Raphael John-Lall

The Trinidad and To­ba­go Gov­ern­ment is yet to re­lease de­tails of the new li­cence to de­vel­op the Drag­on gas field, but un­der the orig­i­nal 2023 agree­ment, Venezuela was set to re­ceive near­ly half of the in­come from the project.

The then agree­ment stat­ed that if Venezuela’s per­cent­age share of gross in­come from the nat­ur­al gas field fell be­low 45 per cent, “a spe­cial vari­able con­sid­er­a­tion in ad­di­tion to that al­ready es­tab­lished in this ar­ti­cle will be ap­plied”. The Drag­on gas field, lo­cat­ed off the coast of Venezuela, has proven re­serves of some 4.2 tril­lion cu­bic feet of gas.

Britain’s multi­na­tion­al Shell and T&T’s Na­tion­al Gas Com­pa­ny (NGC) were re­quired to pay Venezuela no less than 45 per cent of gross rev­enues from the Drag­on gas pro­duc­tion project off Venezuela’s coast. These terms were out­lined in the 2023 li­cence agree­ment.

The gas li­cence grant­ed by the Venezue­lan Gov­ern­ment and signed in De­cem­ber 2023 with the then Dr Kei­th Row­ley ad­min­is­tra­tion was sup­posed to have a du­ra­tion of 30 years, with the pos­si­bil­i­ty of ex­ten­sion.

How­ev­er, in April, the new Don­ald Trump ad­min­is­tra­tion re­voked the pre­vi­ous li­cences that were giv­en dur­ing the Joe Biden tenure. This cre­at­ed un­cer­tain­ty for the Drag­on Gas project and its stake­hold­ers. As then-prime min­is­ter Dr Row­ley had re­mind­ed the coun­try on many oc­ca­sions that se­cur­ing a li­cence that would al­low T&T to ex­plore the gas field in Venezue­lan wa­ters was ur­gent, as T&T’s eco­nom­ic fu­ture de­pends on it.

Six months in­to its new term, the cur­rent Gov­ern­ment has moved quick­ly in se­cur­ing a new li­cence. On Thurs­day, At­tor­ney Gen­er­al John Je­re­mie an­nounced that T&T has of­fi­cial­ly been grant­ed an Of­fice of For­eign As­sets Con­trol (OFAC) li­cence from the Unit­ed States Trea­sury De­part­ment to pur­sue de­vel­op­ment of the cru­cial Drag­on Gas project.

It is the first li­cence the Unit­ed Na­tion­al Con­gress (UNC) Gov­ern­ment has re­ceived as it at­tempts to re­vive the Drag­on gas project, which Prime Min­is­ter Kam­la Per­sad-Bisses­sar said was “dead” af­ter she won the April Gen­er­al Elec­tion.

Je­re­mie, re­spond­ing to ques­tions from the me­dia on Thurs­day, did not dis­close the terms and con­di­tions of this lat­est li­cence. How­ev­er, pre­vi­ous US au­tho­ri­sa­tions to Drag­on have banned cash pay­ments to Venezue­lan Pres­i­dent Nicolás Maduro’s Gov­ern­ment.

Je­re­mie said this li­cence dif­fers from the last OFAC li­cence, as it is be­ing is­sued in stages.

He not­ed the li­cence is the first in a three-tier ap­proval process, in­clud­ing con­di­tions de­signed to en­sure that US com­pa­nies se­cure a com­mer­cial stake. The first stage runs for six months, un­til April 2026, for ne­go­ti­a­tions with Venezuela to set com­mer­cial tar­gets for US com­pa­nies.

The 2023 OFAC agree­ment

Venezuela’s Gov­ern­ment has not made any of­fi­cial com­ment on the lat­est li­cence, but high­lights of the 2023 agree­ment are out­lined in the Venezue­lan gazette.

The Of­fi­cial Gazette of the Venezue­lan Gov­ern­ment is the of­fi­cial news­pa­per of that coun­try, which pub­lish­es new laws, agree­ments, ap­point­ments, and oth­er acts.

In the Ex­tra­or­di­nary Of­fi­cial Gazette num­ber 6,793, dat­ed Jan­u­ary 29, 2024, the terms of the agree­ment be­tween the Min­istry of Pe­tro­le­um of Venezuela, the NGC and Shell to de­vel­op the off­shore gas project in the Drag­on field were pub­lished.

* In­come Floor: “The Bo­li­var­i­an Gov­ern­ment will be en­ti­tled to a spe­cial con­sid­er­a­tion of five per cent in ad­di­tion to what is pro­vid­ed in the pre­vi­ous or­di­nal, which will be cal­cu­lat­ed on the pro­duc­tion vol­umes in ac­cor­dance with the eval­u­a­tion used to cal­cu­late the roy­al­ty and un­der the same con­di­tions es­tab­lished for them. In no case may the Venezue­lan State’s in­come from the project be less than 45 per cent of the gross in­come of the li­censees,” ac­cord­ing to Venezuela’s of­fi­cial gazette.

* Roy­al­ties: The par­ties were sup­posed to have paid a 20 per cent roy­al­ty for dry gas from Venezuela’s Drag­on field and 30 per cent for heavy hy­dro­car­bons as­so­ci­at­ed with the gas, if found.

* Gas Al­lo­ca­tion: Some 70 per cent of the gas pro­duced would have been ex­port­ed to T&T for liq­ue­fac­tion at the At­lantic Plant, and the re­main­ing 30 per cent would have been des­tined for the petro­chem­i­cal sec­tor, ac­cord­ing to the terms of the li­cence.

* Em­ploy­ment: Ac­cord­ing to Ar­ti­cle 62 of the agree­ment, the li­censees would have em­ployed and re­quired their con­trac­tors to em­ploy Venezue­lans to the great­est ex­tent pos­si­ble.

* Re­nun­ci­a­tion of Rights: Ar­ti­cle 71 stat­ed that the li­censees would have re­nounced their ex­plo­ration and ex­ploita­tion rights as long as they had com­plied with all their oblig­a­tions and would have had to no­ti­fy the Venezue­lan Min­istry of Pe­tro­le­um 365 days in ad­vance.

* Law Changes: Ar­ti­cle 74 stat­ed that in the event of pro­mul­ga­tion of new laws or up­dates of ex­ist­ing laws with­in Venezuela, the Min­istry of Pe­tro­le­um, at the re­quest of the li­censees, would have tak­en mea­sures to up­date the plan for whose pur­pos­es it had ap­proved, thus con­tribut­ing to the macro­eco­nom­ic sta­bil­i­sa­tion of the project.

Short US li­cence hints at regime-change cal­cu­la­tions–Gon­za­les

For­mer head of the In­sti­tute of In­ter­na­tion­al Re­la­tions at the Uni­ver­si­ty of the West In­dies (UWI), econ­o­mist Dr An­tho­ny Gon­za­les said the new six-month li­cence could mean that the Amer­i­cans are an­tic­i­pat­ing pos­si­ble regime change in Venezuela soon.

This comes as most me­dia hous­es in the Unit­ed States are re­port­ing that airstrikes on Venezue­lan soil could hap­pen in weeks, if not days.

“I sense it is. They are on­ly giv­ing short pe­ri­ods for ne­go­ti­a­tions and hop­ing that regime change will oc­cur be­fore the project starts. Shell seems to want a ten-year li­cence but is not get­ting it,” Gon­za­les said.

At the same time, Gon­za­les cau­tioned that the Maduro regime’s back­ing from the mil­i­tary and its tra­di­tion­al work­ing-class base means regime change may not be as easy as many ex­pect.

“The mil­i­tary and Chávez sup­port are solid­ly be­hind Maduro and can­not be eas­i­ly bro­ken.”

While point­ing out that the coun­try has not seen the de­tails of the new li­cence, Gon­za­les said that he does not ex­pect any sig­nif­i­cant changes be­tween the last one in 2023 and the new one.

“I do not have the new OFAC li­cence, but I do not ex­pect many changes ex­cept for the time pe­ri­od.”