How Venezuela pushed aside a local oil company to make way for new US partners: ‘They simply took the assets and disappeared’

The heirs of Oswaldo Cisneros, once one of Venezuela’s richest men, received unusual news last April: strangers were touring their oil fields in the Orinoco Belt. On paper, they remained the legitimate operators of the assets, but it soon became clear that, even as those visits took place in plain sight, a plan was being put in motion to take the fields away from them.

The visitors were representatives of Pacific Coast Energy Company (PCEC), a little-known California-based firm owned by Belgian-born Pakistani billionaire Alshair Fiyaz and his partner Klaus Hasbo, the company’s chief executive. It did not take the Cisneros heirs long to understand what they were after: their stake in the business, specifically the 40% interest in Petrodelta, the joint venture that operates the fields alongside Venezuela’s state oil company PDVSA, which holds the remaining 60%.

In a last-ditch effort to stop what they saw coming, they wrote to Pacific Coast, warning that the oil fields already had an owner, but it did little good.

What happened next, according to thousands of pages of case files, documents and public statements, was one of the most opaque oil-asset transfers to emerge in Venezuela since Nicolás Maduro’s removal. Official and unofficial Washington lobbyists acted as intermediaries in a process that enabled billionaire investors to acquire oil fields that were already being operated by others.

This case also has a clear beneficiary: Pacific Coast Energy, a company that, according to a Bloomberg report, entered the picture through Alejandro Betancourt, the Venezuelan businessman who has become a key player in the country’s new political and economic landscape. Betancourt is said to have helped broker the agreement that will give Washington access to oil reserves worth an estimated $65 billion.

“They simply took the assets and disappeared. No one answers the phone,” says Silvestre Tovar Leopardi, director of DP Delta Finance, the Dutch-based company through which the Cisneros family held its stake in Petrodelta. “It happened under Chavismo in the way we all know it happened, and it’s happening again, the same way or even worse, in this new phase,” he adds, in reference to the ruling movement founded by the late president Hugo Chávez and continued by Maduro.

Behind Pacific Coast is Alshair Fiyaz, a billionaire who owns luxury department stores and private clubs in Saint-Tropez and who has spent years investing in the oil industry through a web of investment companies. First in Nigeria, now in Venezuela. Fiyaz, whose superyacht, valued at about $75 million, features two helipads, had been eyeing opportunities in the South American country since at least February, just a month after Maduro’s capture.

On May 21, weeks after representatives of Pacific Coast toured the oil fields, a letter from a department within Venezuela’s Ministry of Hydrocarbons sent a chill through the local operator’s management team. The ministry had opened administrative proceedings against the company, accusing it of failing to meet the investment and production commitments set out in its business plan. The letter warned that its participation in the fields could be revoked.

Just five days after the proceedings were launched, Pacific Coast signed not only a contract for those assets but five additional agreements covering a total of 12 oil fields, according to official documents.

Petrodelta had exploitation rights over the fields until 2042. But only 40 days after receiving the ministry’s letter, the Cisneros family’s company learned that the matter had effectively already been decided. Before the administrative process had even concluded, PDVSA informed Hasbo that a new contract covering six of the fields would take effect on July 1, according to documents reviewed by EL PAÍS. While the Cisneros heirs were still fighting the case through administrative channels, their business had effectively been handed to a new operator.

“You have a process in which they tell you they’re taking away the oil fields, and a few days later all the assets are transferred back to the ministry, which then hands them over to these people,” says Silvestre Tovar Leopardi.

Neither PDVSA nor Pacific Coast Energy responded to questions sent by EL PAÍS.

Oswaldo Cisneros Fajardo, whose fortune was built in mobile telecommunications and soft drinks, acquired Petrodelta in 2016, betting that the Chavista government would provide what many other oil investors in Venezuela had been denied: payment. According to Tovar, that never happened. He says PDVSA has not paid dividends since 2010. According to a statement issued by DP Delta Finance on August 15, the joint venture has produced more than 136 million barrels of oil during that period without the Cisneros family’s company receiving any payment from its share of the profits. DP Delta Finance estimates the resulting losses at more than $2 billion.

“There is no minority B shareholder who has not breached their contract, because the A shareholder, PDVSA, breached it 10 times more,” argues Francisco Monaldi, director of the Latin America Energy Program at the Baker Institute and one of the leading experts on Venezuela’s oil sector. “Taking it away from some and not from others tells you that there is clear discrimination.”

Tovar argues that Petrodelta may be “the most emblematic case” in terms of the damage done to legal certainty for investors. “Our operation was working,” he says.

Why should a private partner be required to meet its contractual commitments when the state itself has failed to honor its own? That was one of the arguments DP Delta Finance presented to the Ministry of Hydrocarbons on June 4. The company contended that selectively enforcing alleged breaches against one partner, while handing the same asset to another investor, suggests a political rather than a technical or commercial decision.

DP Delta Finance also argues that other joint ventures have not been held to the same standard, even though Venezuela’s collapse in oil production is, as it puts it, “a notorious public fact.”

Petrodelta is not an isolated case. Suelopetrol, a private company with a stake in the Petrocabimas joint venture, has publicly complained that it was not notified of a similar reassignment affecting its share of the project. In 2014, the company was granted rights to operate four oil fields in the western state of Zulia for 25 years, meaning those concessions were not due to expire until 2039. Suelopetrol is also contesting the loss of its 1% stake in Petroindependencia, which was transferred to Chevron under the new oil agreements.

China, which holds interests in several Venezuelan oil projects, has likewise sought assurances that its contractual rights will be respected as the country’s oil map is redrawn. But during a recent visit to Caracas, U.S. Energy Secretary Chris Wright made clear that Beijing would not be allowed to claim revenues from new oil production to recover past debts.

Pacific Coast Energy Company is not the sort of operator most industry insiders would expect to manage oil fields containing an estimated 1 billion barrels of reserves. The company specializes in mature fields, but there are doubts about its capacity. “It’s practically a ghost company,” says one industry source. “It has no capacity; it produces practically nothing. Everything indicates that someone much more powerful is behind it.” According to MineralAnswers.com, Pacific Coast produces roughly 13,700 barrels a day from 208 wells, a little more than twice Petrodelta’s recent output.

But Pacific Coast had a powerful backer: Alejandro Betancourt, the Venezuelan businessman investigated in Spain and Switzerland for money laundering, who has been “working to facilitate” Washington’s effort to identify Venezuelan energy assets for investors. Pacific Coast Energy was among the companies involved in that process, according to Bloomberg. Industry sources also say the company benefited from the backing of Mauricio Claver-Carone, until recently Washington’s informal envoy on Venezuela, the same official who described Betancourt’s role as “invaluable” to U.S. efforts in the country.

New oil map

The reassignment of Petrodelta’s fields is just one piece of a broader reshaping of Venezuela’s oil industry driven by U.S. strategic interests. At the center of that process is Betancourt, who has emerged as a key intermediary in a new generation of oil agreements that move away from the traditional joint-venture model.

The new framework relies on so-called Hydrocarbon Production Sharing Contracts (PSC), under which private investors are being offered terms far more attractive than those available under the previous system. According to industry sources, Betancourt’s pitch to Washington included conditions that the Venezuelan state itself could not legally guarantee under the old model: concessions lasting up to 100 years instead of the 25-year limit, majority ownership for private operators, and crude oil sold to the United States at cost.

The lack of transparency is not unique to the Petrodelta case. Participants in recent contract negotiations in Caracas describe a process conducted largely behind closed doors, without public tenders or competitive bidding. According to several sources, investors may propose one oil field only to be offered another by the Ministry of Hydrocarbons, with little clarity about who else is negotiating and with what information. It is, they say, the opposite of the procedures followed in other oil-producing countries in the region. “There is no legal certainty here,” says Tovar. “This is obvious abuse.”

The reform of Venezuela’s Hydrocarbons Law, rushed through after the Jan. 3 military operation that toppled Maduro, was presented as a way to curb the discretionary decision-making that had driven major oil companies away from the country in recent years. But as a new era of investment begins in Venezuela, the question now hanging over Venezuela’s new investment era is whether winners and losers in the sector’s reorganization will be determined by the law or by political access and connections.

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