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The Trump administration defended its new venture to extract Venezuelan oil on Tuesday as Chevron prepared to announce a major expansion of its operations in the country.
In an unusual deal announced last week, Alejandro Betancourt, who owns the second-largest private oil company in Venezuela and is one of the most polarising business figures in the country, is the US’s partner in a group that will control about one-fifth of the Latin American nation’s oil reserves. Venezuela’s National Assembly backed the deal with the US on Tuesday afternoon.
Supporters of Venezuela’s government have heavily criticised the US deal because they said it gave too much influence to a foreign power It followed months of secretive negotiations after US special forces seized the South American country’s former leader, Nicolás Maduro, to face drug-trafficking charges in a US court.
A senior US official said Betancourt had a record of getting things done in an oil industry that has collapsed over the past decade as a result of corruption, mismanagement and the impact of US sanctions.
“I’m not nominating anyone for sainthood here,” said a senior US official put forward by the White House. The deal puts “someone in place who is a proven operator and can deliver on the production capacity that needs to happen”.
The official added: “In geopolitics it is often not the choice between the ideal and the imperfect. It is often you’re trying to navigate what’s the best outcome.”
Betancourt’s company has begun looking for potential investors in the 17 oilfields it has access to with the goal of attracting $100bn in investment to the country. Many of the 17 oilfields were previously controlled by Chinese or Russian companies, prompting the White House to justify its agreement with Betancourt as a way to expel foreign adversaries from “our hemisphere”.
“From a geopolitical sense, it made all the sense in the world for us to engage in this way,” said the official.
He added: “The backing of the US allows this company to attract the investment and capital investment necessary to ramp up production rapidly.”
Betancourt is one of the most prominent Bolichico, a term for the class of politically connected magnates who became immensely wealthy under the socialist government of Hugo Chávez, who took office in 1999. His fortune came in part from no-bid contracts in the country’s electricity sector awarded by the late leader’s government.
He has been investigated in Spain and Switzerland over allegations of involvement in embezzlement and money laundering. Last year, he was barred from leaving the UK, where he was based at the time, because of a Swiss extradition request which has since been lifted. His lawyers say Betancourt has never been charged and denies wrongdoing.
The White House has been frustrated by how few energy companies have invested in Venezuela since the January military operation to seize Maduro. Its defence of its deal with Betancourt comes as Chris Wright, US energy secretary, is visiting Caracas this week to announce investments by US companies.
Chevron on Wednesday is expected to sign a deal to expand its operations in Venezuela, including by adding new oilfields in the Carabobo region within the Orinoco Belt, an oil-rich area that stretches across the central-eastern part of the country. The expansion is separate from the Betancourt agreement.
The new acreage is expected to include portions of the Carabobo 1 and 2 resources, which are close to an oilfield operated by Petroindependencia, a joint venture between Chevron and Venezuela’s state-owned oil group Petróleos de Venezuela, according to a person with knowledge of the deal.
Chevron is the only big US oil company to agree to increase investment in Venezuela’s onshore oilfields, which mainly produce heavy oil, an extra-thick, tar-like crude that does not flow easily and requires specialist equipment and skills to refine into fuels.
ExxonMobil and ConocoPhillips have been reluctant to commit additional capital in a country where they both had billions of dollars expropriated over recent decades. However, some companies with existing operations in the country, including Italy’s ENI and Spain’s Repsol, are seeking to boost production.
Industry executives have also warned high production costs in the country make it difficult to generate profits.
One oil and gas executive with interests in Venezuela said: “The reality is that the economics are very thin. Just simple maths on the numbers: if you take a $65 or $70 barrel, and you get half and you have to pay all the expenses, and then you have to pay a 50 per cent tax. It is razor thin.”
Under the terms of the unusual agreement between Washington and Venezuela’s de facto leader Delcy Rodríguez, the US will take a 35 per cent stake in Betancourt’s company, North American Blue Energy Partners, which the US official said involved “zero investment of dollars”.
The US official said Betancourt had also been “helpful” to the US government, including during Donald Trump’s first term when the administration tried to push the Maduro regime out of power by declaring the head of the national assembly, Juan Guaidó, the legitimate leader of the country.
As a result of his support for Guaidó, whose attempt to dislodge Maduro failed, Betancourt fled the country and temporarily lost control of his oil business, which he has since rebuilt.
