LAS ARMAS DE CORONEL

THE PETROSAUDI-PDVSA FRAUD: WHO ARE INVOLVED?

An article in the Wall Street Journal, https://www.wsj.com/articles/venezuela-alleges-fraud-in-1-3-billion-oil-rig-lease-1489570201 reports that the Venezuelan authorities are requesting an investigation of five unnamed PDVSA executives for “the embezzlement of public funds, paying inflated fees for the lease of an oil rig”. The rig mentioned by the report of the WSJ is the Petrosaudi SATURN. WSJ added that the investigation was restricted to PDVSA and that Petrosaudi or its employees “were not accused of wrongdoing”.

This WSJ report caught my attention because I have been following the Petrosaudi-PDVSA relationship since 2010 and find that there is sufficient evidence that both Petrosaudi and PDVSA top personnel are involved in the fraud, together with some third party “facilitators”. I have written a recent note about this fraud in my blog, see:  http://lasarmasdecoronel.blogspot.com/2017/01/petrosaudi-and-pdvsa-another-great-fraud.html .

In January of this year a significant  exposé of the Petrosaudi-PDVSA deal was published in the Sarawak Report, see: http://www.sarawakreport.org/2017/01/petrosaudis-1mdb-financed-venezuelan-adventure-and-the-money-it-didnt-make/,  which provided very detailed information on how this deal was done and shows documents that reveal the names of the principal actors involved in the fraud, both on the side of PDVSA and on the side of Petrosaudi.

The new aspect of this fraud, as reported by the WSJ, is that the Venezuelan authorities are starting, after seven years, an investigation of the PDVSA’s officers involved in the deal. Up to now, no significant corruption within PDVSA has ever been investigated by the Venezuelan regime. A similar fraud to this one,  involving the offshore drilling barge Aban Pearl has been publicly denounced by me since 2010 (Spanish), see: http://lasarmasdecoronel.blogspot.com/2010/07/mi-entrevista-sobre-el-aban-pearl-en.html and (English) : https://www.caracaschronicles.com/2012/07/19/one-guy-vs-the-petrokleptocracy/ without any investigation taking place by the regime. There is a possibility, therefore, that this newly reported anti-corruption drive by the Venezuelan regime could only be directed towards some of the smaller fish, in order to protect the big fishes.

WHO ARE THE PDVSA EXECUTIVES INVOLVED IN THE FRAUD?

The magnitude of the deal, which involved contractual agreements involving more than one billion dollars in payments from PDVSA to Petrosaudi, could not have been approved by lower level executives at PDVSA. Power at PDVSA under the Venezuelan dictatorial regime has been strongly centralized. The only PDVSA executive named in the WSJ report as being under investigation, Romer Valdez, was a second tier regional manager in PDVSA at the time the contract was signed and could not have had decision-making authority in this deal. This man was already sent to prison in 2015 for corrupt behavior (I don’t know if he is still there) and was known for his close links to a higher level, former PDVSA manager called Jose Luis Parada, also fallen in disgrace at about the same time. Parada, in turn, was a protégé of Rafael Ramirez, who was president of PDVSA and Minister of Energy and Petroleum from 2004 to 2014. It seems too much of a coincidence that Parada and Valdez were objects of investigation only after Ramirez had left. Parada went briefly to prison but he escaped, apparently after paying a sum said to be of $30 million to the person or persons who let him go. There is a possibility that he was just let go by the regime, provided he kept silent about the corruption within PDVSA.

Who, then, are the big Venezuelan fish in this Petrosaudi-PDVSA mega fraud? The excellent report by Sarawak report gives us a strong hint about their identities. This report says that Petrosaudi entered into the contract with PDVSA when the owner of the rig had problems collecting the fees from the Venezuelan company. Petrosaudi found a “fixer” close to the Chavez regime and took over the deal with their help.  With money borrowed from the corrupt Malaysian Fund 1MBD Petrosaudi acquired the rig from its owners, Jaspers, and entered into a joint venture with PDVSA, deal that was proudly announced in 2010 by Rafael Ramirez, see my article: http://tururutururu.com/gustavo-coronel-pdvsa-y-un-gigantesco-fraude-financiero-en-malasia/ . This deal was put together and announced at the very top of the PDVSA executive pyramid. In 2010 I denounced this deal as a fraud, see: http://lasarmasdecoronel.blogspot.com/2010/09/pdvsa-y-el-barco-songa-saturn-un-nuevo.html

The contract signed with PDVSA by Petrosaudi was extremely good to them and to the “facilitators”, but very bad for the Venezuelan nation. According to Sarawak Report “PetroSaudi boasted it had succeeded in extracting hugely advantageous terms with a five year fixed contract for its drill ship Neptune Discoverer (it was 7 years for Saturn) with a daily fee that would guarantee a 30% annual return on the initial investment; a sky high rate of interest on the loan – over 20% – and a ‘mobilization fee’ up-front, which itself amounted to nearly a third of the company’s initial outlay on the asset”. But, adds the Sarawak Report, “that whole facade was soon to fall apart and by 2011 the clapped out Discoverer had to be de-commissioned – according to one expert observer who spoke to Sarawak Report.

 I was that observer mentioned by Sarawak Report and I was further quoted below as saying:

“In March 2011 the workers demanded the evacuation of this barge, now called Petrosaudi Discoverer, due to the deplorable conditions of the equipment. They demanded that Jose Luis Parada, head of PDVSA Services, detain the operations and evacuated the 103 workers in the barge. The barge, they said, lacked the international certification from the American Bureau of Shipping”.

Sarawak report adds that, in 2010, when the deal was being put together, this type of communication went from the Pantin brothers, the “facilitators” to  Petrosaudi:

Eduardo Pantin asked not show the letter to anyone in PDVSA except Eulogio, Jose Luis and Rafael. Who could they be? I am guessing: Eulogio Del Pino, Jose Luis Parada and Rafael Ramirez.

The Sarawak Report adds: “That Saturn contract allowed for a staggering $485,000 fee payable per day on a fixed contract for seven years – at least double the market rate”. The report also quotes me saying:  “When I looked Petro Saudi up I found it to be a company created in 2005 without oil operational experience, along the lines of a financial speculator, managed by a gentleman called Tarek Obaid, who seemed to be an international playboy, more involved with Formula One activities than with the oil business. I also found out that the other barge offered to PDVSA, the 34 year old Neptune Discoverer, had been bought from Jaspers Investments for a price of some $120-150 million, $50 million below book value. Their performance has been dismal. It took two years for the Discoverer to drill the first well, while in Trinidad a similar well could be completed in 30-45 days.”

What role did the Pantin brothers play in this deal?

According the Sarawak Report: “All correspondence was copied into the Pantin brothers Gerardo and Eduardo, major players in the oil business, and whenever trouble arose Mahony [Petrosaudi] turned to them to sort it out: We need a strategy for how we will get paid …. We expect this from you as our partners on the ground and the ones that understand PDVSA best and have all the key relationships”.

When things started to go wrong, in 2011, Petrosaudi wrote the Pantin Brothers:

About the “facilitators” the Sarawak report has this to say:

“The Pantin brothers are in charge of a major family enterprise with a long history in the Venezuela oil business [and] developed good contacts with the Chavez regime. Their company CPVEN was subcontracted to manage all the drilling work for the PetroSaudi adventurers (who had no clue how to run an oil operation). They were also hired as agents. There was also a deal to split the vast mobilization fees that the Pantins extracted as upfront payments from the Venezuelans at the start of each operation.  This fee should have been no more than $15 million to cover costs of the setup, however the Pantins organised $56 million to be paid in the case of Saturn, much of which was distributed back to local officials and contacts via banks in Panama, according to inside information from PetroSaudi. The Pantin brothers themselves requested additional payments of $7 and $8 million to be paid through anonymous off-shore companies:

If outsiders are left wondering over what justification there might be for such kickbacks, so apparently was PetroSaudi’s own shareholder Tarek Obaid.

Does the Venezuelan regime really want to investigate mega-corruption in PDVSA?

The Venezuelan official investigators would do well consulting the Sarawak Report, since they seem to know exactly how things were done and who were the main culprits of this huge fraud to the Venezuelan nation. But will they dare to go ahead and investigate? I doubt it. The PDVSA executives that appear as putting this deal together have been taboo up to now. Will they be subject to a real investigation by the regime of which they have been an integral part? I don’t think so. Such an investigation will probably only be made after the regime is out of power.