Raphael John-Lall

En­er­gy an­a­lyst Fran­cis­co Monal­di does not be­lieve that the T&T’s Supreme Court rul­ing in Sep­tem­ber, which will pave the way for US oil gi­ant Cono­coPhillips to seize T&T’s pay­ments to Venezuela un­der the Drag­on Gas field con­tract, will neg­a­tive­ly af­fect the en­er­gy and busi­ness re­la­tion­ship be­tween the two coun­tries.

The lat­est court rul­ing in Sep­tem­ber has come just as both Gov­ern­ments have op­ti­misti­cal­ly de­clared that tech­ni­cal sur­veys have start­ed on the Drag­on Gas field project.

“I don’t think the rul­ing will have a sig­nif­i­cant im­pact. It is most­ly about a ne­go­ti­a­tion be­tween Cono­coPhillips and PDVSA. They have done this in the past in Cu­ra­cao and oth­er Dutch Caribbean is­lands and ba­si­cal­ly this al­lows Cono­coPhillips to have lever­age in the ne­go­ti­a­tions of pay­ments with PDVSA that has been on­go­ing. They have an­nounced that they have re­ceived a li­cence to ne­go­ti­ate with PDVSA. Al­so, they are the largest cred­i­tor of Venezuela be­hind Chi­na be­cause of the ex­pro­pri­a­tion of their oil projects in Venezuela in 2007,” said Monal­di, di­rec­tor of the Latin Amer­i­ca En­er­gy Pro­gram at the Cen­ter for En­er­gy Stud­ies at Rice Uni­ver­si­ty’s Bak­er In­sti­tute for Pub­lic Pol­i­cy.

He ex­plained that, for now, the pay­ments that Venezuela is re­ceiv­ing from T&T and Shell are “min­i­mal.”

“I think it is the spe­cial com­mis­sion, so­cial con­tri­bu­tions and sur­face tax which is rough­ly US$1 mil­lion dol­lars or so per month. But the bot­tom­line is that we are talk­ing about an amount that is neg­li­gi­ble. So, I think it’s just a way to ne­go­ti­ate the even­tu­al de­vel­op­ment of the field and the pay­ments are fur­ther down the line. This just gives Cono­coPhillips a lever­age in the ne­go­ti­a­tions with PDVSA.”

He de­scribed the most re­cent de­vel­op­ment as an “im­por­tant prece­dent” for Cono­coPhillips.

“But, as I men­tioned, they have al­ready done it a few years back with the Dutch Caribbean is­lands and they have, of course, been su­ing PDVSA in the US to get the PDVSA-owned, US-based re­fin­ery, CIT­GO. So it is a com­pli­cat­ed sto­ry of the ar­bi­tra­tion, which hap­pened a while ago, but they have to now en­force the ar­bi­tra­tion which is more than one ar­bi­tra­tion, which has led to more than US$10 bil­lion in mon­ey owned by Venezuela and PDVSA to Cono­coPhillips.”

Econ­o­mist and a re­tired di­rec­tor of the In­sti­tute of In­ter­na­tion­al Re­la­tions of the Uni­ver­si­ty of the West In­dies (UWI) Dr An­tho­ny Gon­za­les told the Busi­ness Guardian that there are still many de­tails that must be re­vealed to the pub­lic on the lat­est court rul­ing.

How­ev­er, he does not think Venezuela will con­tin­ue any busi­ness and en­er­gy project if they are not be­ing paid.

“I am not clear on the Court’s de­ci­sion and whether it will ap­ply in this case where Shell, a for­eign com­pa­ny, is to make the fi­nal in­vest­ment de­ci­sion to in­vest in de­vel­op­ing and ex­plor­ing Venezuela’s Drag­on gas. Shell has to pay ei­ther PDVSA or the Venezue­lan gov­ern­ment for that gas.

“So, I am not see­ing a di­rect pay­ment be­tween a lo­cal T&T com­pa­ny and PDVSA...but I can­not see the Venezue­lan Gov­ern­ment and PDVSA purs­ing this if they know that they would not be paid by Shell. That would al­so ap­ply to the cross- bor­der fields, such as Man­akin and pos­si­bly Lo­ran where BP and Shell are the for­eign com­pa­nies do­ing the in­vest­ment and then sell­ing the gas to NGC.”

Land­mark rul­ing

In the fi­nal week of Sep­tem­ber, it was re­port­ed that Cono­coPhillips had per­suad­ed T&T’s Supreme Court to ap­point a re­ceiv­er over pay­ments that Venezuela’s state-owned en­er­gy com­pa­ny PDVSA owes to it, as part of the US oil com­pa­ny’s ef­forts to re­cov­er US$1.3 bil­lion un­der an In­ter­na­tion­al Cham­ber of Com­merce (ICC) award.

In Ju­ly, speak­ing in the Sen­ate, En­er­gy Min­is­ter Stu­art Young said that at that time, the State had not been served with any or­der of the High Court re­lat­ed to any Cono­coPhillips mat­ter or ar­bi­tral award.

Cono­coPhillips has in re­cent months moved to seize pay­ments to Venezuela from the Drag­on Gas off­shore nat­ur­al gas project be­ing de­vel­oped by PDVSA, Shell and the Na­tion­al Gas Com­pa­ny (NGC).

Cono­coPhilips was re­cent­ly grant­ed a li­cence from the US Trea­sury De­part­ment to seek the pay­ments.

The Eu­ro­pean-based en­er­gy web­site, en­erg­y­news.pro in an ar­ti­cle dat­ed Sep­tem­ber 30 opined that the re­cent de­ci­sion by the Supreme Court of T&T is a sig­nif­i­cant mile­stone in this strat­e­gy.

“Judge Frank Seep­er­sad au­tho­rised the seizure of pay­ments linked to PDVSA’s par­tic­i­pa­tion in the Drag­on gas project, es­ti­mat­ing that the com­pa­ny might trans­fer its as­sets out of ju­ris­dic­tion to avoid its oblig­a­tions. He high­light­ed PDVSA’s pri­or move of its Eu­ro­pean head­quar­ters to Moscow as a wor­ry­ing prece­dent for in­ter­na­tion­al cred­i­tors.”

En­erg­y­news.pro added that be­yond the fi­nan­cial im­pli­ca­tions for PDVSA, this court de­ci­sion rais­es broad­er ques­tions about en­er­gy co­op­er­a­tion be­tween T&T and Venezuela.

“For sev­er­al years, the two coun­tries have been try­ing to es­tab­lish cross-bor­der col­lab­o­ra­tion to ex­ploit gas re­sources in a re­gion where en­er­gy de­mand is grow­ing. How­ev­er, le­gal dis­putes and as­set seizures make this co­op­er­a­tion chal­leng­ing, po­ten­tial­ly dis­cour­ag­ing oth­er play­ers from get­ting in­volved in sim­i­lar projects.”

En­erg­y­news.pro al­so stat­ed that US sup­port, in the form of spe­cial Of­fice of For­eign As­sets Con­trol (OFAC) li­cences for the Drag­on project, re­flects the geopo­lit­i­cal im­por­tance of this col­lab­o­ra­tion. How­ev­er, if PDVSA con­tin­ues to see its pay­ments seized by for­eign cred­i­tors, this could de­ter T&T from fur­ther en­gag­ing in joint projects with Cara­cas, push­ing the coun­try to turn to oth­er re­gion­al part­ners.

“The out­come of this case could re­de­fine how in­ter­na­tion­al en­er­gy com­pa­nies ap­proach their re­la­tion­ships with Venezuela, both in terms of man­ag­ing le­gal risks and in­vest­ment strat­e­gy.”

De­spite, the re­cent de­ci­sion of the Supreme Court both coun­tries seem to be forg­ing ahead with the Drag­on Gas field project, with En­er­gy Min­is­ter Stu­art Young giv­ing an up­date on his Face­book page.

“Ten months af­ter ob­tain­ing the 30-year li­cence to ex­plore, pro­duce and ex­port gas from the Venezue­lan Drag­on Gas Field to T&T, a sur­vey ves­sel is de­part­ing to com­mence the tech­ni­cal sur­vey ex­er­cise of the Drag­on field and the sea bed be­tween Drag­on and the Hi­bis­cus plat­form in T&T. Work has been pro­ceed­ing apace as we work to en­sure the fu­ture of T&T.”

VENEZUELA’S VEW

Venezue­lan dai­ly news­pa­per, El Ul­ti­mas Noti­cias re­port­ed last Mon­day that Venezuela’s Vice Pres­i­dent and En­er­gy Min­is­ter Del­cy Ro­driguez al­so made a state­ment on the lat­est up­date on the lat­est tech­ni­cal work which has be­gun on the Drag­on Gas field project.

Ro­driguez praised the ar­rival of the Doña José II ves­sel in Venezue­lan wa­ters, which will be­gin the da­ta up­date cam­paign for the de­vel­op­ment of gas pro­duc­tion in the Dragón field, Su­cre state.

Through her In­sta­gram ac­count, she al­so in­di­cat­ed that this is be­ing done as part of the in­ter-gov­ern­ment agree­ment be­tween Venezuela and T&T.

Ro­driguez boast­ed that with this project, Venezuela con­tin­ues to ad­vance in the strate­gic plan to de­vel­op the po­ten­tial of its gas belt, “giv­ing a clear op­por­tu­ni­ty to for­eign in­vest­ment.”