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T&T and Venezuela: The perfect pair?

Thursday, November 30, 2017

Separated by a mere 6.8 miles of Atlantic Ocean and, if told through geography, once presumed to be one country, the relationship between T&T and Venezuela has long been a bit of an oddity.

That two countries could be so close to each other physically, and yet so different politically, economically, culturally and socially speaks volumes in itself. That said, and with the fullness of context and circumstances in view, the following statement is worthy of consideration: at no point in time in the collective histories of T&T and Venezuela have both countries perhaps needed each other more.

To say that the situation in Venezuela is desperate would be a bit of an understatement. Food shortages (imports have declined by 80 per cent in the past five years), electricity rationing, hyper-inflation (at 1000 per cent year-on-year) and protest after protest (more than 125 people have died as a result of ongoing clashes in 2017 alone) have all, at one time or another, punctuated a country in the throes of the sharp decline of energy commodity prices.

Add to this the country’s total debt load of some US$140 billion, dwindling foreign exchange reserves, throw in a few US sanctions, and one gets a reasonably solid understanding of a country teetering on the edge of survival. It should thus come as no real mystery to grasp the exodus of many Venezuelan nationals fleeing their homeland and heading to T&T in search of opportunity and betterment.

But while many see Venezuela as a hemispheric basket case, and in spite of all its shortcomings, the Nicolas Maduro-led country possesses an asset that T&T desperately needs at this time: gas—and lots of it.

In fact, the country has the world’s largest conventional oil reserves, and ranks eighth in the world in terms of its gas reserves. It is this singular resource that provides the nexus around which the relationship between the Bolivarians and Trinbagonians hinges, and will continue to evolve.

Put differently, T&T needs Venezuelan gas to offset the long-standing curtailment issues that have stymied operations of both the LNG and petrochemicals sector in Point Fortin and Pt Lisas, and the Venezuelans need the cash associated with monetising their hydrocarbon resources. It comes as no surprise, therefore, that on both sides of the ocean, feverish activity is underway to iron out issues that constrain the progress of the relationship at the commercial level.

The major players involved (NGC, energy powerhouse Shell, and Venezuela’s PDVSA) clearly understand the opportunities for collective gain all around. If all goes as envisioned, it is expected that as early as 2019, first gas from Venezuela’s Dragon field could make landfall in T&T—supplying roughly 150 million standard cubic feet of gas per day at the start.

With additional supply expected to come on stream from the cross-border Loran Manatee field in 2022 and deals signed for gas from the Venezuelan fields in the Mariscal Sucre region, the long-term commercial outlook for both countries appears promising.

While the economics of the gas-sharing arrangements makes sense, the politics of it is another issue altogether. Venezuela’s socialist governance structure and history of political turmoil has been the proverbial thorn in the side of many a commercial venture in the country.

In 2007, for example, when oil prices were on the rise, the then Hugo Chavez-led government sought more revenue as billions of dollars of investments in technology and infrastructure made by international oil companies such as Total, ExxonMobil, BP and Statoil began to pay off. Venezuela demanded changes to agreements made by international oil companies that would give its state-run PDVSA majority control of projects.

Many acquiesced, but Exxon and ConocoPhillips refused and, as a result, their assets were expropriated. (A World Bank arbitration tribunal has ruled against Venezuela in both expropriation cases, but the country continues to appeal the decision).

Though the overtures coming from the Maduro administration seem to signify a more “business-friendly” stance, the fraught political system in Venezuela provides a sobering reality check about the potential for things going wrong in any deals made with Caracas.

Crisis has a way of unifying purpose, and though the scale and scope vary, both T&T and Venezuela are battling their own predicaments.

Working together in the trenches, however, is often quite different from working together when things get better.


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