorable terms will help replenish the Strategic Petroleum Reserve and “supply military and other sensitive uses,” the White House said.
U.S. officials told reporters on a conference call Tuesday that the Trump administration does not anticipate using the U.S.’s right of first refusal on the remaining 80% of NABEP production.
The first veto is a long-term insurance policy that the United States uses in times of crisis, said the official, speaking on condition of anonymity to discuss the deal freely.
The agreement is “first and foremost about geopolitics,” the official said. “This was an opportunity to secure an area that was primarily under the influence of Chinese and Russian companies.”
big oil hesitation
Energy Secretary Chris Wright told CNBC’s Brian Sullivan in Caracas on Wednesday that the Trump administration’s goal is to encourage private investment in Venezuela by strengthening investor confidence in the country through the U.S. government’s presence.
Wright said the agreement with NABEP “does not replace or displace private companies.” He said the U.S. government is “not the operator or producer” of Venezuela’s reserves.
The US government partnered with NABEP because most US oil majors have been reluctant to invest in Venezuela since the socialist regime in Caracas nationalized industrial assets in 2007.
ExxonMobil CEO Darren Woods told President Trump during a White House video conference in January that Venezuela was “uninvestable.” conocophilips CEO Ryan Lance said in February that he would not return to Venezuela until he had collected the money owed from Caracas.
chevron is the only US oil major operating in Venezuela. The company announced another agreement this week to invest $7 billion and more than double domestic production by 2031.
“This entity was created because there was no interest in private investment in Venezuela,” Linthicum said of the NABEP contract. “I don’t know where the private capital is flowing right now.”
Betancourt’s record
U.S. officials said the Trump administration partnered with NABEP because NABEP’s CEO is an “excellent oil businessman” with a “past history of service to the U.S. government.”
But Betancourt faces money laundering and corruption allegations. He has not been charged with a crime and denies wrongdoing.
Asked about Betancourt’s past, a U.S. official told reporters: “I’m not going to name anyone a saint here.” The CEO has not been charged with any violation of law in the United States, the person said.
“In particular, this individual is an established oil operator and, given his knowledge of the industry, we believe that he can bring these fields to the production capacity to produce the oil needed to generate the revenue that Venezuela needs to emerge from a truly 20-year crisis,” the U.S. official said.
Betancourt expanded NABEP’s production in Venezuela from 18,000 barrels per day to more than 200,000 barrels per day, the company announced. This will make NABEP the second largest private oil producer in Venezuela, according to a company statement.
NABEP said the agreement will bring nearly $100 billion in investment to Venezuela’s oil sector. The short-term goal is to increase production to more than 1 million barrels per day.
Uncertainty of legality
However, the partnership between the US government and NABEP faces legal and political uncertainty, raising questions about the long-term viability of the agreement.
“As with other stock transactions, the Trump administration does not seem to have laid out any legal basis or justification for thinking it could make this happen,” said Peter Harrell, who served as international economic adviser on the National Security Council under President Joe Biden.
The US government’s statement caused confusion. Before the deal was announced, the Pentagon said the Office of Strategic Capital (OSC) would not acquire stock in private companies.
“Based on its statutory authority, the OSC’s role is strictly limited to providing capital support in the form of loans, loan guarantees, and technical assistance,” Pentagon spokesman Sean Parnell said in a statement to CNBC on August 28.
The White House later confirmed on Monday that OSC would acquire a 35% stake in NABEP under the agreement. U.S. officials later told reporters on a conference call Tuesday that “the stock position is structured consistent with the legal authority given to the Office of Strategic Capital.”
Rapidan Energy President Bob McNally said if a Democrat wins the 2028 presidential election, the agreement would at least be reconsidered, and possibly terminated entirely. If a Republican becomes the next president, a future Venezuelan administration could tear up the deal, McNally said.
“While the U.S. goal is to de-risk private long-term investments, significant political risks in both Washington and Caracas will limit the plan’s impact,” McNally said.
