Raphael John-Lall

The Nicolás Maduro’s Gov­ern­ment is like­ly to ac­cept what­ev­er terms are of­fered if ne­go­ti­a­tions be­tween Venezuela and T&T for the Venezue­lan owned Dragón gas fields be­gin and are suc­cess­ful­ly com­plet­ed.

This is the view of US en­er­gy econ­o­mist Fran­cis­co Monal­di who jus­ti­fied his po­si­tion in an in­ter­view with the Busi­ness Guardian.

Monal­di is a lec­tur­er in en­er­gy eco­nom­ics at Rice Uni­ver­si­ty’s De­part­ment of Eco­nom­ics, and a lec­tur­er in en­er­gy man­age­ment at the Jones Grad­u­ate School of Busi­ness in the Unit­ed States.

Last week Tues­day, US Sec­re­tary of State Mar­co Ru­bio met Prime Min­is­ter Kam­la Per­sad-Bisses­sar in Wash­ing­ton DC, sup­port­ing the Gov­ern­ment’s Dragón gas pro­pos­al and steps to en­sure it will not pro­vide sig­nif­i­cant ben­e­fit to the Venezue­lan Gov­ern­ment.

In April, the Don­ald Trump ad­min­is­tra­tion re­voked the li­cence that was sup­posed to al­low T&T’s Na­tion­al Gas Com­pa­ny (NGC) to ex­ploit the Dragón field in Venezue­lan wa­ters, as part of its strat­e­gy to pres­sure Cara­cas.

Up­on her re­turn to T&T from the US, Per­sad-Bisses­sar made it clear she is will­ing to vis­it Cara­cas to be­gin ne­go­ti­a­tions.

Monal­di who has fol­lowed the ne­go­ti­a­tions be­tween T&T and Venezuela over years called the lat­est de­vel­op­ment “sur­pris­ing and in­ter­est­ing.”

“I think the key el­e­ments here are that clear­ly we’re go­ing back to the sce­nario in which the orig­i­nal li­cence that was pro­vid­ed to T&T and to Shell was giv­en, mean­ing that they can­not pay, at least not in cash.”

He then ex­plained why the Venezue­lan Gov­ern­ment would ac­cept such a pro­pos­al.

“Well, they are not re­nounc­ing their tax­es and roy­al­ties, but they know that at the be­gin­ning there has to be some sig­nif­i­cant in­vest­ment and it will take years for them any­way to re­ceive mon­ey. So, they pre­fer this to hap­pen than noth­ing at all. And of course, the in­ter­pre­ta­tion is that if Maduro ac­cepts this, as I think he prob­a­bly will, it is be­cause he feels a lot of pres­sure from the Unit­ed States and not many op­tions. He doesn’t feel that he has lever­age.”

He al­so said that the multi­na­tion­al en­er­gy com­pa­nies in­volved would have to analyse how they would ben­e­fit.

“In ad­di­tion, of course, the in­vestors, Shell and BP, for ex­am­ple, need to eval­u­ate if this sit­u­a­tion is like­ly to last in terms of the will­ing­ness of the US ad­min­is­tra­tion to pro­vide a li­cence. I think, as I men­tioned be­fore, they need a long-term li­cence. So, so far, what Sec­re­tary Ru­bio seems to be sig­nalling is a li­cence to do this rene­go­ti­a­tion, to open the con­ver­sa­tions, get a draft of a new agree­ment. And then that will be rat­i­fied or not by the US Gov­ern­ment.”

Monal­di com­plet­ed his analy­sis by say­ing he is “op­ti­mistic” about these po­ten­tial ne­go­ti­a­tions.

“So, I think you can be more op­ti­mistic, with­out a doubt, be­cause this is a very pub­lic step by the Sec­re­tary of State, giv­ing the green light to keep ne­go­ti­at­ing. And that seemed un­like­ly in the last cou­ple of months. But at the same time, there are a lot of agree­ments to be made and po­ten­tial hur­dles. But hav­ing said that, I think the fi­nal ques­tion is, are the in­vest­ments go­ing to hap­pen? Are the com­pa­nies go­ing to get long-term li­cences that make them se­cure or at least re­duce the risk that they will face in terms of this US sanc­tion is­sue.”

Venezuela’s po­si­tion

Luis Pietro, who is a Venezue­lan en­gi­neer and nat­ur­al gas spe­cial­ist, be­lieves that the cur­rent T&T Gov­ern­ment led by Per­sad-Bisses­sar is not in­ter­est­ed in any se­ri­ous ne­go­ti­a­tions with Venezuela over its cross-bor­der gas re­serves, un­til the present Venezue­lan Gov­ern­ment is gone.

Pietro ex­pressed his views in a re­port en­ti­tled “The Trinidad and To­ba­go Dilem­ma: Venezue­lan Gas as a So­lu­tion, Wait­ing for a Po­lit­i­cal Change to Ne­go­ti­ate?”

Venezue­lan news­pa­per El Ul­ti­mas Noti­cias pub­lished a sum­ma­ry of his re­port on Sep­tem­ber 28.

In the col­umn, Pri­eto ar­gued that T&T’s Prime Min­is­ter ex­pressed her au­tho­ri­sa­tion for even­tu­al US mil­i­tary op­er­a­tions at sea to con­tin­ue the “siege against Venezuela.”

“The de­sire for a change of gov­ern­ment dri­ven by a para­dox­i­cal mil­i­tary in­ter­ven­tion in Venezuela has led the Trinidad and To­ba­go Gov­ern­ment to dream of very at­trac­tive vol­umes of gas for the Caribbean na­tion’s eco­nom­ic fu­ture,” he said.

Giv­en this com­plex sce­nario, he point­ed out that T&T’s Gov­ern­ment pro­ceed­ed to hold busi­ness rounds to of­fer the var­i­ous blocks in ul­tra-deep wa­ters, which, be­yond the dif­fi­cul­ty posed by the deep­wa­ter sur­face, are al­so af­fect­ed by the in­sta­bil­i­ty in the re­gion re­sult­ing from the US pres­ence through its mil­i­tary forces in the Caribbean Sea and Exxon­Mo­bil, and Venezuela’s claim to sov­er­eign­ty over its At­lantic coast, gen­er­at­ed by the Es­se­qui­bo ter­ri­to­ry.

The Venezue­lan en­er­gy spe­cial­ist cor­rob­o­rates his hy­poth­e­sis with the re­sults of the 2025 Deep­wa­ter Com­pet­i­tive Bid­ding Round, con­duct­ed by T&T, which of­fered 26 blocks. On­ly four bids were re­ceived, de­spite the at­trac­tive 2025 Pro­duc­tion Shar­ing Mod­el (PSC). The Gov­ern­ment’s ex­pec­ta­tions were not met, he ar­gued.

In that round, he said T&T re­ceived bids from Chi­na Na­tion­al Off­shore Oil Cor­po­ra­tion (CNOOC) for three blocks and from a con­sor­tium of small­er en­er­gy com­pa­nies for an­oth­er block.

De­spite T&T’s Gov­ern­ment’s ef­forts to at­tract sig­nif­i­cant bids, these pro­pos­als were on­ly sub­mit­ted for the four avail­able deep­wa­ter oil and gas blocks.

He notes that the lim­it­ed num­ber of bids sug­gests that for­eign in­vestors were not en­thu­si­as­tic about this round. One pos­si­ble rea­son, he points out, in ad­di­tion to the ge­o­log­i­cal com­plex­i­ty and tech­ni­cal chal­lenges of deep­wa­ter drilling, is Exxon Mo­bil’s strong pres­ence and re­cent in­vest­ments in the re­gion.

He ar­gued that the gas short­age in T&T is “crit­i­cal.”

“The on­ly gas liq­ue­fac­tion and ex­port plant, At­lantic LNG, has faced se­ri­ous prob­lems due to the de­cline in do­mes­tic pro­duc­tion and the cur­rent gas short­age. The most log­i­cal and im­me­di­ate so­lu­tion to over­come this cri­sis was an agree­ment with Venezuela. How­ev­er, the promise of an ini­tial US$42 mil­lion in­vest­ment by Exxon Mo­bil could be post­pon­ing, or even pre­clud­ing, any busi­ness with Venezuela.”

He con­tin­ued by say­ing as a di­rect re­sult of the nat­ur­al gas short­age, At­lantic LNG’s ca­pac­i­ty has been se­vere­ly im­pact­ed, lead­ing to the per­ma­nent shut­down of one of its four liq­ue­fac­tion trains.

“This sit­u­a­tion high­lights the vul­ner­a­bil­i­ty of Trinidad and To­ba­go’s en­er­gy in­fra­struc­ture and its grow­ing de­pen­dence on geopo­lit­i­cal de­ci­sions and the in­flu­ence of large in­ter­na­tion­al cor­po­ra­tions. Liq­ue­fied nat­ur­al gas ex­ports ac­count for ap­prox­i­mate­ly 50 per cent of Trinidad and To­ba­go’s GDP; there­fore, its re­liance on its sole liq­ue­fac­tion fa­cil­i­ty is es­sen­tial for the Caribbean na­tion.”

On a more pos­i­tive note, he re­mind­ed read­ers that af­ter 22 years, Exxon­Mo­bil re­turned to T&T with an ini­tial in­vest­ment of US$42 mil­lion, adding that com­pe­ti­tion from gas and oil com­pa­nies with a com­pa­ny of this mag­ni­tude may have dis­cour­aged oth­er po­ten­tial in­vestors, who fear a dis­ad­van­tage in a mar­ket where a dom­i­nant play­er is ca­pa­ble of re­duc­ing pro­duc­tion in neigh­bour­ing fields.

Pri­eto points out that the re­cent auc­tion of en­er­gy blocks in T&T opens a new chap­ter in the geopo­lit­i­cal com­plex­i­ties of the re­gion.

“With­out a doubt, Trinidad and To­ba­go’s search for new sources of gas is a chal­lenge, es­pe­cial­ly since its ter­ri­to­r­i­al wa­ters could con­tain re­serves in ul­tra-deep wa­ters. This not on­ly en­tails great tech­ni­cal com­plex­i­ty but al­so sig­nif­i­cant in­vest­ments, at a time when gas prices in key mar­kets like Asia have sta­bilised af­ter the pan­dem­ic.”