Raphael John-Lall

A week af­ter T&T and Venezuela signed a non-dis­clo­sure agree­ment re­lat­ed to the ex­plo­ration of the Drag­on gas field, Venezuela’s Oil Min­is­ter Tarek El Ais­sa­mi re­signed amid al­le­ga­tions of cor­rup­tion and ar­rests of oth­er se­nior Venezue­lan of­fi­cials.

On Mon­day night on Venezue­lan tele­vi­sion, Venezue­lan Pres­i­dent Nico­las Maduro promised to root out cor­rup­tion and re­struc­ture Venezuela’s oil and gas sec­tor.

Di­rec­tor, Latin Amer­i­can En­er­gy Pro­gram, Rice Uni­ver­si­ty’s Bak­er In­sti­tute for Pub­lic Pol­i­cy, Dr Fran­cis­co Monal­di, in an in­ter­view with the Busi­ness Guardian on Mon­day, said this may im­pact the ne­go­ti­a­tions that both coun­tries are cur­rent­ly un­der­tak­ing.

He al­so spoke about what seems to be a pow­er strug­gle go­ing on among pro-Gov­ern­ment fac­tions in Venezuela.

On Mon­day, the Venezue­lan me­dia re­port­ed that the Na­tion­al An­ti-Cor­rup­tion Po­lice ar­rest­ed Hug­bel Roa, a for­mer min­is­ter in the Maduro Gov­ern­ment.

Roa, a for­mer Min­is­ter of High­er Ed­u­ca­tion, is be­ing in­ves­ti­gat­ed for acts of cor­rup­tion that oc­curred in PDVSA. He is as­so­ci­at­ed with PDVSA sub­sidiaries, specif­i­cal­ly Petro­cedeño, a mixed state with share­hold­ings from France and Nor­way.

“There have been ac­cu­sa­tions of cor­rup­tion re­gard­ing PDVSA and peo­ple close to (for­mer) Oil Min­is­ter Tarek El Ais­sa­mi who ap­pear to be in­volved in these ac­cu­sa­tions.

“These events may al­so af­fect the pace of ne­go­ti­a­tions with T&T. These ne­go­ti­a­tions will have to be cleared by Pres­i­dent Maduro and the Vice Pres­i­dent. If they are in­volved in a pow­er strug­gle that will af­fect ne­go­ti­a­tions with T&T. Of course, it is all spec­u­la­tive at this point as de­tails are still opaque,” he told the Busi­ness Guardian in an in­ter­view from Rice Uni­ver­si­ty, Hous­ton in the Unit­ed States.

Se­ri­ous ne­go­ti­a­tions

The ex­pert on Latin Amer­i­can en­er­gy pol­i­cy be­lieves that the con­fi­den­tial­i­ty agree­ment signed be­tween T&T and Venezuela over the Drag­on gas field is an in­di­ca­tion that these ne­go­ti­a­tions are “se­ri­ous.”

Monal­di, who is a fel­low in Latin Amer­i­can en­er­gy pol­i­cy point­ed out, how­ev­er, that the ne­go­ti­a­tions will not gen­er­ate any rev­enues or ben­e­fits for ei­ther side in the short term.

“If you have a Non-Dis­clo­sure Agree­ment, that means that you have an on­go­ing ne­go­ti­a­tion that, in some sense, is se­ri­ous be­cause there are a lot of is­sues to be dis­cussed that would re­quire an agree­ment like that. I think that the ne­go­ti­a­tions are no doubt ad­vanc­ing. The con­di­tions are there for a deal. Venezuela has no oth­er way to mon­e­tise that gas and both coun­tries will ben­e­fit even­tu­al­ly,” he told the Busi­ness Guardian in an in­ter­view from Rice Uni­ver­si­ty, Hous­ton in the Unit­ed States.

Dr Francisco Monaldi, director, Latin American Energy Program, Rice University’s Baker Institute for Public Policy

Last week, En­er­gy Min­is­ter Stu­art Young led a lo­cal team of of­fi­cials to Cara­cas to con­tin­ue ne­go­ti­a­tions with Venezuela’s state-owned oil com­pa­ny Petróleos de Venezuela (PDVSA), fol­low­ing which he signed a Non-Dis­clo­sure Agree­ment.

In Jan­u­ary 2023, T&T se­cured a two-year li­cence from the Unit­ed States Gov­ern­ment to com­mence the de­vel­op­ment of the long-stalled Drag­on project.

The Drag­on project was sched­uled to start pro­duc­tion over a decade ago. How­ev­er, sanc­tions by the US ad­min­is­tra­tion, as well as a lack of cap­i­tal, de­layed the pro­duc­tion start of the field.

The li­cence al­lows T&T to un­der­take busi­ness re­lat­ed to the Drag­on field with Venezuela’s heav­i­ly sanc­tioned State-run oil com­pa­ny PDVSA.

As per the es­ti­mates, the PDVSA-owned Drag­on field has up to 4.2 tril­lion cu­bic feet of nat­ur­al gas.

The En­er­gy Cham­ber of T&T in an ar­ti­cle on its web­site in Jan­u­ary said im­port­ing gas from Venezuela to T&T will pro­vide nat­ur­al gas for the down­stream petro­chem­i­cal and LNG sec­tors, help­ing se­cure jobs, for­eign ex­change, and con­tin­ued busi­ness op­por­tu­ni­ties.

Hard to get

Monal­di said that while ex­ploit­ing its large gas re­serves is im­por­tant, the Venezue­lan Gov­ern­ment is more fo­cused on re­build­ing its oil in­fra­struc­ture ca­pa­bil­i­ties.

Pre­vi­ous­ly, Monal­di said that once ne­go­ti­a­tions are com­plet­ed be­tween T&T and Venezuela, he ex­pects that the Venezue­lan Gov­ern­ment will get at least US$25 mil­lion month­ly.

“On the oil side, this will sig­nif­i­cant­ly im­prove the rev­enue for the Venezue­lan Gov­ern­ment. On the gas side, this is some­thing that will not gen­er­ate rev­enues in one and a half to two years and maybe even more if the ne­go­ti­a­tions drag on.

“Sec­ond­ly, even when it starts gen­er­at­ing a flow of roy­al­ties it will be rel­a­tive­ly small com­pared to rev­enues gen­er­at­ed on the oil side. On top of that, the Venezue­lan Gov­ern­ment can­not get cash but hu­man­i­tar­i­an aid. The car­rots are not that big for the Venezue­lan Gov­ern­ment to be ex­cit­ed.”

He added that if the Venezue­lan Gov­ern­ment is de­lib­er­ate­ly drag­ging its feet for po­lit­i­cal rea­sons, it will be hard­er to com­plete ne­go­ti­a­tions and fi­nalise a deal.

“My sense is that the Venezue­lan Gov­ern­ment is play­ing hard to get be­cause they are un­hap­py about the con­di­tions that have been set by the Unit­ed States’ Of­fice of For­eign As­sets Con­trol (OFAC) not on­ly for this li­cence, but for the ne­go­ti­a­tions with Chevron. This is part of a more gen­er­al pat­tern of the Venezue­lan Gov­ern­ment these days; sort of play­ing hard to get in the sense of telling the US Gov­ern­ment that they will not do what the US wants them to do, such as po­lit­i­cal con­ces­sions for fair elec­tions for fur­ther lift­ing of sanc­tions.”

He al­so said that the Venezue­lan Gov­ern­ment thought that it would have re­ceived more sanc­tion re­lief be­cause of the sit­u­a­tion in the in­ter­na­tion­al en­er­gy mar­ket.

“Venezuela thought that the Unit­ed States and Eu­rope were ea­ger to get those hy­dro­car­bons out and those in­vest­ments to hap­pen. But I think the Venezue­lan Gov­ern­ment is re­al­is­ing now the sit­u­a­tion in the in­ter­na­tion­al en­er­gy mar­ket is not as tight as it was and Venezuela can­not pro­vide sig­nif­i­cant help in that re­gard. The Amer­i­cans are less in­clined to give con­ces­sions with­out some po­lit­i­cal con­ces­sions from the Venezue­lan side.”