Raphael John-Lall

De­spite the threat of the US Gov­ern­ment reim­pos­ing sanc­tions on Venezuela, Fran­cis­co Monal­di, Di­rec­tor of the Latin Amer­i­ca En­er­gy Pro­gram at the Cen­ter for En­er­gy Stud­ies at Rice Uni­ver­si­ty, is op­ti­mistic that the gas agree­ment signed be­tween T&T and Venezuela last De­cem­ber will most like­ly suc­ceed.

In De­cem­ber, a li­cence grant­ed by Venezuela to Shell and the Na­tion­al Gas Com­pa­ny (NGC) of T&T will al­low the com­pa­nies to pro­duce nat­ur­al gas off the Venezue­lan coast for 30 years.

The agree­ment fol­lows last Oc­to­ber’s de­ci­sion by the US De­part­ment of the Trea­sury’s Of­fice of For­eign As­sets Con­trol to ease sanc­tions on Venezuela, in­clud­ing those re­lat­ing to Venezuela’s oil, gas, and gold sec­tors, by is­su­ing sev­er­al new gen­er­al li­cences.

The Drag­on field has prospect of pump­ing up to 350 mil­lion cu­bic me­tres of gas and is lo­cat­ed in the north­east of Venezuela, near the mar­itime bor­der with T&T. Drag­on is ad­ja­cent to fields in this coun­try op­er­at­ed by Shell.

Prime Min­is­ter Dr Kei­th Row­ley stressed the im­por­tance of this agree­ment for T&T’s econ­o­my and fu­ture af­ter it was signed.

“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 T&T.”

As for Venezuela, it is a ma­jor mile­stone as it would be the first time that it is ex­port­ing gas.

Crit­ics have ar­gued that the agree­ment is pre­car­i­ous as it all de­pends on US sanc­tions re­lief, as the US Gov­ern­ment has made clear it can re­sume sanc­tions de­pend­ing on if de­mo­c­ra­t­ic elec­tions are held.

Venezuela’s state-owned en­er­gy com­pa­ny PDVSA dis­cov­ered the Drag­on field over a decade ago and built some in­fra­struc­ture be­fore US sanc­tions on Venezuela’s en­er­gy sec­tor halt­ed de­vel­op­ment. Though no US en­ti­ties are in­volved in the project, com­pa­nies and gov­ern­ments re­quest a green light from Wash­ing­ton to avoid be­ing slapped with sec­ondary sanc­tions.

Monal­di told the Busi­ness Guardian there are many vari­ables in­volved that could im­pact on how suc­cess­ful the project is.

“I think the agree­ment has a rel­a­tive­ly high prob­a­bil­i­ty of suc­cess mean­ing that it will stay and the project will go on. I tend to think that for the Amer­i­cans even if the po­lit­i­cal lib­er­al­i­sa­tion, fails as is like­ly to hap­pen, and Pres­i­dent Maduro stays in pow­er with elec­tions that are not very com­pet­i­tive, I think the Amer­i­cans will not go back to the pol­i­cy of sanc­tion­ing every­thing. I think that the gen­er­al li­cences that they gave in Oc­to­ber, that might go away and they might change it. That’s a like­ly even­tu­al­i­ty.”

In­ter­na­tion­al mar­ket

In its first phase, the project is ex­pect­ed to yield an out­put of 185 mil­lion cu­bic feet per day of nat­ur­al gas and it in­volves build­ing a 17-kilo­me­ter pipeline from Venezuela’s Drag­on field to Shell’s Hi­bis­cus field in Trinida­di­an wa­ters for the pro­duc­tion of liq­ue­fied nat­ur­al gas (LNG) and petro­chem­i­cals. Part of the out­put will be ear­marked for ex­port to in­ter­na­tion­al mar­kets.

Monal­di point­ed out that this agree­ment is like­ly to suc­ceed as oth­er ma­jor pow­ers are in­volved such as the Eu­ro­peans and they will ben­e­fit.

“They feel that it is im­por­tant for geo-po­lit­i­cal rea­sons to pro­vide ad­di­tion­al sources of gas. On the oth­er hand, it is not a ma­jor source of rev­enue for Maduro. I tend to think that this is one of the more like­ly li­cences to sur­vive in a sce­nario if the US de­cides to reim­pose some sanc­tions. How­ev­er, there is al­ways a sce­nario where Maduro goes to an ex­treme like Nicaragua where op­po­si­tion can­di­dates are im­pris­oned and so the agree­ment may be in jeop­ardy. Not on­ly be­cause of the sanc­tions but the com­pa­nies in­volved might slow down giv­en the un­cer­tain­ties it may in­tro­duce.”

Year of elec­tions

Monal­di said if he were in the shoes of com­pa­nies like Shell, he would be “care­ful­ly mon­i­tor­ing” the volatile sit­u­a­tion but op­ti­misti­cal­ly added once all par­ties sur­vive 2024, they should en­ter a pe­ri­od of sta­bil­i­ty with no new elec­tions on the hori­zon and the ini­tial test phase will be over.

“The more prob­lem­at­ic year is 2024. Af­ter that what­ev­er hap­pens is like­ly to stay for a rel­a­tive­ly longer time. This year is the year of un­cer­tain­ty as it is the year of not on­ly Venezue­lan elec­tions but Amer­i­can elec­tions. That is the oth­er big ques­tion to ask. If Mr Trump wins the elec­tions in the US, that in­tro­duces an­oth­er lay­er of un­cer­tain­ty be­cause it is not clear at all what type of poli­cies he will im­ple­ment in Venezuela. Mr Trump tends to be very dis­mis­sive of the poli­cies of his op­po­nents so he may go against cer­tain poli­cies of Pres­i­dent Biden. How­ev­er, I would think Mr Trump would es­tab­lish some lev­el of re­la­tion­ship with Venezuela. But this is all very hard to know and un­pre­dictable.”

He said if a Biden ad­min­is­tra­tion con­tin­ues then the li­cences will most like­ly sur­vive, which will keep the gas project alive well in­to the fu­ture.