Raphael John-Lall
T&T may not reap the economic benefits expected from the recently negotiated Venezuelan natural gas agreements, as the commercial incentives offered to Shell and BP could ultimately encourage the companies to direct gas towards lucrative European and Asian LNG markets, rather than the country’s struggling petrochemical sector.
That is the warning from Venezuelan petroleum engineer and energy analyst Dr Einstein Millán Arcia, who in an interview with the Sunday Business Guardian argues that the economics of the agreements could leave T&T with insufficient levels of gas for local downstream industries, while international energy companies pursue substantially more profitable export opportunities.
“In T&T, Prime Minister Kamla Persad-Bissessar is celebrating the signing of these agreements as a personal achievement that will bring economic and social benefits, without realising that the ultimate outcome of these agreements could actually be the opposite,” he said.
This concern comes after three agreements were signed over the last six months. The signing between Shell and Venezuela in March clears the way for the development of the Dragon gas project and for first gas to be exported to T&T by the third quarter of 2027.
In June, an agreement was signed allowing Shell’s exploration and development of the shared Loran field. Two weeks ago, another agreement was signed allowing a second-phase Loran development involving BP in Venezuela’s Atlantic projection.
Two weeks ago, Prime Minister Kamla Persad-Bissessar congratulated acting Venezuelan President Delcy Rodríguez on the signing of licences for gas exploration in Venezuela’s Loran Phase 2 development and the Plataforma Deltana area.
Persad-Bissessar noted that the two agreements signed in Venezuela could send approximately seven trillion cubic feet of gas from Venezuela to T&T for processing at the country’s LNG and petrochemical plants.
Rodríguez has assured that the gas flowing across the border could benefit T&T and other countries through shared development and industrial activity.
The agreements have been promoted as an opportunity for T&T to secure additional gas supplies and strengthen its energy industries. But Millán Arcia argues that simply obtaining access to Venezuelan gas does not guarantee that the gas will be economically competitive for T&T’s domestic industries.
His central concern is that Shell and BP, which each hold a 45 per cent interest in Atlantic LNG, will seek to allocate gas towards the markets that generate the strongest returns for the companies.
“When analysing the impact in terms of the balance between the additional costs resulting from the financial burden of payments to Venezuela/Petróleos de Venezuela (PDVSA) and the net profits available to the operators and T&T, the agreements could be advantageous to Shell and BP. They will likely orient their strategy toward prioritising the upstream and markets segments in order to monetise their production in European and Asian markets, rather than focussing on manufacturing and petrochemicals. This could contribute to the closure of plants in Point Lisas.”
His warning is particularly significant because T&T’s gas industry is already under severe pressure.
Domestic natural gas production, according to Millán Arcia, has fallen from approximately 4.3 billion cubic feet per day (Bcf/d) in 2009 to around 2.3 Bcf/d today. The decline has contributed to shortages affecting LNG production as well as the country’s gas-intensive manufacturing and petrochemical industries.
Atlantic LNG has been one of the most visible casualties.
The company once operated four LNG trains with combined capacity of approximately 15 million tonnes per annum (MMtpa). Train 1 was shut down in 2020 following years of feedstock difficulties and is scheduled for complete decommissioning in the fourth quarter of 2026, leaving approximately 11.5 MMtpa of capacity.
Millán Arcia says the company’s gas requirements have fallen from approximately 1.6–1.8 bcf/d when all four trains were operating to around 1.1–1.2 Bcf/d today.
That still represents close to half of T&T’s total gas production.
Foreign markets
Under the original Dragon agreement signed in December 2023, Venezuela and PDVSA were expected to receive at least 45 per cent of gross revenue under the country’s 2006 amended Organic Hydrocarbons Law, in addition to royalties of 20 per cent for gas and 30 per cent for recoverable liquids.
Millán Arcia said the financial terms of the two more recent agreements involving Loran have not been officially clarified, creating uncertainty over the ultimate cost of Venezuelan gas to T&T.
“In the case of the two most recent agreements, there is considerable opacity, and the financial terms have not been officially clarified. These two agreements fall under the umbrella of the latest amendment to the Organic Hydrocarbons Law of 2026, which grants Venezuela’s executive branch broad discretion. Nevertheless, it is expected that the financial terms for Venezuela will not differ substantially from those of the 2023 Dragon agreement.”
At the same time, he pointed out that international LNG markets provide a powerful incentive for producers to pursue exports.
According to his analysis, the Gulf of Mexico benchmark is around US$2.80 per million British thermal units (MMBtu) now, compared with approximately US$21/MMBtu in Europe and US$21.50/MMBtu in Asia.
That enormous price differential could influence how Shell and BP choose to monetise the additional gas.
“Therefore, it is highly likely that both Shell and BP will concentrate their efforts on exporting LNG to the European and Asian markets in order to maximise their profits in the short and medium term, accelerating the recovery of their investments and maximising Net Present Value (NPV). In the case of Point Lisas, the industrial complex will face increasing pressure from shrinking margins,” he said.
He also added that if Venezuelan gas carries significant additional financial costs because of payments to Venezuela and PDVSA, those costs could ultimately be reflected in the price paid by T&T’s industrial consumers.
That would further squeeze margins at Point Lisas, where companies are already dealing with higher energy costs and constrained feedstock availability.
He also said if the economics instead encourage Shell and BP to prioritise European and Asian LNG markets, T&T could find itself with access to additional gas without gaining the competitive advantage its manufacturers and petrochemical producers urgently need.
That could leave Point Lisas confronting another round of pressure on margins, investment and production, while the most valuable economic opportunities from the new gas resources are captured elsewhere.
The major concern, according to Millán Arcia, is that the Venezuelan gas arrangements could increase gas availability without providing the price advantage required to protect T&T’s downstream industries.
“In the case of Point Lisas, the industrial complex will face increasing pressure from shrinking margins, since the gas supplied through these new agreements is very unlikely to be more economically competitive than gas produced from T&T’s own assets.”
Sufficient gas
Economist Dr Anthony Gonzales took a different view and told theSunday Business Guardian that the expected cross-border gas along with that from T&T’s deep water drilling should be more than enough to meet the needs of both the LNG and downstream plants after 2028.
“Our LNG plants are operating way below their capacity and we have several idle petrochemical plants that need gas. It is not clear how they plan to use it but either way, it benefits T&T. If all goes into LNG which is exported then we may gain less but it is hard to say since we saw recently the prioritisation of the LNG plants over the idle petrochemical plants as the Government tends to gain more in revenue.”
He added that if T&T has enough to get the four LNG plants running and extra to run the six idle downstream plants, that would be ideal.
“A lot depends on what price this gas is being sold and the prices of the downstream products. The gas producers will work out the way to optimise their returns from distributing the gas between LNG and the petrochemical plants. The Government may also choose to offer incentives to the downstream plants to get them to reopen and keep their plants here.”
