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Govt, Shell officials head to Caracas for gas talks

Thursday, November 30, 2017

Officials from the government of T&T and Shell are to travel to Caracas today, hoping to resolve several issues that are preventing the development of the massive 10 trillion cubic feet (TCF) Loran/Manatee cross-border gas field.

At the heart of the challenge is the signing of what is called the Unitisation and Unit Operator Agreement (UUOA).

This is an agreement amongst Royal Dutch Shell, Chevron and PDVSA which will determine how much each company invests in the project and how the gas is shared amongst the companies when it is produced.

The agreement has to be approved by both the governments of T&T and Venezuela.

When the two governments last met in Port-of-Spain they raised more than a dozen concerns they had over the UUOA proposed by the companies.

One of the major sources of disagreement is the length of time that the companies are asking between the sign-off on the UUOA and they having to produce a development plan.

Under the treaty between the two governments, upon the signing of the UUOA the consortium has 90 days in which to produce a development plan that outlines the time frame that they expect first gas, the size of the investment, where the platforms are to be placed and how many wells will be drilled to produce the gas.

However the companies are asking for as much as one and a half years to produce the development plan.

Highly placed sources say this is unacceptable to both the Venezuelans and the T&T government.

Venezuela is anxious to get the project going as a source of additional revenue and T&T also desperately needs the gas to sure up its supply to Atlantic LNG and downstream companies.

The Guardian Business and Money has learnt that Chevron has argued that it has spent a lot of money up front on the project without a UUOA in place and has not been able to recover that money from Shell and PDVSA and was not prepared to spend more money until it can get the UUOA in place which would then set a clear mechanism for cost allocation.

Sources say that Royal Dutch Shell has raised concerns about the termination clause in the treaty and the ability of either the governments of T&T or Venezuela to walk away from the agreement.

It is understood that this is a particular concern because of what has happened in the past in the Bolivarian Republic in which the government walked away from agreements and also took away acreage from international companies.

Business and Money was told that the T&T government has sought to reassure the parties that there are sufficient safeguards in the agreement; pointing to the treaty itself which says even if there is a termination of the treaty both countries will fulfill its continuing obligation.

The treaty reads, “upon termination of this treaty the parties undertake to fulfill any continuing obligation which may have been assumed pursuant to this treaty or any related agreement, unless otherwise agreed by the parties.”

The companies are also concerned about the mechanisms of the rebalancing of the gas. In other words while the technical studies show that 2.7 tcf is on the Trinidad side and 7.3 tcf on the Venezuela side, there may be a possibility that when they start producing the gas more pressure may be on one side or another and that can impact how much gas and money goes to each company and each government.

But Venezuela and T&T have argued that this is catered for in the treaty which identifies a set number of times that you can have rebalancing and says if it is to be done there must first be compelling evidence that the resources are different from what was initially thought to exist and cannot be triggered on the whims and fancy of either government.

Loran/Manatee is considered a monster gas field by global standards and the gas is expected to be sent to T&T for processing.

The governments want the negotiations to conclude by the end of the year.


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