Raphael John-Lall

En­er­gy econ­o­mist Pro­fes­sor Fran­cis­co Monal­di is warn­ing that the an­nounce­ment by the Trump ad­min­is­tra­tion last week that it would ter­mi­nate the li­cence of US oil and gas multi­na­tion­al Chevron in Venezuela’s en­er­gy sec­tor could neg­a­tive­ly im­pact Venezuela’s Drag­on gas deal with T&T.

Monal­di, who lec­tures at Rice Uni­ver­si­ty’s De­part­ment of Eco­nom­ics, Unit­ed States told the Busi­ness Guardian that there is still a lot of un­cer­tain­ty about these events as they are un­fold­ing quick­ly. But he said al­though nat­ur­al gas and oil li­cences are dif­fer­ent, the “Chevron ef­fect” could have a domi­no im­pact in oth­er sec­tors and with oth­er coun­tries.

“So, there is a lot of un­cer­tain­ty of how it will af­fect com­pa­nies oth­er than Chevron, ex­act­ly how that would be im­ple­ment­ed, what will be the new li­cence Chevron will re­ceive in terms of a wind-down li­cence. There is even more un­cer­tain­ty about li­cences for nat­ur­al gas be­cause they are very dif­fer­ent types of li­cences. There is the in­volve­ment of T&T. We will have to wait and see what hap­pens. Of course, if they are can­celled, that li­cence will put a neg­a­tive sign on the vi­a­bil­i­ty of the Drag­on Gas deal. Even if lat­er on they give an­oth­er li­cence, it will dra­mat­i­cal­ly in­crease the risk for Shell to de­vel­op that project. Drag­on would in jeop­ardy all the time, de­pend­ing on the re­la­tion­ship be­tween the Trump ad­min­is­tra­tion and the Maduro Gov­ern­ment,” he said.

US Sec­re­tary of State, Mar­co Ru­bio post­ed on X last Thurs­day that he was “pro­vid­ing for­eign pol­i­cy guid­ance to ter­mi­nate all Biden-era oil and gas li­cences that have shame­ful­ly bankrolled the il­le­git­i­mate Maduro regime.”

The T&T Gov­ern­ment had been plan­ning to re­quest an ex­ten­sion from the US Gov­ern­ment for the li­cence grant­ed to Shell and the state-owned Na­tion­al Gas Com­pa­ny (NGC) to de­vel­op the Drag­on gas field in Venezuela, ac­cord­ing to a Reuters re­port last week.

In Jan­u­ary 2023, a two-year Of­fice of For­eign As­sets Con­trol (OFAC) waiv­er was se­cured by Port of Spain from the US Trea­sury De­part­ment for ex­ploita­tion of the Drag­on nat­ur­al gas field with the pro­vi­so that Venezuela re­ceived no cash pay­ments.

Lat­er in Oc­to­ber 2023, some US sanc­tions were lift­ed against Venezuela af­ter Pres­i­dent Nicholas Maduro signed an elec­toral deal with the coun­try’s main op­po­si­tion par­ty.

That led to an Oc­to­ber 2023 amend­ment to the OFAC waiv­er that al­lowed T&T and Venezuela to agree their own pay­ment terms.

T&T and Venezuela signed a 30-year agree­ment that al­lows Shell and NGC to ex­plore, pro­duce and ex­port of nat­ur­al gas from the Drag­on Gas Field in Venezuela to Trinidad in De­cem­ber 2023.

Prime Min­is­ter Dr Kei­th Row­ley said the sign­ing marked a his­toric de­vel­op­ment in the part­ner­ship be­tween the two na­tions, al­low­ing Trinidad and To­ba­go to ac­cess and process Venezuela’s vast nat­ur­al gas re­serves.

“To have en­tered in­to this agree­ment in 2023, to open this door to al­low us with the in­fra­struc­ture on the ground in Trinidad, to ac­cess and process the raw ma­te­r­i­al from be­low the ground in Venezuela, puts the two na­tions in a po­si­tion to play a big­ger and ben­e­fi­cial role in the world’s econ­o­my and for the ben­e­fit of the peo­ple of Venezuela and Trinidad and To­ba­go,” said Row­ley.

Both T&T and Venezuela en­vis­age that the Drag­on field would sup­ply nat­ur­al gas to Trinidad by 2027.

Monal­di ex­plained that the US Gov­ern­ment still has to give le­gal and tech­ni­cal de­tails about when and how Chevron will leave Venezuela.

“We have Mar­co Ru­bio’s post­ing say­ing that en­er­gy li­cences grant­ed by the ad­min­is­tra­tion of for­mer pres­i­dent Biden would be can­celled and re­voked. So that would in­clude the li­cences for the Drag­on Gas and Man­akin-Cocuina gas fields. The US Trea­sury De­part­ment has not pub­lished any­thing ex­cept that they are work­ing on it. Some peo­ple say that means the Chevron’s li­cense was au­to­mat­i­cal­ly re­newed on March 1 be­cause it is re­new­able every 1st of the month un­less it is ex­plic­it­ly re­voked and since they did not re­voke it on March 1 it is valid. I think that is true but it is ir­rel­e­vant be­cause they are clear­ly go­ing to re­place it with a new li­cence which will re­voke that one and that could hap­pen any time. Per­haps as soon as to­day but who knows as they have not been ex­plic­it about it.”

He al­so not­ed that as a ma­jor in­ter­na­tion­al en­er­gy com­pa­ny, Chevron has to wind down op­er­a­tions and the U.S. Trea­sury De­part­ment still has to give those de­tails.

“So, we do know, for ex­am­ple, that in ar­ti­cle 41, the Chevron’s li­cence, the wind-down pe­ri­od will be the one that is six months or if they will have an­oth­er wind down. I have been hear­ing that it might be a short­er wind down but again, there is a lot of un­cer­tain­ty. So, you can see there are a lot of unan­swered ques­tions. The base­line sce­nario seems to be main­tained. In fact, some peo­ple even talk about fur­ther li­cences be­ing giv­en. At the same time, Pres­i­dent Trump has said that it was wrong of Biden to give Venezuela ac­cess to the Amer­i­can mar­ket and the Unit­ed States does not need Venezue­lan oil. There were con­tra­dic­to­ry mes­sages but that was the sta­tus quo un­til the an­nounce­ment by Pres­i­dent Trump.”

Guyanese dis­pute

Monal­di al­so spoke about Venezuela’s navy’s in­cur­sion in­to Guyana’s wa­ters last week­end and the im­pact that could have on the geopo­lit­i­cal sit­u­a­tion.

Venezuela’s Min­is­ter of De­fence Vladimir Padri­no López cat­e­gor­i­cal­ly re­ject­ed Guyanese Pres­i­dent Ir­fan Ali’s state­ment, which ac­cused the Span­ish-speak­ing coun­try of en­ter­ing Guyana’s ter­ri­to­r­i­al wa­ters with a navy ves­sel last Sat­ur­day.

“We are a coun­try at­tacked by prox­ies of North Amer­i­can im­pe­ri­al­ism such as Exxon­Mo­bil,” Padri­no said.

Monal­di ar­gued that this clash with Venezuela, two days af­ter the can­celling of Chevron’s li­cences is not a co­in­ci­dence.

“This took place near the Exxon Mo­bil plat­form. It seems to be timed for Pres­i­dent Maduro to sig­nal to the US that they could es­ca­late on the Guyana is­sue and in­flict some cost on the Unit­ed States if they can­cel all the li­cences. It can­not be a co­in­ci­dence in the sense that they could have done that at any oth­er time. There was no event that oc­curred oth­er than the event of the Chevron li­cence that could ex­plain the tim­ing. That is some­thing that we have to take in­to ac­count as part of the ne­go­ti­a­tions that are go­ing to oc­cur or not be­tween the US and Maduro.”

Monal­di al­so said if all li­cences are re­voked that will be a blow to the Venezue­lan oil pro­duc­tion.

“Ini­tial­ly, it will not de­cline dra­mat­i­cal­ly but it will even­tu­al­ly de­cline be­cause of a lack of dilu­ents. Venezuela is im­port­ing 130,000 bar­rels a day of dilu­ents and re­fined prod­ucts and that will be in jeop­ardy. It can be that Venezuela will sim­ply bring it from Iran and that will be a prob­lem for the pro­duc­tion of ex­tra heavy oil but al­so, they might have dif­fi­cul­ty sell­ing in the black mar­ket. That is what they were sell­ing to the U.S. un­der the Chevron li­cence, which was not on­ly to the US but Eu­rope and to In­dia. All that will now go to Chi­na and the black mar­ket.”

He con­clud­ed by say­ing that if Chevron stops in­vest­ing as well as Rep­sol, it will lead to fur­ther de­cline in oil and gas pro­duc­tion un­less they find oth­er in­vestors, who will be dif­fi­cult with­out li­cences.

“The bot­tom­line is it will have a neg­a­tive im­pact. We will not see the col­lapse of 2020. In fact, we were ex­pect­ing an in­crease in Venezuela’s oil pro­duc­tion af­ter the 15 per cent in­crease in 2024 and oth­er in­crease may not ma­te­ri­alise in 2025 if all li­cences are can­celled. Sim­i­lar­ly with gas, the in­vest­ments may not hap­pen.”