Raphael John-Lall

Amer­i­can en­er­gy econ­o­mist Fran­cis­co Monal­di be­lieves that the US Gov­ern­ment’s lat­est moves which re­voked the li­cences to ex­plore and de­vel­op the gas fields with­in Venezue­lan bor­ders is a “ma­jor blow” for T&T’s en­er­gy sec­tor.

Monal­di lec­tures in en­er­gy eco­nom­ics at Rice Uni­ver­si­ty in the Unit­ed States and is of­ten quot­ed in the in­ter­na­tion­al me­dia and oil and gas jour­nals where he shares his views on the in­ter­na­tion­al en­er­gy in­dus­try.

“It is a bad day and bad news for the T&T’s gas in­dus­try. I was sur­prised by the re­vo­ca­tion of the li­cences be­cause I as­sume that in the short term, it did not pro­vide any rev­enue to the Venezue­lan regime and e fact that it was a very im­por­tant agree­ment for T&T. Al­so, I as­sumed they would not re­voke the li­cences right now and wait un­til they ex­pired and would al­so wait with­in the next year to de­cide. This shows that the US Sec­re­tary of State Mar­co Ru­bio’s dri­ve to­wards max­i­mum pres­sure left noth­ing stand­ing,” he told the Busi­ness Guardian.

Last Tues­day, Prime Min­is­ter Stu­art Young an­nounced that T&T’s li­cences grant­ed by the Unit­ed States’ Of­fice of For­eign As­sets Con­trol (OFAC), which would fa­cil­i­tate the ex­ploita­tion of gas fields in Venezue­lan wa­ters, had been re­voked.

Young said the Gov­ern­ment would be ex­plor­ing le­gal op­tions with re­gard to re­vers­ing the de­ci­sion of the Unit­ed States Gov­ern­ment.

The re­vo­ca­tion of the OFAC li­cences blocks ex­plo­ration of the Drag­on and Cocuina-Man­akin gas fields and their pos­si­ble mon­eti­sa­tion up­on which T&T’s eco­nom­ic for­tunes re­ly.

On Tues­day night at a po­lit­i­cal ral­ly in Point Fortin, the Prime Min­is­ter said that he is con­tin­u­ing to com­mu­ni­cate with the Venezue­lan Gov­ern­ment.

Monal­di agreed that there is al­ways hope giv­en the ever-chang­ing geopo­lit­i­cal land­scape.

“How­ev­er, I would not say that this agree­ment is com­plete­ly dead in the sense that first of all the deal still makes eco­nom­ic sense and will con­tin­ue to make sense for many, many years. The fact is that you have all this gas that can be po­ten­tial­ly mon­e­tised close to an in­fra­struc­ture that can ex­port it and that is a win/win for both coun­tries. So, when­ev­er there is a po­lit­i­cal tran­si­tion in Venezuela or con­di­tions change in the US ad­min­is­tra­tion, I think this will be re­vived. This does not mean it is not a ma­jor blow, of course it is,” he said.

Monal­di added that there is a “mas­sive po­ten­tial” for the de­vel­op­ment of sur­round­ing gas fields with Venezuela but the right po­lit­i­cal con­di­tions must ex­ist.

The Mariscal Su­cre Project in Venezuela is a large-scale, nat­ur­al gas ex­ploita­tion project in­volv­ing sev­er­al off­shore gas fields near the Paria Penin­su­la.

The project aims to de­vel­op and pro­duce gas from fields like Rio Caribe, Patao, Mejil­lones, and Dragón.

While the project has been in de­vel­op­ment for some time, its fu­ture has been un­cer­tain due to var­i­ous fac­tors, in­clud­ing past po­lit­i­cal in­sta­bil­i­ty and the po­ten­tial for in­ter­na­tion­al part­ner­ships.

“How­ev­er, it could be­come po­ten­tial­ly un­at­trac­tive be­cause of risks or be­cause of de­vel­op­ments both in T&T and in the nat­ur­al gas mar­kets. Maybe the win­dow for this to hap­pen might close and nev­er hap­pen. That is a first con­sid­er­a­tion. I think that gas will be left in the ground un­til there is a po­lit­i­cal change in Venezuela. There are not on­ly the Cocuina-Mankin and Drag­on fields but al­so the Lo­ran Man­a­tee po­ten­tial and oth­er fields next to Drag­on like Mejil­lones, Patao and Rio Caribe and all those could al­so be de­vel­oped even­tu­al­ly so the po­ten­tial could be mas­sive. But these would not be able to be un­locked un­less there is a dif­fer­ent po­lit­i­cal sit­u­a­tion. So, it will not be de­vel­oped on the Venezue­lan side,” Monal­di ex­plained.

He added that T&T has a busi­ness-friend­ly en­vi­ron­ment and Venezuela will al­ways need T&T to help mon­e­tise sur­round­ing gas fields.

“The on­ly rea­son these projects could fly is that they could be ex­port­ed through T&T. First of all be­cause T&T has spare ca­pac­i­ty in the Liq­ue­fied nat­ur­al gas (LNG) in­fra­struc­ture and sec­ond­ly be­cause that gave in­vestors the guar­an­tee against reneg­ing against the Venezue­lan Gov­ern­ment be­cause the mon­eti­sa­tion oc­curred through a coun­try like T&T which has much more sta­ble in­sti­tu­tions than Venezuela. So, it would not hap­pen with­out T&T,” Monal­di ex­plained.

Go­ing for­ward he ad­vised that T&T must fo­cus on its own gas fields that are with­in its bor­ders and mon­e­tise what is with­in its con­trol.

“T&T must de­vel­op the po­ten­tial on its side but keep an eye on the de­vel­op­ments in Venezuela and the US to see if these op­por­tu­ni­ties come back again. T&T must al­so look at po­ten­tial co­op­er­a­tion with Guyana and Suri­name giv­en the fact that T&T has a de­vel­oped hy­dro­car­bon sec­tor. Of course, the bor­der dis­pute be­tween Venezuela and Guyana makes it re­al­ly hard for con­nec­tiv­i­ty in terms of what is hap­pen­ing be­tween Guyana and Suri­name in terms of in­fra­struc­ture with T&T. There are many ben­e­fits in work­ing with Guyana’s and Suri­name’s en­er­gy sec­tors.”

Sig­nif­i­cant Loss

Econ­o­mist and for­mer head of the In­sti­tute of In­ter­na­tion­al Re­la­tions at the Uni­ver­si­ty of the West In­dies (UWI) Dr An­tho­ny Gon­za­les al­so told the Busi­ness Guardian that the prime min­is­ter’s lat­est an­nounce­ments spelled bad news for the coun­try’s fu­ture.

“This loss is sig­nif­i­cant and will im­pact neg­a­tive­ly on the sta­bil­i­ty and de­vel­op­ment of the coun­try in the medi­um term as there are lit­tle or no al­ter­na­tives at this stage. It was not avoid­able as the sit­u­a­tion re­quires sat­is­fy­ing con­di­tions in two cap­i­tals si­mul­ta­ne­ous­ly which is ex­treme­ly dif­fi­cult geopo­lit­i­cal­ly. The ex­pe­ri­ence, how­ev­er, would sug­gest that our en­er­gy diplo­ma­cy must be un­re­lent­ing and must ac­cept that small states just have to ex­ploit all the op­tions un­til the day that a door is opened,” he ex­plained.

De­spite the lat­est neg­a­tive de­vel­op­ments, Gon­za­les ad­vised that ne­go­ti­a­tions must al­ways re­main open be­tween the two neigh­bour­ing coun­tries.

“At least we have got­ten Venezuela to ac­cept the ex­por­ta­tion of its gas to us, the ex­ploita­tion of cross-bor­der gas from one side on­ly and a 30-year li­cence for Shell to de­vel­op Drag­on gas.

“While ex­plor­ing all eco­nom­ic al­ter­na­tives, our diplo­ma­cy must con­tin­ue with these two cap­i­tals in the hope that con­di­tions change and ac­cess to these gas fields be­come at­tain­able in the not-too-dis­tant fu­ture,” he said.

Gon­za­les added that he is not sur­prised by the ac­tion tak­en by the US Gov­ern­ment giv­en how they or­dered their own com­pa­nies in Venezuela like Chevron to leave.

“I am not en­tire­ly sur­prised. Once they start­ing re­vok­ing the li­cences for their own com­pa­nies, I be­came less hope­ful.”