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The importance of this gas deal

Thursday, August 30, 2018
Prime Minister Dr Keith Rowley and Venezuelan President Nicolas Maduro exchange documents after the signing of the terms of the development of the cross-border gas from Venezuela’s Dragon Gas Field between NGC, PDVSA and Shell in Venezuela on Saturday August 25. PICTURE RISHI RAGOONATH

Venezuela’s ambition to become the largest exporter of gas in Latin America dates back many decades, well before the start of the on and off talks with T&T on utilisation of cross border gas assets.

That country, now beset by economic and social turmoil, has the potential to produce 1,200 million cubic feet and 28,000 barrels per day of condensate gas and has been pursing partnerships with neighbouring energy producing nations, as well as private entities, in it quest to become a major gas production hub.

Its best prospects for realising that dream now reside in the Mariscal Sucre project—a development of great interest to T&T—since it encompasses four giant deposits located in northern Paria Peninsula (east Venezuela): Dragón, Patao, Mejillones and Río Caribe.

Dragón field alone is expected to produce some 300 million cubic feet of gas. That, combined with the other deposits that make up the Mariscal Sucre Project is expected to reach more than 1,000 million cubic feet in the coming years.

With 198 trillion cubic feet of natural gas reserves, Venezuela holds the largest such reserve base in Latin America and the eighth-largest in the world. However, our closest Latin America neighbour has been hampered by a natural gas deficit in its industrial western region which it is seeking to alleviate by developing it offshore natural gas reserves located in the projects.

Apart from Mariscal Sucre, where the Dragón field is located, development is also being pursued in Rafael Urdaneta and Deltana Platform.

It must be remembered, that for both countries, the political and economic scenarios were quite different when the talks started on cross border gas arrangements. Venezuela, then in the “glory days” of the Hugo Chávez Bolivarian Revolution, was still enjoying bumper years of oil production. Then the Chavez regime embarked on forcible seizure of foreign-owned upstream energy assets and drilling activity began to decline.

Meanwhile, in T&T, just around the turn of the 21st century, a Patrick Manning administration was in place when the first Atlantic LNG train was established. The facility eventually expanded into a four-train, 14.8mn t/yr liquefaction complex and this tiny twin-island state evolved into a prosperous gas-based economy.

Bilateral agreements on hydrocarbons started in 2007 when Chávez and Manning signed the Framework Treaty for unification of hydrocarbon reservoirs, along with a series of trade and public safety agreements.

This had been preceded, in December 2004, by Chevron Texaco’s discovery if 5 trillion cubic feet of natural gas in the Loran field which straddles the territorial waters of our two countries.

Venezuela subsequently signed deals with Chevron Texaco and Repsol to increase natural gas production. Chávez expected the Loran to advance Venezuela’s plans build its own LNG plant.

It is no surprise that negotiations between the two countries on developing cross-border gas fields have stalled several times over the years. However, these do not detract from the significant milestones that were achieved leading up to last Saturday’s historic agreement, signed in Caracas, Venezuela.

Also not to be overlooked is the fact that progress in negotiations have been relatively few and far between and that, in the case if T&T, has extended over the life of more than one political administration.

So while the talks began during the tenure of the late Patrick Manning, neither he nor his People’s National Movement (PNM) where at the helm in August 2010. That was when, just months into the People’s Partnership administration of Kamla Persad-Bissessar, this country and Venezuela signed a long-awaited agreement to develop natural gas reserves on their maritime border.

Then, in September 2013, a preliminary agreement, also during Persad-Bissessar’s tenure. Another deal was signed to exploit the Loran-Manatee field.

In the intervening years came the drop in oil prices which sent both countries into economic tailspins.

It was therefore a significant step forward in the protracted negotiations when, in December 2016, with Dr Keith Rowley just over a year in the Office of the Prime Minister, the two governments signed an agreement to facilitate transport and sale of Venezuelan gas to this country. Since then, closed door talks have focused on hammering out a deal that is financially and commercially viable, with legal protection from any risks.

What both sides have now agreed to is for150 million cubic feet of gas per day—eventually increasing to 300 million cubic per day—to flow from Venezuela’s Dragon field through a 17-kilometre pipeline to Shell’s Hibiscus platform offshore T&T. From there, the gas will be distributed by the National Gas Company. Operations are slated to begin in 2020.

While full details have not yet been made public, the deal is also supposed to cover, among other things, joint development of Venezuelan gas reserves with the participation of companies from T&T, as well as construction of a 300-kilometre gas pipeline that would ship gas from Mariscal Sucre to Güiria.

Also in the pipelines are further talks on development of the Loran-Manatee field that straddles the borders of Venezuela and T&T and contain more than 10 trillion cubic feet of natural gas. Already agreed is the allocation of 73.75 per cent of those reserves to Venezuela and the remaining 26.25 per cent to T&T.

This field has the potential to significantly increase overall gas production. There have been discussion of Loran-Manatee by the respective but on the T&T end very little has been revealed about a potential investment decision from the multinational companies holding the rights to develop the acreage.

Also still to be considered is the much smaller Manakin Cocuina field, discovered in 2000, which is estimated to contain around 0.4 trillion cubic feet of reserves with the majority (66 per cent) on the T&T side of the boundary.

There are many other deals still in talks so negotiations over cross-border gas resources will continue well into the foreseeable future. Now that the deal for interconnection to export from the Dragon field to the Hibiscus platform has been finalised, attention can now shift to the other potential pipeline route from Güiria, Sucre state, to Point Lisas.

Success in all these discussions is critical since the Government has promised that the natural gas shortages experienced by local downstream companies will come to an end by 2021. While this is based primarily on the just concluded Dragon gas agreement, other developments are also contributing to the resolution of the gas curtailments, such as bpTT’s Angelin field, with reserves estimated to be in the region of 1.5 trillion cubic feet, where there have been significant developments in just the past few weeks.

These must be viewed in tandem with developments over the past several months, including the Trinidad Onshore Compression project (TROC) which has resulted in additional compression capabilities for the Point Fortin Atlantic LNG plant.

Other significant projects include Juniper, which at peak will produce 590 million cubic feet per day of natural gas from the Corallita and Lantana fields located 80 kilometres off Trinidad’s south east coast and Sercan gas field, a joint venture between EOG Resources and bpTT, which has the capacity to produce 250 million cubic feet of gas per day.

While a deal has been signed off—particularly the prevailing economic and social conditions in Venezuela—great care must be taken to ensure agreements already in place are kept and future deals are approached with a level of diplomacy. The value and proximity of the assets involved must never be under estimated.

It helps that in this case Venezuela needs these arrangements to succeed as much as, or perhaps more than, T&T. Very likely, that country is staking its economic recovery on successful implementation of Dragón and the other energy deals it is currently pursuing with other countries in the region.

For T&T, currently sitting on an estimated 11.5 trillion cubic feet of proved natural gas reserves, the challenge is not only to bring new gas reserves into production as a means of stemming the current shortage but to also maximise production from existing reserves.

Our economic survival still depends heavily on natural gas, so even while efforts must be made to develop other sectors, keeping this industry alive and ensuring it returns to optimal capacity is crucial.

That is why the Dragón deal was such a significant development.

It is one of many important steps for economic recovery and future prosperity.


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