Private equity's big oil opportunity in Venezuela
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Photo illustration: Brendan Lynch/Axios. Photo: Suzanne Plunkett/Getty Images
There is a $100 billion question hanging over the Trump administration's deal to effectively gain control of more than a dozen large oilfields in Venezuela.
Why it matters: This could become a big opportunity for private equity and private credit, albeit one fraught with pallets of political risk.
Catch up quick: The U.S. last week struck a deal with Venezuela's government to take control of 17 oil fields with 65 billion barrels of reserves.
- The operator is North American Blue Energy Partners, a closely held company in which the Pentagon taking a 35% equity stake.
- NABEP is led by controversial Venezuelan oil executive Alejandro Betancourt, who played a role in getting the U.S. comfortable with arresting Nicolás Maduro.
- In short, it's a public-private partnership with an imperfect partner.
Zoom in: NABEP says that its plans "will involve nearly $100 billion in investment to increase production capacity and oil and gas infrastructure in Venezuela."
- But NABEP doesn't seem to have $100 billion, and only has invested $1 billion over the past two years.
- Thus the apparent opportunity for outside investment — even if the company is telling U.S. officials that it can eventually hit that figure by signing prepayment deals and reinvesting profits as it scales, according to Axios' Marc Caputo.
Yes, but: The deal may prove more popular in D.C. than in Caracas — even among Venezuelans who acknowledge that much of the country's oil infrastructure went to pot under Maduro.
- There could be legal challenges in both countries, and this could strengthen the opposition's hand were Venezuela to hold elections that Trump insists he still supports.
- Plus, there's the broader question about making long-term investments in a company that's de facto controlled by a U.S. administration that will be gone in a few years.
The bottom line: Announcing $100 billion in future investment is the easy part.
