The gas deal being signed in Caracas, Venezuela, today for commercial exploitation of the Dragon gas field brings T&T and Venezuela closer to full agreement on monetisation of cross-border gas resources.
It is the culmination of work that has been taking place over the last year between the Energy Ministry, the National Gas Company (NGC), Venezuela's PDVSA and the Government of Venezuela that will allow commercial users of natural gas to find supplies from Venezuela.
One of the key components of the deal is state-owned NGC's offer to finance construction of a gas pipeline linking this country to the Dragon field.
This new source of supply will help revive T&T's stuttering LNG production after several years of curtailments and other challenges and the hope is that projects that have been stalled because of the gas shortage will now proceed.
Preliminary agreement on the Dragon field was reached in May during a visit to T&T by Venezuelan President Nicolas Maduro.
The two countries are now expected to embark on a joint venture to market LNG produced at the Atlantic complex in Point Fortin.
The Dragon field, located 17 kilometres from pipelines in T&T, is estimated to hold 12 trillion-13 trillion cubic feet of gas. It is part of Venezuela's undeveloped Mariscal Sucre offshore gas project.
According to Prime Minister Dr Keith Rowley, who is leading T&T's delegation to Caracas today, the biggest challenge facing this country is that there is not enough gas to satisfy the needs of its downstream industry.
However, signing off on one deal won't bring immediate relief to all that ails the energy sector and the economy as a whole.
The agreement that is being signed today represents a major step in a process that was initiated close to a decade ago, in 2007, when Venezuela and T&T signed a unitisation and unit operating agreement for the development and production of the Loran Manatee cross-border natural gas fields.
The Loran-Manatee field, which like Dragon is undeveloped, contains an estimated 10.25 trillion cubic feet of gas, of which 73.75 per cent belongs to Venezuela and 26.25 per cent to T&T.
Negotiations had been stalled for several years although both sides had acknowledged that developing the fields makes commercial sense.
While there are now signs of progress, some areas of uncertainty remain, including the role of Venezuela's cash-strapped PDVSA in developing the reserves and how the arrangements could be affected by that country's economic and political problems.
Still, the signing of the Dragon field agreement, coming just days after OPEC's agreement to cut production outputs, are welcome news for this country's struggling energy sector.
The stark reality is that although there is much talk about economic diversification, this country is still dependent on revenue from oil and gas, which has declined significantly since late 2014.
The challenge for the Rowley administration is to find ways of maximising whatever benefits can still be gleaned from the oil and gas industry while developing the productive and competitive capacity of T&T's non-oil sector.
This means listening to concerns that have been expressed by stakeholders in the sector about the current tax regime and current practices and policies that are hindering exploitation and production.
At present, oil production is at its lowest level ever in this country–approximately 81,000 barrels per day and natural gas production currently averages 3.8 standard cu feet per day.
Incentives to attract private sector investment may thus be required now, including reforms to the supplementary petroleum tax (SPT) by possibly introducing mechanism where a much lower SPT is imposed at $50 per barrel, and then gradually ramps up as oil prices increase.