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The U.S. government structured its 35 percent position in a Venezuelan oil venture with warrants that protect Washington\u2019s stake from being weakened by fresh raises of capital, a U.S. official said.<\/strong><\/p>\n Speaking on Thursday \u200cabout the deal announced last week by President Donald Trump, the official said the Pentagon structured the stake using \u201cpenny warrants\u201d in North American Blue Energy Partners (NABEP), giving it the right but not the obligation to buy the equity at a later date. Penny warrants can be exercised at a token price.<\/p>\n NABEP, controlled by \u200bVenezuelan businessman Alejandro Betancourt, was granted 100-year rights to 17 oilfields holding an estimated 65 billion barrels of reserves as \u200bpart of the recent deal between Washington and Caracas.<\/p>\n The concessions were awarded without a competitive process. The \u2060U.S. has been working to revive the South American country\u2019s oil sector after American forces captured and removed former President Nicolas Maduro from \u200bpower in January.<\/p>\n The official, speaking on background, explained the structure was designed specifically to maintain U.S. ownership levels even as NABEP raises money \u200bto support the project\u2019s capital needs.<\/p>\n Broad expansion of offshore oil fields requires billions in investment.<\/p>\n The warrants act as an anti-dilution mechanism that the U.S. holds until the project reaches maturity, \u201cso that way the U.S. government will realize 35% of the full value of the project \u2026 once it reaches mature production, as opposed to \u200bbeing diluted in the interim,\u201d the official said.<\/p>\n Crucially, the official said the arrangement still entitles the U.S. to dividends before the warrants are ever \u200bexercised. The structure, the official said, \u201cgives the United States all the benefits of being an equity holder today while protecting us from dilution while the project \u200cis \u2060being developed.\u201d<\/p>\n The official also confirmed the Pentagon holds a separate right of first offer to purchase NABEP\u2019s oil output. Twenty percent can be purchased at a price reflecting the company\u2019s production cost, rather than market rates, with the rest purchased at market prices.<\/p>\n The deal has drawn scrutiny\u00a0over Betancourt\u2019s past business dealings, which have been investigated by U.S. and European authorities. He has never been charged and has denied wrongdoing. Other U.S. \u200bofficials earlier this week defended\u00a0the arrangement, \u200bcasting the pact as part \u2060of a process to align the country\u2019s energy industry with U.S. interests.<\/p>\n Venezuela\u2019s oil output, which peaked above 3 million barrels per day in the late 1990s before collapsing amid sanctions and mismanagement, sits near \u200b1.1 million to 1.2 million barrels a day \u2014 a level U.S. Energy Secretary Chris Wright said this week \u200bcould more than \u2060double in a few years as separate deals with Chevron Eni\u00a0ONGC, GeoPark\u00a0and GE Vernova\u00a0announced on Wednesday also take effect.<\/p>\n Separately, the official said the Pentagon requires officials who previously worked at Cerberus Capital Management, which is not involved in the Venezuela oil deals, to recuse themselves from any transactions involving the \u2060private equity \u200bfirm\u2019s assets and direct any such deals to Commerce Secretary Howard Lutnick for review and approval.<\/p>\n Lawmakers \u200bhave demanded greater transparency on contracts linked to Cerberus-affiliated companies and have called for a cleaner break between Deputy Secretary of Defense Steve Feinberg, a founder of Cerberus, and \u200bprocurement decisions.<\/p>\n Cerberus did not immediately respond to a request for comment.<\/p>\n<\/div>\n