Venezuela turmoil puts a pause on Dragon Gas deal with Trinidad and Tobago

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Venezuela's President Maduro shakes hands with Trinidad and Tobago's Prime Minister Rowley during an agreement-signing ceremony between Trinidad and Tobago and PDVSA in Caracas on August 25, 2018. (Reuters photo)

Deteriorating conditions in Venezuela, home of the world’s largest oil reserves, is obstructing a deal with neighbouring Trinidad and Tobago to transport gas over a 17 km pipeline from the Dragon Gas Field to the Hibiscus platform, in the twin island republic.

In August 2018, an agreement to import natural gas from the offshore Dragon field was made between the Trinidad & Tobago National Gas Company (NGC), Shell and the Venezuelan state-owned oil and natural gas company, Petróleos de Venezuela, S.A (PDVSA).

The imported natural gas will contribute to Trinidad & Tobago’s (TT’s) strategy to mitigate the supply curtailments to its gas-based industries including the liquefaction plant operated by BP and Shell as well as its several petrochemical plants. The Dragon field, along with Patao, Mejillones, and Rio Caribe fields, is located in the Mariscal Sucre Complex area north of Paria peninsula in offshore Venezuela.

Loop reported on Wednesday that TT Energy Minister Franklin Khan, Responding to a question in the Senate on Tuesday from Opposition Senator Wade Mark on whether the deal needed to be ratified by the Venezuelan National Assembly, said the state-owned Venezuelan oil and natural gas company has provided contractual representation that all requisite approvals and consents have been obtained.

However, as to the next steps in the agreement, Khan said while a term sheet agreeing to a quantity and price has already been signed by the three entities, the process is now at a virtual standstill owing to the current political situation in the South American country.

“The rest of the agreement is formalisation of the other clauses and that has been taking some time. It is no secret that it has slowed down almost to a standstill based on what is currently transpiring in Venezuela,” the Minister said, as reported by Loop.

Asked whether sanctions imposed by the US against PDVSA played a part in the delay in the conclusion of the deal, Khan said he could not speak on behalf of the Venezuelan company, but indicated that that sanctions would not affect Shell or the NGC.

“But, the whole process has slowed down, largely because of the current situation in Venezuela,” he restated.

Pressed further by Mark on a time period for the conclusion of the process, Khan maintained that the deal is one that can stand commercial scrutiny, and is to the benefit of both nations, Loop reported.

Describing the deal as “symbiotic” Khan said he holds the view that once the situation improves in Venezuela the finalisation process will come to its natural conclusion and will be executed.

The Dragon field, which is to be operated by Shell, is projected to supply an estimated 150 million cubic feet per day in 2020, with plans to increase to 300 million cubic feet by 2022.