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Energy analysts question US$1B Venezuela-T&T Dragon gas funding – Guardian TT

  • t will not be another three to five years before T&T starts to benefit -Professor Anthony Bryan
Venezuelan President Nicolas Maduro, right, greets T&T’s Minister of Energy, Stuart Young, at Miraflores Palace, Caracas, Venezuela on August 29. The men discussed Dragon Gas Field developments.
Venezuelan President Nicolas Maduro, right, greets T&T’s Minister of Energy, Stuart Young, at Miraflores Palace, Caracas, Venezuela on August 29. The men discussed Dragon Gas Field developments.(Guardian TT)

Raphael John-Hall, Guardian T&T

PORT SPAIN
Energiesnet.com 09 08 2023

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.”

Two pipeline 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 PDV- SA’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.”

Transparency 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.”

guardian.co.tt 09 07 2023

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