Venezuela: Natural Gas Talks with Trinidad, Shell Progress Over Expected Credit Recognition
Caracas, September 8, 2023 (venezuelanalysis.com) – The negotiations between Venezuela and Trinidad and Tobago over a joint energy project are expected to take a step forward.
According to Reuters, the Caribbean island’s National Gas Company (NGC) and UK corporation Shell will reportedly agree to credit Venezuelan state oil company PDVSA for a US $1 billion investment in a natural gas field.
Caracas and Port of Spain have engaged in talks to explore offshore natural gas reserves in Venezuelan waters, with Shell as the project’s operator. PDVSA had demanded that the partners recognize the construction of a pipeline connecting the field to the Venezuelan shore.
A source quoted by Reuters said the NGC and Shell are prepared to acknowledge “all legitimate claims.”
Conversations began after the Trinidadian government received a two-year license from the US Treasury Department to discuss exploration of the Dragon field with the Nicolás Maduro administration.
However, progress has been hampered by US conditions that Venezuela receive no cash payments from the project. Caracas has repeatedly denounced the “colonial” nature of US licenses and refused Trinidad’s proposal to pay in kind, for example via food or medicine shipments.
In late July, Trinidadian Prime Minister Keith Rowley admitted that the talks had stalled because “the Venezuelans have not accepted the terms laid down by the Americans.” His administration has reportedly lobbied the Biden White House to amend the stringent restrictions. The talks continued when Trinidad’s Minister of Energy Stuart Richard Young visited Caracas in August.
Though the shared project does not involve any US entities, both the NGC and Shell would likely face secondary sanctions should they progress without a green light from Washington.
After directly targeting most Venezuelan state entities, particularly in the oil industry, the US Treasury Department went on to impose secondary sanctions against Rosneft while also threatening a number of multinational corporations into winding down their Venezuela activities.
Reuters likewise reported that PDVSA is prepared to accept part of the payment in cash and the rest in kind. The joint venture would see PDVSA and the NGC as shareholders with Shell hired as field operator.
The exploration of the 4.2 trillion cubic feet (tcf) Dragon gas field could allow Venezuela to boost its domestic supply, while Trinidad would also increase its exports to other Caribbean customers.
The partners are additionally discussing the transportation of natural gas from the project. Apart from a partially built pipeline to Guiria on the Venezuelan east coast, the project would require a second one to connect to Shell’s Hibiscus field in Trinidadian waters. PDVSA has proposed an alternative of transporting all the gas to Guiria. In that case, only a smaller pipeline to Trinidad’s liquefied natural gas export plants in Point Fortin would need building.
Venezuela currently sits on the world’s eighth-largest proven natural gas reserves, estimated at over 200 trillion cubic feet. The Maduro government has recently touted the largely unexplored resources as an investment opportunity for international corporations, stating that Venezuela’s supply could help address energy shortages in Europe.
In May, Venezuela granted a license to Spain’s Repsol and Italy’s Eni to export natural gas liquids (NGL) from their jointly-owned Cardón IV offshore project. In addition, PDVSA is negotiating with Repsol and France’s Maurel et Prom to overhaul compression plants that capture gas that is currently flared.
Whereas in joint oil ventures Venezuelan law requires that PDVSA hold a majority stake, the same does not apply to natural gas projects. US primary sanctions only target entities where PDVSA or another Venezuelan state company owns more than 50 percent of shares. Nevertheless, foreign companies are unlikely to pursue any investment without a favorable view from the US Treasury Department.
