On March 6, 2017, the Venezuelan Inspector General’s office recommended that the Public Prosecutor’s office investigate possible corruption in a deal between the Venezuelan government and Saudi oil company PetroSaudi. The Inspector General’s office recommended that the Public Prosecutor charge five executives of the Venezuelan state-run oil company, Petroleos de Venezuela S.A. (PdVSA) of embezzling public funds in connection with the lease of an oil rig owned by PetroSaudi.
The rig, the PetroSaudi Saturn, was rented by PdVSA in connection with an offshore oil project entitled “Marsical Sucre”. However, this project has yet to produce any actual oil, despite the $1.3 billion price tag of the lease between PetroSaudi and PdVSA. The Inspector General has accused the PdVSA executives of paying a highly inflated lease rate to PetroCaribe, with the charge being that the amount was inflated so that the excess money could then be embezzled.
Such a project would be labeled a boondoggle even in normal economic times — though such waste and possible graft was commonplace at PdVSA during the oil boom of the 2000s — but the collapse of the oil market over the last several years has launched Venezuela’s economy into deep recession, putting heavy pressure on the Venezuelan government. Both the Public Prosecutor’s office and the Inspector General’s office launched separate investigations into the PetroSaudi Saturn deal earlier this month.
The rig is the second one purchased by PetroSaudi, a company founded in 2005 by Saudi royal family member Turki Bin Abdullah Al Saud, for doing business in Venezuela. The first such rig, the Neptune Discoverer, was financed by embattled Malaysian bank 1MDB; the U.S. Department of Justice alleges that $700 million in financing of that deal was diverted and not used for the purchase of the rig, though the DoJ has not yet accused PetroSaudi of wrongdoing. The Saturn rig was leased by PdVSA from PetroSaudi in September 2010 at $485,000 a day for seven years, without a bidding process. Venezuelan lawmaker Luis Parra argued that the rig should have cost about $230,000 a day, and added: “There’s no reason whatsoever to justify the difference between the average price and the exorbitant price PetroSaudi charged PdVSA” for the Saturn. Both the Discoverer and the Saturn have been poorly equipped for the jobs they were contracted for, and have completed fewer than 10 wells out of 70 planned.
A London court ordered PdVSA on March 13, 2017, to pay more than $130 million in unmade payments to PetroSaudi. PdVSA is suing PetroSaudi in the United Nations arbitration court in Paris for allegedly failing to meet the terms of the Saturn contract.
More information can be found in a Wall Street Journal article linked here: https://www.wsj.com/articles/petrosaudi-used-funds-from-1mdb-venture-to-finance-venezuela-project-1489570206