The Trump administration has confirmed it will be taking a 35% equity stake in a new oil company that will drill across more than a dozen oil fields in Venezuela.
On Monday night, the White House published new details of the deal, first announced by President Donald Trump late last week, revealing that the U.S. government will be given “power governance rights” and “economic ownership” over tens of billions of barrels of Venezuelan oil.
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The announcement answers some questions regarding the legal structure and political longevity of the agreement, but it also leaves key details unexplained.
As part of the deal, the White House said “Venezuelan interim authorities” granted North American Blue Energy Partners, a private oil and gas exploration and production company, 100-year concessions for 17 oil fields that have proven reserves of roughly 65 billion barrels of crude.
The company, which is led by Venezuelan businessman Alejandro Betancourt, has since granted the Pentagon’s Office of Strategic Capital a 35% equity stake in its corporate parent. The White House said this came “at no cost to the American taxpayer.”
The State Department has also been granted the right to purchase oil produced at production cost, with a guaranteed 20% of the offtake from all current and future fields that NABEP will operate.
The Trump administration has said that purchasing this oil will ensure the U.S. government can refill the Strategic Petroleum Reserve.
It remains unclear how it will do that with Venezuelan crude, as the SPR facilities were not built to hold this type of oil. According to the Department of Energy, the SPR can hold oil that is of light gravity — 30 to 40° API — and contains less than 2.0 mass percent total sulfur. Venezuelan crude contains between 3% to 5% sulfur with an API gravity between 8 and 16 degrees.
As part of the agreement, the State Department has also been granted the right of first refusal to purchase the remaining 80% of NABEP’s production.
The U.S. government will also have significant control over the makeup of the Venezuelan oil company, holding veto power over the appointment of any member of the board of directors. The majority of the company’s board must also be U.S. citizens.
The deal has come under criticism for the secrecy in which it was formed, as well as the fact that the agreement did not appear to go through any competitive process, such as bidding.
U.S. officials brushed off these concerns by pointing out that NABEP is the largest single operator in Venezuela other than the state-owned oil developer PdVSA, just ahead of Chevron.
One U.S. official said on Tuesday that, as a private company, NABEP is able to choose its business partners.
The release put out by the White House on Monday leaves several questions unanswered, such as what the legal framework will be to keep the deal in place as administrations in the U.S. and Venezuela change over time.
U.S. officials have said that the deal will not infringe on any democratic transition and instead will lay the groundwork for the next government of Venezuela to be a “successful republic in the long term.”
There also appears to be a discrepancy between statements from the U.S. and Venezuelan governments regarding how long the new oil company will be able to produce in the 17 oil fields.
While the administration has said it is a 100-year concession agreement, interim President Delcy Rodriguez said over the weekend that the agreement will last 25 years.
Trump has touted the deal as a way to lower gasoline prices, which continue to tick up ahead of the November midterm elections due to the war in Iran.
U.S. officials have denied setting a specific timeline for when Americans might see prices at the pump fall due to increased Venezuelan crude imports.
TRUMP SAYS VENEZUELAN OIL WILL REPLENISH STRATEGIC PETROLEUM RESERVES
Additionally, it is unclear what the terms are for the Pentagon’s Office of Strategic Capital to take the equity stake, as spokesman Sean Parnell previously told Reuters that the office does not take 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 (including transaction structuring for developing and financing investments),” Parnell said.
The Trump administration has set precedents by taking ownership stakes in private companies in industries that officials see as key for national security or industrial purposes.
One U.S. official told reporters Tuesday that the authority granted to the OSC to conduct such deals was established under the Biden administration, and that the stake in NABEP is a “very standard deal.”
Energy Secretary Chris Wright was expected to travel to Venezuela this week, where he will meet with Rodriguez.
