New PDVSA Sought Funding with Unconventional Allies

As if they were pieces of a broken mirror scattered in many islands around the world, several offshore companies form an oil-trading business network that reveals the trajectory of Alessandro Bazzoni and Francisco D'Agostino. Both of them, together with the Venezuelan telecommunications magnate Oswaldo Cisneros, landed in 2016 in the Orinoco Belt to fill the vacancy of the original partner, Harvest Natural Resources.

21 January 2018
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"Without a stable market and a fair price, oil investments are difficult," said President Nicolás Maduro in Miraflores, on November 4, 2016. In the televised broadcast, the president broke down, as a trophy, the amount of 10 thousand dollars in private investments announced by Pdvsa, aimed at the Plan Soberano Siembra Petrolera (Oil Sowing Plan), focused on boosting the sharp fall of the state company's production.

A billion of that amount corresponded to Oswaldo Cisneros, the Venezuelan businessman who owns Digitel, who, sitting in front of Maduro, made clear in that afternoon his incursion into the oil world. The presidential assignment was not minor. Cisneros and his share should contribute to triple oil production from wells in Monagas within 5 years.

But Cisneros was not alone there. On the path that led him to the partnership of his company Delta Finance with Pdvsa to promote the creation of the Petrodelta joint venture (of the Orinoco Belt), he was accompanied by Francisco D'Agostino and Alessandro Bazzoni. The former associated with the scandal of the electrical purchases of Derwick Associates with the government of Hugo Chávez, and the later, an unknown Italian businessman.

The signing of the agreement was a surprise to observers of the oil business due to the unexpected incursion of the telecommunications magnate, ignoring the two other entrepreneurs. The case portrays the avid determination of new players, even from other areas, to financially assist Pdvsa and, thus, being part of its businesses by taking the places that traditional partners leave in the country, exhausted from dealing with a declining company and in the midst of a postwar economy. 

Neither D'Agostino nor Bazzoni have historical records of professional services in the Venezuelan oil industry. However, their personal information appear in company records in Barbados and Malta, according to documents obtained in a leak from law firm Appleby reported by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalism, better known as Paradise Papers.

Asked about his oil investments, D'Agostino, who is a member of Daycohost and a member of the board of directors of Banco Occidental de Descuento, as well as the brother-in-law of opposition politician Henry Ramos Allup, claimed that his oil business, Element Capital, was excluded from the PDVSA contracting system and, therefore, does not maintain business with the state company. 

Bazzoni confirmed that he is a minority partner of Petrodelta and adviser to company Elemento LTD, which "could only market four PDVSA vessels from February to April 2017". He added that his current relationship with D'Agostino is a social relationship only. Both denied having business with Derwick Associates, accused in multiple investigative journalism works for having defrauded the Venezuelan State with the sale of power plants with surcharge.

Broken Mirror

It is the area of capital consolidation for oil businesses where Bazzoni and D'Agostino are obvious. In 2015, one year before the announcement in Miraflores, Cisneros, D'Agostino and Bazzoni were already in the belt as part of Petrodelta, as directors of Harvest (PDVSA’s original partner in the joint venture), of which they had bought a part and for which they designed a financing plan with the aim of repositioning the Argentine company in Venezuela.

This participation in the business had its cost. It entailed that company CT Energy Holding, controlled at that time by the three partners, according to documents of the Security Exchange Commission (SEC), bought financial notes to Harvest for about 60 million dollars. Then, the total transfer of Harvest (which already wanted to leave the country) was materialized by the Venezuelans who then became direct partners of PDVSA. 

On PDVSA’s side, the path was paved. Harvest had years trying to get rid of his society with the state company, which blocked its attempts demanding more capitalization. "Harvest is an example of a partner that does not have the capacity (financially speaking) to invest in the oil business. They only want the dividend, not to invest," Eulogio Del Pino, then president of PDVSA, told to Reuters.

When CT Energy arrived, PDVSA -eager for fresh money- unblocked the path for the company. The businessman of Italian origin tried for several years to enter the oil business in Venezuela and Harvest's eagerness to leave the country was his opportunity. But Bazzoni raised suspicions among PDVSA officials due to his unknown career, according to a former employee of the state oil company. Also, he did not get the financing, until he associated with Cisneros, said the source. 

From Barbados to New York

Documents from the Barbados company register reveal a series of offshore companies with names similar to CT Energy Holding, which finally formed with PDVSA the Petrodelta joint venture. Bazzoni and D'Agostino participate in all the companies as shareholders, directors or company controllers. In many cases, only the "last name" of the company changes: CT Energía Holding, CT Derivatives Corporation and CT Energía Oil and Gas LTD. Some, like CT Energy Holding SRL, have headquarters in Las Mercedes, in the Daycohost building, the company owned by the D'Agostino family.

Others are in Malta and Barbados. England is another location for two joint ventures, Elemento Solutions Limited and Elemento Services Limited. The records indicate that the nature of the companies is the purchase and sale of oil. Cisneros does not appear in them but the partnership of D`Agostino and Bazzoni in CT Energy Holding sealed the financial agreement with Harvest in June 2015 and it entered as a member of PDVSA in Petrodelta in November 2016. 

Daycohost- Crédito:

In the meantime, several of Bazzoni's previous partners in oil financing businesses (Centauro, Chemoil, Saltpond and Imperial Energy Ventures) opened consultations in anti-fraud courts in Texas and New York, targeting Italian offshore companies due to diversion of funds, breach of contract and failure to comply with of jurisdiction agreements. One of them requires compensation for damages of up to 21 million dollars.

From Barbados, the fall of Bazzoni reached New York. On the Caribbean island, the entrepreneur had incorporated a company called Cinque Terre Financial Group, and a judge ordered liquidation thereof  in April 2016 for insolvency and debts. However, the liquidator of Barbados noted that although the liquidation process had begun, Bazzoni opened subsidiaries of the Cinque Terre (peculiarly with the name of CT Energía LTD), both on that island and in Malta.

For the moment, almost nothing is known about the productivity of the alliance between PDVSA and these partners. More than a year after sealing their commitment to boost production, it is a mystery if these unconventional allies who formed Petrodelta contributed to the Oil Sowing Plan.

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