– Venezuela is poised to kick off 2024 with revitalized oil and natural gas agreements with partners in the Caribbean and Europe.
CARACAS, (venezuelanalysis.com) – The governments of Venezuela and Trinidad and Tobago signed an agreement on Thursday to jointly produce and export offshore natural gas from the Dragon Gas Field.
According to a Venezuelan statement, Venezuela’s state oil company PDVSA has granted a 30-year license to Trinidad’s National Gas Company (NGC) to develop Dragon, located in Venezuelan waters, with Royal Dutch Shell as the project’s operator.
In its first phase, the project is expected to yield an output of 185 million cubic feet per day of natural gas and it involves building a 17-kilometer pipeline from Venezuela’s Dragon field to Shell’s Hibiscus field in Trinidadian waters for the production of liquefied natural gas (LNG) and petrochemicals. Part of the output will be earmarked for export to international markets.
Previously, Caracas had pushed for the construction of a second pipeline to connect the Dragon field to Venezuelan shores to meet domestic demand. The gas line, although not mentioned in Thursday’s statement, could be part of the project’s next stages.
The signing ceremony took place in Caracas and was attended by Venezuelan oil minister Pedro Tellechea, Venezuelan vice president Delcy Rodríguez and Trinidadian energy minister Stuart Richard Young.
“The Dragon Field is set to become one of the most important gas production hubs in the region,” stated Tellechea. “With this license, we are consolidating the operational settings for its definitive development, harnessing its full potential for the benefit of our country and the world.”
Vice president Rodríguez hailed the project as a “historic milestone” for Venezuela, marking the country’s debut in natural gas production and export. She praised the collaboration with Trinidad and Tobago as a model of cooperation and friendship between nations.
Minister Young, in response, emphasized that the 30-year agreement would bring mutual benefits to the people of both Caribbean countries.
For his part, Trinidad and Tobago prime Minister Keith Rowley celebrated the partnership and hailed the opening of “a door to a new commercial frontier.” “In the spirit of good neighbourliness, the ‘dragon’ can dance,” he posted on Facebook.
Venezuela currently sits on the world’s eighth-largest proven natural gas reserves, estimated at over 200 trillion cubic feet (TCF), and the Dragon field alone contains approximately 4.2 TCF worth of deposits. In the next decades, Venezuela is hoping to become an important gas exporter with the Nicolás Maduro government aiming to supply Europe as well as the Caribbean market.
PDVSA discovered the Dragon field over a decade ago and built some infrastructure before US sanctions on Venezuela’s energy sector halted development. Though no US entities are involved in the project, companies and governments request a green light from Washington to avoid being slapped with secondary sanctions.
In January, after Trinidad’s persistent efforts, the Rowley government announced a two-year license from the US Treasury Department to negotiate natural gas initiatives with Caracas. However, Washington prohibited any cash payments to Venezuela, which president Maduro denounced as a form of colonialism, leading to a standstill in the negotiations between Caracas and Port of Spain.
The path to launching the Dragon project was finally cleared in October when Washington temporarily lifted some sanctions against Venezuela’s oil, gas and gold sectors after the Maduro government and the US-backed opposition signed an electoral deal.
In Trinidad’s case, the US Treasury amended the license granted in January allowing the two Caribbean nations “to do straight-up commercial arrangements” and agree on their own payment terms, explained a statement by Rowley’s office.
Prior reporting stated that Shell would hold a 70 percent stake in the joint venture, and Trinidad’s National Gas Company (NGC) the remaining 30. Venezuela would collect royalties and taxes, possibly via natural gas supplies. PDVSA and Shell had a further disagreement over gas price projections which was sorted before Thursday’s announcement.
Washington’s recent sanctions relief has additionally opened the door for new deals between Caracas and other foreign partners. On Tuesday, Venezuelan oil minister Tellechea signed an oil-for-debt swap agreement with the owner of Curacao’s La Isla refinery, Refineria di Korsou (RdK) following a five-year operational cessation.
The 335,000-barrel-per-day refinery is located 140 kilometre off Venezuela’s northern coast and has been leased out by PDVSA since 1985 until RdK abruptly ended the cooperation in 2019 under pressure from US sanctions and citing low production levels. In 2020, RdK sued PDVSA for US $51 million of alleged missed service payments between February 2018 and December 2019.
The refinery has remained idle since terminating business with PDVSA. RdK sold remaining crude stocks and tried to collect the rest by joining a group of creditors seeking to collect unpaid debts from a US-court-ordered shares auction of Venezuela’s US-based oil subsidiary CITGO, but the manoeuvre failed.
Although the current debt amount was not disclosed, Curacao prime minister Gilmar Pisas said that the Maduro administration agreed to settle $450 million in 10 years for debt payment, including $21 million in labor liabilities and bilateral projects, such as a gas line to connect the two nations.
PDVSA is likewise working to resume regular crude supplies to La Isla and store its crude oil in the island’s facilities. Patrick Newton, director of RdK, said the deal was “fair” for both parties and would lead to tighter cooperation.
Caracas’ energy negotiations last week went on to include Spain’s Repsol. On Monday, the two companies amended a previous agreement to ramp up crude and gas output in the Petroquiriquire joint venture and accelerate debt repayment. Repsol executives were received by Maduro afterwards.
This year, the Petroquiriquire project, in which PDVSA holds a 60 percent stake and Repsol the remaining 40 percent, has yielded approximately 20,000 barrels per day of crude and 40 million cubic feet per day of gas, as reported by Reuters. It is anticipated that production will double to around 40,000 bpd within the next two years.
In May 2022, the US Treasury granted Italy’s Eni and Spain’s Repsol a sanctions waiver to recoup accumulated debt and dividends from their joint ventures in Venezuela. Last August, Caracas renegotiated the agreement with both European companies to receive refined products as well as debt relief. Repsol and PDVSA are reportedly in talks to expand the terms of other natural gas projects.
Venezuela’s state oil company struck similar deals with US oil giant Chevron in November 2022 and more recently with France’s Maurel & Prom. The revamped partnerships could help Venezuela surpass the one million daily barrels threshold and sustain growth through 2024.
As of the latest OPEC report, PDVSA’s current daily production stands at 780,000 daily barrels. The recent sanctions easing has allowed the company to expand its client portfolio as well, with China’s Sinochem Corp buying a million barrels of Venezuelan Merey crude for arrival in December. The large purchase is the first of its kind since 2019.
