Raphael John-Lall

Co-founder of the Caribbean Pol­i­cy Con­sor­tium and for­mer pro­fes­sor and di­rec­tor of the In­sti­tute of In­ter­na­tion­al Re­la­tions at UWI, St. Au­gus­tine An­tho­ny Bryan be­lieves even if Venezuela were to be com­pen­sat­ed for its in­vest­ment in the Drag­on Gas Field project now, it will not be an­oth­er three to five years be­fore T&T starts to ben­e­fit.

“As far as the ven­ture it­self is con­cerned, the ques­tion is whether key mar­ket con­di­tions ex­ist for a suc­cess­ful joint ven­ture pro­gramme be­tween Venezuela and T&T. Even if the mat­ter of pay­ment is­sues were set­tled now, nat­ur­al gas from the Drag­on Field is prob­a­bly at least three to five years in the fu­ture. Nat­ur­al gas re­sources are ex­pen­sive to de­vel­op, and projects to­day must clear mul­ti­ple fi­nan­cial in­vest­ment chal­lenges,” he told the Busi­ness Guardian in a state­ment by email .

Last week Tues­day, En­er­gy Min­is­ter Stu­art Young met Venezue­lan Pres­i­dent Maduro in Cara­cas to fol­low up on ne­go­ti­a­tions over the Drag­on Gas Field.

Ac­cord­ing to a Reuters re­port on Tues­day, Shell and Trinidad and To­ba­go’s Na­tion­al Gas Com­pa­ny (NGC) are close to agree­ing to cred­it Venezuela’s state-run oil firm, PDVSA, for its US $1 bil­lion in­vest­ment in a gas field the three want to joint­ly de­vel­op, four peo­ple close to the dis­cus­sions said.

The Reuters re­port al­so said if agreed, the move could help speed a long-stalled off­shore de­vel­op­ment. The US in Jan­u­ary grant­ed Venezuela’s PDVSA, Shell and NGC a two-year au­tho­ri­sa­tion to re­vive the project, which could boost T&T’s gas pro­cess­ing and ex­ports.

“Much of the US$1 bil­lion that Venezuela wants recog­nised as its con­tri­bu­tion be­longs to a near­ly-com­plet­ed gas line con­nect­ing the off­shore field to Venezuela’s shore, two of the peo­ple said.

The field is in Venezue­lan wa­ters and past ef­forts to find part­ners for its de­vel­op­ment stum­bled over PDVSA’s de­mands for com­pen­sa­tion. Shell and NGC have not giv­en fi­nal word to PDVSA on the re­im­burse­ment, but are pre­pared to pay for all le­git­i­mate claims,” Reuters quot­ed one of their sources as say­ing.

Be­cause of a non-dis­clo­sure agree­ment signed be­tween T&T and Venezuela, no de­tails have been di­vulged so far about where the ne­go­ti­a­tions have reached.

Bryan added that there is no fi­nal word on the re­im­burse­ment as of this date.

“The harsh re­al­i­ty is that any deal is sub­ject to US ap­proval via the Trea­sury De­part­ment’s Of­fice of For­eign As­sets Con­trol (OFAC) be­cause of US sanc­tions on Venezuela. De­spite the best ef­forts, the T&T gov­ern­ment has been un­able to get the US to ad­just its terms with re­spect to pay­ment to the Venezue­lan gov­ern­ment.”

He said the im­pact of sanc­tions on Venezuela have been pro­found.

“They ef­fec­tive­ly con­sti­tute a block­ade of the coun­try’s hy­dro­car­bon in­dus­try. Be­yond lim­it­ing the abil­i­ty of PDVSA to sell oil in the in­ter­na­tion­al mar­ket, US sanc­tions have al­so made se­cur­ing oil in­fra­struc­ture parts near­ly im­pos­si­ble.

The coun­try’s abil­i­ty to main­tain its oil and gas in­fra­struc­ture is de­clin­ing rapid­ly. The US-led block­ade al­so re­sults in firms re­fus­ing to do busi­ness with Venezuela to avoid run­ning afoul of US sanc­tions de­spite not nec­es­sar­i­ly vi­o­lat­ing uni­lat­er­al co­er­cive mea­sures.”

Re­fer­ring to the Reuters re­port, he said while he wel­comes any agree­ment, he re­mains cau­tious.

“While the re­port that Shell and NGC are close to an agree­ment to cred­it PDVSA for its $1 bil­lion in­vest­ment in the Drag­on field to re­vive the project, would be wel­come news, I am aware that Venezue­lan en­er­gy ex­perts have been cau­tious about this new sanc­tion ex­cep­tion giv­en that cru­cial de­tails from the ne­go­ti­a­tion be­tween T&T and the Biden ad­min­is­tra­tion, as well as the ne­go­ti­a­tions with the Venezue­lan gov­ern­ment, are still un­known.

“In my opin­ion, the com­pli­ca­tion around the Drag­on deal is one of en­er­gy prag­ma­tism, where in­ter­na­tion­al geopol­i­tics has once more trumped eco­nom­ics.”

The Reuters re­port al­so said un­der the terms agreed to date, Shell would be­come field op­er­a­tor with NGC and PDVSA hold­ing eq­ui­ty stakes. PDVSA, which holds a li­cense is­sued by Venezuela for de­vel­op­ment, would bring in Shell and NGC as part­ners un­der that au­tho­ri­sa­tion.

“The par­ties are con­sid­er­ing two sep­a­rate gas lines: A line now par­tial­ly built to trans­port PDVSA’s por­tion of the gas to Guiria, on Venezuela’s east­ern coast. A sec­ond could con­nect to Shell’s Hi­bis­cus field on Trinidad’s side, al­low­ing gas to flow to Trinidad, the peo­ple said. Venezuela al­so has sug­gest­ed that all the gas pass through Guiria, so on­ly an ad­di­tion­al short pipeline would be need­ed to link Guiria to Point Fortin, home of Trinidad’s liq­ue­fied nat­ur­al gas ex­port plants,” Reuters re­port added.

Com­ment­ing on the Reuters re­port, di­rec­tor, Latin Amer­i­can En­er­gy Pro­gram, Rice Uni­ver­si­ty’s Bak­er In­sti­tute for Pub­lic Pol­i­cy, Dr Fran­cis­co Monal­di told the Busi­ness Guardian if there is mer­it to that in­for­ma­tion that there could be two pipelines, with one al­low­ing Venezuela to redi­rect gas to its in­ter­nal mar­ket, it may not be at­trac­tive to T&T and Shell.

“This means that PDVSA can re-di­rect the flow to the do­mes­tic mar­ket and that takes away one of the most sig­nif­i­cant at­trac­tions of the project, which would be that ba­si­cal­ly the gas can on­ly be mon­e­tised through Shell and through Trinidad and can’t be used for oth­er us­es.

“In terms of the US$1 bil­lion, I think that’s more a mat­ter of num­bers. As far as I un­der­stand, the in­vest­ments are not the ones that nor­mal­ly ac­com­pa­ny a pri­vate trans­ac­tion recog­nised at all be­cause the pipeline is not of in­ter­est to part­ners in Trinidad and Shell and the in­vest­ments that have been done on the plat­form are very in­ad­e­quate so there has to be ad­di­tion­al in­vest­ments.

“So recog­nis­ing this in­vest­ment would not hap­pen in a com­mer­cial trans­ac­tion be­cause they are not use­ful for the pur­pose of ex­port­ing gas to Trinidad,” said Monal­di.

He said at the end of the day, the deal would on­ly be sealed if it is an at­trac­tive propo­si­tion for T&T and Shell.

“I don’t know if the oth­er par­ties will ac­cept an­oth­er pipeline to Guiria. If I were in the shoes of T&T and Shell, I would not. But I un­der­stand that it’s an at­trac­tive propo­si­tion for PDVSA be­cause it would fin­ish some­thing they want­ed to do for a very long time, which is bring some of that gas the do­mes­tic mar­ket. But that’s an ob­sta­cle from the per­spec­tive of the oth­er side. I don’t know if it will suc­ceed.”

For­mer En­er­gy Min­is­ter Kevin Ram­nar­ine told the Busi­ness Guardian that the Reuters re­port rais­es a num­ber of ques­tions as it re­lates to trans­paren­cy.

Al­though he em­pha­sised that in the ab­sence of an of­fi­cial state­ment from T&T’s Gov­ern­ment or Venezuela’s side, Reuter’s re­port would be spec­u­la­tive at this point.

“The ar­ti­cle rais­es a num­ber of ques­tions. What is the ex­po­sure of the NGC in this re­port­ed US$1 bil­lion cred­it arrange­ment? Giv­en the po­ten­tial to sig­nif­i­cant­ly ex­pose the NGC, there is ob­vi­ous­ly a con­cern.

“How was that fig­ure of US$1 bil­lion de­ter­mined, or is it spec­u­la­tion? What per­cent­age of that li­a­bil­i­ty is with NGC? I as­sume this is Venezuela mak­ing a claim for the sunk costs as­so­ci­at­ed with the wells drilled and the re­lat­ed pipeline. Has the NGC sought an in­de­pen­dent as­sess­ment of the in­tegri­ty of those wells giv­en that they were drilled and shut in over 10 years ago? Fi­nal­ly, how does all this sit with the OFAC li­cense of Jan­u­ary 2023?”

He al­so said giv­en the fact that NGC is in­volved, there should be full dis­clo­sure to the pub­lic via the Par­lia­ment or a joint Se­lect Com­mit­tee on en­er­gy.

“The sub­sea in­fra­struc­ture in Drag­on has to be as­sessed by NGC and Shell. I don’t know if that has been done as yet.”