How My Powerful Venezuela Oil Connection Ended Up in Jail

How My Powerful Venezuela Oil Connection Ended Up in Jail

by | published December 1st, 2017

In Quito, Ecuador a while back, while providing a risk assessment workshop for officials from Latin American oil companies, I was able to spend several days in private conversations with Venezuela’s Minister of Oil.

Now heading up the national oil company PDVSA, he was considered one of the most knowledgeable and able of the region’s execs at the time.

During our talks, he shared some useful advice on how to integrate the national oil company budgetary requirements with the vortexes of national politics.

At one point, over a late-night drink, he confided the following: “You are always in a no-win situation when it comes to insulating working capital from central budgets,” he declared. “You have to provide for the next round of drilling. For that, proceeds from sales must be segregated. But the politicians can only see buying the next election.”

We were to renew the conversation later when I was scheduled to provide a similar seminar at the invitation of PDVSA.

However, by the time that was to take place, the domestic civil strife in Venezuela had intensified.

The government admitted they could not provide sufficient security for my appearance in the eastern, oil-producing region where the meeting was to take place, while the U.S. Department of State chimed in advising that I should not go.

And yesterday, my “drinking colleague,” – or Eulogio Del Pino, as the world knows him –  was arrested at his home in Caracas.

This is one of the latest in a series of arrests orchestrated by embattled President Nicolas Maduro.

Maduro claims there is a “cartel of organized crime” intent on spreading graft and undermining the national energy sector.

His political opposition charge the president with a desperate attempt to purge those who have criticized his leadership.

Let me say upfront that I have no personal knowledge of whether the graft charges are true or which side has the upper hand in the telling of truths about what is occurring internally in Venezuela.

After experiencing the last year in American politics, we certainly have no right to lecture to others.

But I do recall what Eulogio told me back in Ecuador.

It involved two energy matters that brought the latest wave of political arrests in Venezuela.

And both have resulted in Maduro seeking out opponents to pillory…

The Real Reason Behind PDVSA’s Recent Arrest Spree

The first is a contentious financial deal for Citgo refineries in the U.S.

The second is Petrozamora S.A, a joint venture with Russian banking major, Gazprombank (itself, an arm of state-run natural gas giant Gazprom and oil major Gazprom Neft).

Del Pino is closely involved in the Petrozamora affair, while another well-known oil exec – Nelson Martinez – headed up the Citgo network both while PDVSA owned it, and after sales began to other interests.

However, the president’s real political target in Caracas may actually be Rafael Ramirez.

Ramirez is the former Venezuelan oil kingpin, a close ally of U.S. interests in the area, and the most likely opponent for Maduro – should there ever again be democratic elections in the country.

Ramirez has been the mentor of both Del Pino and Martinez as they rose through the ranks of the Venezuelan oil hierarchy.

Speculation has already begun that yesterday’s arrests were more to pressure Del Pino and Martinez to turn “states evidence” against their former patron.

These latest moves follow the arrests of more than 60 others within PDVSA- casting a chilling silence over the national oil company, to say the least.

None of my current contacts there will answer any messages these days.

According to Maduro, the issue surrounds billions of dollars in corruption within PDVSA, its arrangements with foreign companies and finance, as well as its administration of assets held abroad (like the Citgo refineries in the U.S.).

Others, however, charge that the real problem results from an increasingly desperate political leadership with its own “private accounts” in which public revenues are being siphoned while the central budget implodes under the weight of its own red ink.

The situation has only been intensified by the technical default into which both PDVSA bonds and Venezuelan sovereign debt (much tied to that PDVSA paper) have fallen after Caracas failed to pay interest as scheduled.

Eulogio also didn’t help his standing with Maduro when he went public with an opinion that Venezuela needs to own up to its foreign debt obligations.

There was, of course, another reason for that position…

PDVSA’s Transparency Problem

PDVSA is in desperate need of securing finance to fund ongoing operations.
Crude oil sales remain the dominant source of the country’s revenues.

And this brings us back to the advice he gave me years ago.

With normal international finance markets closing to PDVSA, designing foreign ventures to obtain the working capital necessary for drilling becomes the only genuine option.

Petrozamora may well have been in that category.

By directing the finance to projects, PDVSA kept the lights on and workers paid.

But it did so at the expense of inciting the ire of the president and his cronies.

This morning, PDVSA was taken over by a general loyal to Maduro.

That means we should not expect any transparency anytime soon.

It also means something else…

Given the recent experience with debt payment defaults, I would be concerned if I was representing a Russian bank or energy major who thought they had some paper control over assets inside Venezuela.

Under the rule of Maduro, such papers have an irritating habit of disappearing… along with the Venezuelan officials who signed them.



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  1. Cal Johnson
    March 27th, 2019 at 16:16 | #1


    Thanks for the thoughts on Venezuela. Very cogent.

    As bad as free speech can be, it is far better than force of arms. I would encourage everyone to understand that Chavez’ and Maduro’s decisons to go strongman and socialist with the country are destroying the country. The heavy oil extraction there is dying.

    Heavy oil from Canada and the Gulf will probably rerate higher compared to WTI.

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