Official: US structure Venezuela oil position in order to protect it against dilution
A U.S. official said that the U.S. government has structured its 35% stake in an oil venture in Venezuela as warrants to protect Washington's position from being weakened by fresh capital raises.
The official stated that the Pentagon had structured its stake in North American Blue Energy Partners, which was announced by President Donald Trump 'last week'. This gave the Pentagon the right to purchase the equity at a future date but not an obligation. Penny warrants are exercisable at a token value.
As part of a recent agreement between Washington and Caracas, NABEP, which is controlled by Venezuelan businessman Alejandro Betancourt was granted 100-year right to 17 oilfields with estimated reserves of 65 billion barrels.
The 'concessions' were not awarded through a competitive process. After capturing and removing former president Nicolas Maduro in January, the U.S. is working to revitalize the oil sector of South America.
A senior official explained that the structure was specifically designed to maintain U.S. levels of ownership even while NABEP raises money to support the capital needs of the project.
Investments of billions are needed to expand offshore oil fields.
The warrants are an anti-dilution tool that the U.S. will hold until the project is mature. "So?that the U.S. Government can realize 35% of its full value...once it reaches production maturity," the official said.
The official stressed that the U.S. is entitled to dividends even before the warrants have been exercised. The official explained that the structure "gives us all the benefits as equity holders today, while protecting us against dilution during the development of the project."
Officials confirmed that the Pentagon has a separate first-offer right to buy NABEP oil. The official confirmed that the Pentagon has a separate right of first offer to purchase NABEP's oil output.
Betancourt has been scrutinized for his past business dealings. U.S. authorities and European officials have investigated them. He has not been charged with any crime and has denied all wrongdoing. The arrangement was defended by other U.S. officials this week, who framed the agreement as part of an effort to align the energy industry in the country with U.S. interest.
Venezuela's oil -output peaked at 3?million barrels a a day in the late 90s, before falling due to sanctions and mismanagement. It now sits between 1.1 and 1.2 million barrels a a day. U.S. Energy Sec. Chris Wright?said that this level could more than double within a few year as separate agreements with Chevron Eni, ONGC GeoPark, and GE Vernova, announced on Wednesday, also come into effect.
Officials from the Pentagon have also stated that officials who worked for Cerberus Capital, a private equity firm not involved in Venezuela's oil deals, must recuse themselves and refer any deals involving the assets of the company to Commerce Secretary Howard Lutnick.
The lawmakers have demanded more transparency in contracts linked to Cerberus affiliated companies. They have also called for a clearer separation between Cerberus founder Steve Feinberg and procurement decisions.
Cerberus didn't immediately respond to an inquiry for comment.
(source: Reuters)
