The Pentagon has received a large stake in an obscure private oil company that will control crude reserves larger than ExxonMobil’s global portfolio if President Donald Trump’s deal with Venezuela is successful. The deal comes eight months after Washington overthrew former Venezuelan President Nicolás Maduro in a military raid and co-opted the remaining regime led by interim President Delcy Rodríguez. The Rodríguez government has granted the North American Blue Energy Partners, based in Barbados, concessions for 17 oil fields in Venezuela for a century. NABEP CEO Alejandro Betancourt is a controversial figure who has faced investigations into his past companies. NABEP, in turn, has given the Pentagon’s Office of Strategic Capital a 35% equity stake at no cost to the American taxpayer, according to details of the deal released by the White House this week. The Trump administration has acquired stakes in companies at an unprecedented rate, particularly for a Republican administration, outside of major crises such as the world wars and the Great Depression and Recession. He has argued that such agreements are necessary to secure resources critical to national security. But it’s hard to find historical precedent for the U.S. government taking a direct stake in an oil company, let alone one that will operate fields in a foreign nation, said Tyler Priest, an oil industry historian at the University of Iowa. The deal gives the U.S. majority control over 65 billion barrels of Venezuela’s proven crude reserves, the White House said. This is around 20% of the 303 billion barrels the country is believed to possess. If the White House figures are accurate, NABEP would be the world’s second-largest oil company, measured by proven reserves, behind Saudi Aramco, said Patrick Rutty, director of global intelligence at Enverus. It would be about four times larger than Exxon’s reserves, Rutty said. The deal with Venezuela appears to be unprecedented, Priest said. The United States considered taking direct control of an oil concession in Saudi Arabia during World War II but backed off because of industry opposition, he said. Congress came close to creating a federal oil company in 1976, but the vote narrowly failed. “For the U.S. government to get involved with a shady concessionaire businessman in a country known for its endemic corruption just raises all kinds of red flags,” Priest said. “State-owned enterprise” In addition to the Pentagon’s shareholding, the State Department has the right to purchase 20% of NABEP’s oil production at the cost of production and not the market price. The US agency also has the right of first refusal for the remaining 80% of NABEP’s production. The US government can also veto appointments to NABEP’s board of directors and the majority of the board must be US citizens. The agreement with NABEP is governed by US law and is subject to the jurisdiction of its courts. “This is straight up a state-owned company,” said Scott Lincicome, an international trade law expert at the Cato Institute. “De facto control of 100% of production at cost: that’s ownership.” Oil purchased by the United States on favorable terms will help replenish the Strategic Petroleum Reserve and “provide supply for military and other sensitive uses,” the White House has said. The Trump administration does not plan to use the U.S. right of first refusal on the other 80% of NABEP production, a U.S. official told reporters in a phone call Tuesday. The right of first refusal is a long-term insurance policy that the United States would use when faced with a crisis, said the official, who spoke on condition of anonymity to discuss the agreement freely. The agreement is “first and foremost about geopolitics,” the official said. “This was an opportunity to secure fields that had been largely under the influence of Chinese and Russian companies.” Big Oil Hesitant 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, Energy Secretary Chris Wright told CNBC’s Brian Sullivan on Wednesday in Caracas. The NABEP agreement “is neither a displacement nor a replacement for private companies,” Wright said. The United States government “will not be the operator or producer” of Venezuela’s reserves, he stated. Washington has partnered with NABEP as most U.S. oil majors are hesitant to invest in Venezuela after the socialist government in Caracas nationalized the industry’s assets in 2007. ExxonMobil CEO Darren Woods told Trump that Venezuela is “non-investable” during a televised meeting at the White House in January. ConocoPhillips does not plan to return to Venezuela until it recovers the money Caracas owes it, its CEO, Ryan Lance, said in February. Chevron is the only major US oil company active in Venezuela. It announced a separate deal this week to invest $7 billion to more than double its production in the country by 2031. “This entity emerged due to a lack of private investment interest in Venezuela,” Lincicome said of the NABEP deal. “It’s hard for me to see where private equity is going now.” Betancourt’s track recordThe US official said the Trump administration partnered with NABEP because its CEO is a “good oil operator” who in “the past has been useful to the US government.” But Betancourt has faced accusations of money laundering and corruption. He has not been charged with any crime and has denied any wrongdoing. “I’m not nominating anyone for sainthood here,” the U.S. official told reporters when asked about Betancourt’s past. The CEO does not face any charges in the US for violating its laws, the official said. “This individual, in particular, is a proven oil operator who we believe can, given his knowledge of the industry, bring these fields to a productive capacity that produces the oil necessary to generate the income necessary for Venezuela to emerge from 20 years of being in the hole,” the US official said. Betancourt scaled NABEP’s production in Venezuela from 18,000 barrels per day to more than 200,000 bpd, the company has said. This makes NABEP the second largest private oil producer in Venezuela, according to company statements. NABEP has said the deal will bring nearly $100 billion of investment to Venezuela’s oil sector. Its short-term goal is to increase its production to more than 1 million bpd. Legal uncertaintyBut the US government’s partnership with NABEP faces legal and political uncertainty that raises questions about the long-term viability of the agreement. “As with other stock deals, the Trump administration does not appear to have presented any legal basis or justification for how they believe they can do this,” said Peter Harrell, who served as an international economic adviser on the National Security Council under President Joe Biden. The US government’s statements have created confusion. Before the deal was announced, the Pentagon said that “the Office of Strategic Capital (OSC) does not acquire equity stakes in private companies.” “Under its statutory authority, OSC’s role is strictly limited to providing capital assistance in the form of a loan, loan guarantee, or technical assistance,” Pentagon spokesman Sean Parnell said in a statement to CNBC on August 28. The White House later confirmed Monday that OSC would receive a 35% stake in NABEP under the deal. A U.S. official later told reporters on Tuesday’s call that “the capital position is structured in accordance with the legal authority granted to the Office of Strategic Capital.” If a Democrat wins the 2028 presidential election, the deal will at least be reconsidered and possibly rescinded entirely, said Bob McNally, president of Rapidan Energy. If a Republican is the next president, a future Venezuelan regime could break the agreement, McNally said. “The US goal is to de-risk long-term private investment, but significant political risks in both Washington and Caracas will limit the plan’s impacts,” McNally said. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.
