On Fri­day, the US Trea­sury De­part­ment Of­fice of For­eign As­sets Con­trol (OFAC) an­nounced the is­suance of two gen­er­al li­cences that al­low Shell and BP to pro­ceed with near-bor­der and cross-bor­der de­vel­op­ment the Drag­on and Cocuina gas fields.

In the analy­sis be­low, en­er­gy ex­pert Tony Paul pro­vides an in­sti­tu­tion­al his­to­ry of the ge­ol­o­gy, cap­i­tal, geopol­i­tics and the slow mon­eti­sa­tion of off­shore gas with a fo­cus on the Drag­on gas field

When Venezuela is­sued a li­cence in Jan­u­ary 2024 bind­ing the Drag­on gas field to Trinidad and To­ba­go’s com­mer­cial gas sys­tem, it was wide­ly framed as a diplo­mat­ic break­through and an en­er­gy se­cu­ri­ty tri­umph. In the nar­row le­gal sense, that was true. But in the deep­er in­sti­tu­tion­al and eco­nom­ic sense, the li­cence did not cre­ate a project. It closed one.^1

Drag­on did not ar­rive on Trinidad’s hori­zon as a dis­cov­ery. It ar­rived as a ma­ture, heav­i­ly worked off­shore as­set whose ge­ol­o­gy had been proven for decades, whose wells had al­ready been drilled, whose pipelines had near­ly been laid, and whose mon­eti­sa­tion had been re­peat­ed­ly de­layed not by en­gi­neer­ing fail­ure but by shift­ing mar­kets, geopol­i­tics and in­sti­tu­tion­al de­sign.^2

To un­der­stand why Trinidad ul­ti­mate­ly be­came the fi­nal vi­able mar­ket for Drag­on gas, one has to re­turn not to the head­lines of 2024, but to the late 1970s—to a pe­ri­od when Venezuela’s off­shore gas fron­tier was first be­ing mapped in earnest.^3

Dis­cov­ery be­fore dereg­u­la­tion

Be­tween 1978 and 1982, Petróleos de Venezuela SA (PDVSA) drilled a se­quence of ex­plorato­ry wells across four off­shore struc­tures north of the Paria Penin­su­la: Mejil­lones, Patao, Dragón and Río Caribe. Thir­teen wells in to­tal con­firmed the pres­ence of large non-as­so­ci­at­ed gas ac­cu­mu­la­tions in shal­low wa­ter, un­usu­al­ly close to shore and even clos­er to in­ter­na­tion­al ship­ping routes.^4

By the mid-1980s, ex­ten­sive seis­mic cam­paigns had al­ready giv­en PDVSA a tech­ni­cal un­der­stand­ing of the basin that many mod­ern off­shore provinces would en­vy. This was not spec­u­la­tive fron­tier ge­ol­o­gy. It was a proven gas province await­ing a mar­ket.^5

The ques­tion from the be­gin­ning was not whether gas ex­ist­ed. The ques­tion was where—and how—it would be mon­e­tised.

The LNG dream: Cristóbal Colón

In 1988 PDVSA turned to Shell to ex­plore what at the time ap­peared the most nat­ur­al de­vel­op­ment route: liq­ue­fied nat­ur­al gas ex­ports to glob­al mar­kets. The Cristóbal Colón Project was born, em­body­ing the clas­sic late-twen­ti­eth-cen­tu­ry mega-project mod­el—large off­shore re­serves feed­ing large on­shore LNG trains fi­nanced by multi­na­tion­al cap­i­tal.^6

By 1991 the part­ner­ship ex­pand­ed to in­clude Exxon­Mo­bil and Mit­subishi Cor­po­ra­tion. Three-di­men­sion­al (3-D) seis­mic da­ta was ac­quired, in­te­grat­ed reser­voir mod­els were con­struct­ed, and in 1994 the joint com­pa­ny Su­cre Gas S.A. was formed to ad­vance de­vel­op­ment.^7

All the fa­mil­iar in­gre­di­ents of a fi­nal in­vest­ment de­ci­sion (FID) were present: proven re­serves, strong part­ners, grow­ing glob­al gas de­mand.^8

Then the mar­ket moved

Gas price pro­jec­tions soft­ened. LNG eco­nom­ics tight­ened. By 1996 the re­turns that had jus­ti­fied the project no longer cleared cor­po­rate in­vest­ment hur­dles.^9

Cristóbal Colón stalled—not be­cause the reser­voirs dis­ap­point­ed, but be­cause glob­al gas mar­kets are ruth­less about tim­ing.^10

It was the first mo­ment in Drag­on’s long his­to­ry when ge­ol­o­gy stood ready and eco­nom­ics blinked.

Rein­ven­tion un­der the state

The ear­ly 2000s brought a new po­lit­i­cal econ­o­my in Venezuela and with it a new vi­sion for off­shore gas. The project was re­brand­ed as the Mariscal Su­cre Project and re­framed around dual ob­jec­tives: do­mes­tic in­dus­tri­al de­vel­op­ment and fu­ture ex­port op­tion­al­i­ty.

Pre­lim­i­nary De­vel­op­ment Agree­ments ex­am­ined mas­sive gas flows to an on­shore in­dus­tri­al com­plex near Güiria, with vol­umes ap­proach­ing a bil­lion cu­bic feet per day when ful­ly de­vel­oped. The gas was to fu­el pow­er gen­er­a­tion, petro­chem­i­cals, and po­ten­tial­ly LNG ex­ports once mar­ket con­di­tions im­proved.

By 2007, PDVSA had cre­at­ed a ded­i­cat­ed off­shore di­vi­sion to cen­tralise tech­ni­cal plan­ning, en­vi­ron­men­tal man­age­ment and na­tion­al con­tent, sig­nalling that off­shore gas was now viewed as a strate­gic pil­lar of Venezuela’s en­er­gy fu­ture rather than a part­ner-led com­mer­cial ven­ture.

Once again, the bot­tle­neck was not ge­ol­o­gy.

It was the chal­lenge of con­vert­ing re­serves in­to rev­enue in a shift­ing glob­al en­vi­ron­ment.

When Drag­on be­came a built field

In Feb­ru­ary 2008 Venezuela ap­proved the In­te­gral Ex­ploita­tion Plan for Dragón and Patao. For the first time, de­vel­op­ment moved de­ci­sive­ly from plan­ning to ex­e­cu­tion.

Six­teen de­vel­op­ment wells were au­tho­rised: eight in Drag­on, eight in Patao. Be­tween late 2008 and March 2011 PDVSA drilled the full Drag­on de­vel­op­ment set, trans­form­ing the field from ap­praisal con­cept in­to pro­duc­tion-ready as­set.

In May 2011 the gov­ern­ment for­mal­ly ap­proved re­serves ex­ceed­ing three tril­lion cu­bic feet re­cov­er­able.

At this point Drag­on was no longer a “fu­ture op­por­tu­ni­ty.” It was a de­vel­oped gas field await­ing sur­face in­fra­struc­ture and mar­ket ac­cess.

That tran­si­tion from pa­per project to in­dus­tri­al op­er­a­tion was sym­bol­ised in May 2010 when the se­mi-sub­mersible Aban Pearl sank while drilling a Drag­on de­vel­op­ment well. No lives were lost, but the in­ci­dent un­der­scored that heavy off­shore ex­e­cu­tion was now un­der­way.

Plat­forms, sub­sea sys­tems, and ac­cel­er­at­ed pro­duc­tion

In late 2010 Tech­nip se­cured a ma­jor off­shore con­tract cov­er­ing the Drag­on pro­duc­tion plat­form, sub­sea sys­tems, and full en­gi­neer­ing and con­struc­tion man­age­ment. This was not con­cep­tu­al en­gi­neer­ing. It was the kind of con­tract that pre­cedes steel fab­ri­ca­tion, ves­sel mo­bil­i­sa­tion, and bil­lion-dol­lar cap­i­tal flows.

At the same time, PDVSA in­tro­duced an Ac­cel­er­at­ed Pro­duc­tion Scheme de­signed to bring ear­ly gas vol­umes on­stream while the full field build-out pro­gressed. Se­lect­ed wells were per­fo­rat­ed, flow-test­ed, and re-en­gi­neered be­tween 2013 and 2014 to max­imise de­liv­er­abil­i­ty.

From a sub­sur­face per­spec­tive, Drag­on was es­sen­tial­ly ready. The re­main­ing hur­dle was evac­u­a­tion from the field and pro­cess­ing.

The pipeline that near­ly fin­ished the job

PDVSA ad­dressed that hur­dle with a mas­sive off­shore pipeline link­ing the Drag­on area to the CIG­MA com­plex near Güiria: a 36-inch line stretch­ing rough­ly a hun­dred kilo­me­tres across the seabed.

By 2015, PDVSA pub­licly re­port­ed the line more than nine­ty per cent com­plete. In prac­ti­cal terms, this meant that most of the phys­i­cal ex­port cor­ri­dor al­ready ex­ist­ed on the ocean floor. Re­ports sug­gest the pipeline had less than a 5km span to be com­plet­ed.

The as­so­ci­at­ed on­shore project, the Plan­ta de Acondi­cionamien­to de Gas para el Mer­ca­do In­ter­no (PAG­MI,) was de­signed as east­ern Venezuela’s gas heart: de­hy­dra­tion, liq­uids han­dling, and in­jec­tion in­to do­mes­tic trans­mis­sion net­works, with fu­ture LNG in­ter­faces al­ways im­plic­it.

Drag­on, af­ter near­ly four decades, stood with­in reach of com­mer­cial flow. And then geopol­i­tics in­ter­vened.

Rus­sia en­ters and the world tight­ens

Be­tween 2017 and 2020, Venezuela is­sued for­mal off­shore gas li­cences cov­er­ing Patao and Mejil­lones to a Ros­neft-linked en­ti­ty. The move re­flect­ed a strate­gic piv­ot to­ward Russ­ian cap­i­tal and geopo­lit­i­cal back­ing as West­ern en­er­gy firms re­treat­ed from Venezue­lan risk.

On pa­per, it was a new de­vel­op­ment chap­ter. In prac­tice, it co­in­cid­ed al­most per­fect­ly with es­ca­lat­ing US sanc­tions on both Venezue­lan and Russ­ian en­er­gy com­pa­nies. Fi­nanc­ing chan­nels nar­rowed. In­sur­ance be­came com­pli­cat­ed. Con­trac­tors hes­i­tat­ed. Ros­neft it­self un­der­took ma­jor re­struc­tur­ing of its Venezue­lan ex­po­sure.

No sin­gle de­cree ex­plic­it­ly states that sanc­tions froze Mariscal Su­cre. But large off­shore gas de­vel­op­ments can­not pro­ceed when pay­ment sys­tems, ship­ping and cap­i­tal mar­kets are con­strained by geopo­lit­i­cal iso­la­tion.

Once again, the prob­lem was not ge­ol­o­gy. It was ac­cess.

The Chi­nese foot­print: build­ing with­out own­ing

Through­out this pe­ri­od, Chi­nese par­tic­i­pa­tion sur­faced re­peat­ed­ly, par­tic­u­lar­ly in in­fra­struc­ture de­vel­op­ment tied to PAG­MI and as­so­ci­at­ed fa­cil­i­ties. Co­op­er­a­tion agree­ments and project port­fo­lios fre­quent­ly ref­er­enced Chi­na Na­tion­al Off­shore Oil Cor­po­ra­tion and Chi­nese en­gi­neer­ing firms.

How­ev­er, the pub­lic li­cens­ing record does not clear­ly show Chi­nese na­tion­al oil com­pa­nies hold­ing up­stream field li­cences in Drag­on or its neigh­bour­ing struc­tures. In­stead, Chi­na’s role ap­pears pri­mar­i­ly as builder and fi­nancier of in­dus­tri­al in­fra­struc­ture: a pat­tern con­sis­tent with its glob­al en­er­gy strat­e­gy.

Chi­na helped con­struct the ar­ter­ies. The mol­e­cules re­mained po­lit­i­cal­ly strand­ed.

Why Trinidad be­came in­evitable

By the ear­ly 2020s Venezuela pos­sessed some­thing rare in glob­al gas de­vel­op­ment: proven re­serves; drilled wells; en­gi­neered off­shore sys­tems; a near­ly com­plet­ed pipeline and a de­signed pro­cess­ing hub.

Yet com­mer­cial flow re­mained elu­sive.

At the same time Trinidad and To­ba­go faced a struc­tur­al gas squeeze. Ma­ture off­shore fields were de­clin­ing. LNG trains were un­der­utilised and petro­chem­i­cal plants faced pe­ri­od­ic feed­stock short­ages — even as bil­lions of dol­lars of in­dus­tri­al in­fra­struc­ture re­mained in place.

Ge­og­ra­phy, long post­poned by pol­i­tics, fi­nal­ly as­sert­ed it­self.

The short­est com­mer­cial route for Drag­on gas was not west in­to a con­strained do­mes­tic sys­tem. It was east — in­to Trinidad’s LNG and in­dus­tri­al cor­ri­dor.

When Venezuela is­sued the 2024 li­cence bind­ing Shell Venezuela and the Na­tion­al Gas Com­pa­ny of Trinidad and To­ba­go, it did not in­vent a new strat­e­gy. It in­sti­tu­tion­alised the one the map had al­ways im­plied.

The deep­er les­son

Drag­on’s four-decade jour­ney is not a sto­ry of failed re­sources. It is a case study in how nat­ur­al re­source de­vel­op­ment is gov­erned by cy­cles of cap­i­tal, in­sti­tu­tions, mar­kets and geopol­i­tics.

Each phase made eco­nom­ic sense with­in its his­tor­i­cal con­text:

• The LNG mega-project fit the 1990s;

• State-led in­dus­tri­al­i­sa­tion fit the 2000s;

• Russ­ian part­ner­ships fit the sanc­tion era;

• Chi­nese in­fra­struc­ture fit cap­i­tal con­straints; and

• Trinidad mon­eti­sa­tion fit strand­ed abun­dance.

What nev­er changed was the gas. What kept chang­ing was the world around it.

Why Trinidad tru­ly “got the last dance”

Trinidad did not un­lock Drag­on. It in­her­it­ed the fi­nal vi­able mon­eti­sa­tion path­way for a field that had al­ready been dis­cov­ered, drilled, en­gi­neered, and near­ly con­nect­ed long be­fore Port-of-Spain en­tered the pic­ture.

The achieve­ment of the 2024 li­cence is in­sti­tu­tion­al rather than ge­o­log­i­cal — a po­lit­i­cal workaround for decades of stalled de­vel­op­ment.

Drag­on wait­ed forty years not for bet­ter reser­voirs, but for con­di­tions that al­lowed mol­e­cules to move.

In the end, align­ment came not through new dis­cov­er­ies, but through ne­ces­si­ty — Trinidad’s gas hunger meet­ing Venezuela’s strand­ed abun­dance.

Not a mir­a­cle, just his­to­ry fi­nal­ly catch­ing up with ge­og­ra­phy.

Foot­notes

1. Venezue­lan Gac­eta Ofi­cial Ex­tra­or­di­nar­ia No. 6.793 (29 Jan­u­ary 2024), li­cence for Cam­po Dragón.

2. PDVSA off­shore ex­plo­ration and seis­mic cam­paign sum­maries, 1978–1985.

3. Cristóbal Colón Project part­ner­ship an­nounce­ments, PDVSA/Shell/Exxon/Mit­subishi (1988–1996).

4. PDVSA Pre­lim­i­nary De­vel­op­ment Agree­ments and Mariscal Su­cre plan­ning doc­u­ments (2002–2007).

5. Reuters and Mar­itime Ex­ec­u­tive re­port­ing on Aban Pearl rig in­ci­dent, May 2010.

6. Tech­nip off­shore con­tract an­nounce­ments, 2010.

7. PDVSA well com­ple­tion and Ac­cel­er­at­ed Pro­duc­tion Scheme re­ports, 2013–2015.

8. PDVSA ac­tiv­i­ty re­port cit­ing 91.5 per cent com­ple­tion of Drag­on–CIG­MA pipeline, 2015.

9. Venezue­lan gazette in­stru­ments and Reuters cov­er­age of Ros­neft-linked li­cences, 2017–2020.

10. Project port­fo­lios and Venezue­lan press cov­er­age of PAG­MI and Chi­nese EPC par­tic­i­pa­tion.