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Shell seeks longer US license before sanctioning Venezuela Dragon gas project

The license is for a period of two years until October 31, 2025, and allows for payments in fiat currency, U.S. dollars, Bolivars, and via humanitarian means.

Marianna Parraga and Curtis Williams, Reuters

EnergiesNet.com 04 04 2024

iOil major Shell is seeking a long-term license from the U.S. before making a final investment decision on the Dragon natural gas project in Venezuela, four people familiar with the matter said.

The Dragon field lies in Venezuelan waters near the maritime border with Trinidad and Tobago, and holds up to 4.2 trillion cubic feet of gas. Trinidad needs the fuel to supply its liquefied natural gas and petrochemical industries, and Venezuela wants to open a new source of revenue from exports.

Washington in January 2023 gave Trinidad a two-year license to negotiate and develop Dragon, with Shell as operator and state firms PDVSA from Venezuela and the National Gas Company (NGC) from Trinidad as participants in the project.

The U.S. amended the license in October 2023, extending its validity until October 2025 and allowing Venezuela to receive proceeds from gas sales in cash. The Venezuelan government, on its side, in December green-lit the project through a 30-year license, granting Shell and NGC the rights to produce the gas and export it to Trinidad.

Trinidad expects a final investment decision (FID) for Dragon, the last step in determining whether to move forward with its sanctioning and construction, to come next year. By the time the current U.S. license expires, the FID and first gas might not be ready, creating the need for a new authorization.

Shell is now pressing to have a longer U.S. license to make the FID and co-develop the field with NGC (NGCTT.UL). Shell has initially proposed a 15-year license, two of the people said.

One of the sources said that Shell hopes the U.S. will award the license, even if not this year, because Washington officials would not expect the company to invest over $1 billion “without certainty of that investment.”

A Shell spokesperson declined to comment. PDVSA, NGC, Venezuela’s oil ministry and the U.S. Treasury Department did not immediately reply to requests for comment. The U.S. Department of State declined to comment.

Trinidad’s Energy minister, Stuart Young, has engaged Venezuela and the U.S. on the issue, and met with U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt last month, Young told Reuters on the sidelines of the CERAWeek conference in Houston.

“Obviously, a two year license has a window and this is a transaction that will take more than two years,” Young said.

Dragon and another gas project by Shell in Trinidad’s waters, Manatee, are expected to compete to inaugurate production and supply the gas to Trinidad.

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Reporting by Curtis Williams and Mariannna Parraga in Houston, writing by Curtis Williams. Additional reporting by Matt Spetalnick in Washington; Editing by David Gregorio

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