Cisneros family alleges $2 billion loss from nullified oil stake
Pacific Coast Energy, a small California oil producer, is negotiating to operate Venezuelan oil fields that the Cisneros family, one of Venezuela’s most prominent business dynasties, asserts it rightfully owns through a decade-old joint venture. The family alleges that Venezuela’s interim government secretly nullified its rights and is now offering the same assets to the new entrant, claiming $2 billion in losses.
The dispute highlights the complications of doing business in Venezuela eight months after the U.S. asserted de facto control of the country’s energy industry and encouraged American investors to return. While ExxonMobil and ConocoPhillips have been reluctant to re-enter two decades after Venezuela nationalized their assets, Pacific Coast says it has raised $800 million in debt, equity and trade finance to fund initial operations, and has announced deals with 30 Venezuelan companies for supplies, equipment and services, plus talks with oil traders Trafigura and Vitol about marketing the crude.
The Cisneros family’s lawyer, Juan Domingo Alonso, said the family’s entity, DP Delta Finance, was notified by Venezuela’s government last week that an administrative process had been opened in May and that, based on a finding that the family had failed to meet its financial commitments, its interests in the joint venture PetroDelta were revoked in June. Alonso said Delta Finance was pushed out without an opportunity to address the allegations, which it denies, or to appeal the decision, despite holding a contract good through 2042.
“This has been an abrupt, arbitrary and unusual procedure,” Alonso said.
The Cisneros family has extensive business holdings in Venezuela. Oswaldo Cisneros — who died in 2020 and whose fortune had been built on mobile-services providers and sugar — expanded the family’s portfolio into oil, spending more than $1 billion in 2016 to acquire and invest in a 40% stake in PetroDelta for six oil fields, with the Venezuelan government holding the remainder.
Oswaldo Cisneros had bet on rebounding crude prices, and the plan was to triple output to 115,000 barrels a day. Instead, industry mismanagement and a punishing economic depression left PdVSA and its partner squabbling over payments, according to people familiar with the business. U.S. sanctions on Venezuela’s financial system severely crimped investment in the venture. Over the past year, output was around 10,000 barrels a day.
Alonso said Delta Finance is owed hundreds of millions in unpaid services fees and dividends that were never disbursed by the government. He added that Venezuelan authorities never liquidated the joint venture and therefore cannot transfer its oil fields to a new partner. “This just wasn’t what was expected for the sector…confiscating assets and with everything done in the dark, behind Delta Finance’s back,” Alonso said.
Venezuela, which nationalized foreign companies’ oil assets in the 1970s and again in the 2000s, is pursuing agreements with U.S. producers to develop its oil industry under new legal and regulatory reforms implemented by acting President Delcy Rodríguez.
Pacific Coast, little known outside the oil industry, has pumped heavy oil in California for 30 years, supplying the likes of Chevron, and has developed fields in West Africa and Europe. It is registered in the Santa Barbara County, Calif., town of Orcutt through a corporate structure that includes a parent entity in Delaware by the same name. The company has disclosed limited information about its ownership but says it has been controlled since 2019 by Europe-based investors.
In a July 30 statement announcing talks with Venezuelan officials, Pacific Coast Chief Executive Klaus Hasbo said “establishing a presence in Venezuela aligns with [Pacific Coast’s] core capabilities and strategic focus on heavy oil extraction and the rejuvenation of mature, low-decline oil fields.” Pacific Coast referred questions about the Cisneros assertions to Petróleos de Venezuela, the country’s state-run oil giant, which did not respond to requests for comment. Venezuela’s Information Ministry also did not respond to calls and emails seeking comment about Pacific Coast and the Cisneros allegations.
One of the Pacific Coast owners, Belgian-Pakistani investor Alshair Fiyaz, visited Venezuela earlier this year, as did Santa Barbara-based Hasbo. Fiyaz, who could not be reached, has been associated with a number of oil and financial investments and is also known for his ownership of a luxury yacht and polo grounds in St. Tropez, in southern France. Ahead of Pacific Coast’s move into Venezuela, Fiyaz and a group of company executives in April visited PetroDelta offices in the eastern oil hub of Maturin, according to people familiar with the situation. The Cisneros family says it had no knowledge that PetroDelta stakes were on the block.
The Trump administration supports U.S. companies leading the recovery of Venezuela’s oil production, but it was not involved in any advocacy for the transaction involving Pacific Coast, according to a White House official. Nor, however, have the Cisneros allegations raised objections from the Trump administration. Some in Washington, who view the current Venezuelan government as more motivated to reopen the industry, see smaller U.S. oil companies as more nimble and better suited to reviving Venezuela’s crude production than established players.
On Tuesday, Hunt Oil, another U.S. wildcatter with a long history of working in far-off jurisdictions, signed a production-sharing agreement with Venezuela to help pump oil from two fields on the country’s eastern flank. Venezuela’s oil minister, Paula Henao, told a Houston investment conference on Wednesday that the country’s new legal and regulatory reforms offer “a much clearer regulatory framework, with legal certainty for the investor, with dispute resolution.” It “truly fills us with pride and happiness to know there is so much interest in investing in Venezuela,” she said. “Venezuela is willing to negotiate, to commercialize, to agree on those new deals.”