The Dragon gas deal is the first of countless possibilities between TT and Venezuela, Prime Minister Dr Keith Rowley suggested yesterday, even teasing the possibility that Venezuelan oil may one day be used to supply state-owned oil company, Petrotrin.
Rowley and Venezuela’s President Nicolas Maduro shook hands to seal the deal that will see TT for the first time processing Venezuelan natural gas.
Rowley called the deal, nearly two years in the making, a “historic development” that clears the way for the economy of TT to be linked to the resources of Venezuela.
The deal was borne out of concern for TT’s longevity in the hydrocarbons business, he said, and Government worked hard to negotiate with the government of Venezuela to link TT’s infrastructure with their wells in the Mariscal Sucre fields. These fields, to our west and Venezuela’s east have been capped but are ready to be exploited. They’re far from the main processing centres in Venezuela, Rowley said, but near enough to TT’s infrastructure.
Rowley thanked his main delegates, National Security Minster Stuart Young and Foreign Affairs Minister Dennis Moses for spearheading the negotiations that were “a long time in coming. Negotiations have not been easy. I anticipated we would be where we are today, a year ago.”
Young noted to the media on the flight back that over the course of discussions he travelled to Venezuela five times during the bargaining process.
Along with Rowley and Maduro, representatives of Shell (Mounir Bouaziz), and the National Gas Company (CEO Mark Loquan), also signed the agreement yesterday.
“Now we have successfully come to the point where the two most important aspects have been agreed to: volume and price,” Rowley said.
That was all he was prepared to say about the contract, because even though these were both arguably the two biggest hurdles to cross, there were “still some i’s to dot and t’s to cross.”
“I will not disclose the price because that is usually confidential. I will say it was extremely competitive and a better price that we are paying in TTD for what we are contracted to supply. It’s the price that is satisfactory to Venezuela and TT,” he said.
The basic outline of the Dragon deal is that TT and its partner, Shell, will build an 18 kilometre pipeline from the Hibiscus platform, off the northwest tip of TT, to the Dragon field which has reserves of 2.4 trillion cubic feet. From Hibiscus, the gas will then be transferred through existing infrastructure to Point Lisas and other NGC customers. The Dragon gas field is owned by Venezuela’s state oil company PDVSA. TT will pay PDVSA for the gas, helping that country monetize its hydrocarbon assets. The first tranche, which Young had previously stated will be delivered by 2020, is about 150 million standard cubic feet, and will eventually go as high as 300 million standard cubic feet.
Regarding the arrangement with Shell, Rowley said that this has allowed TT to overcome financial hardships, since Shell has given a guarantee that if Government was able to make the deal happen diplomatically they would partner with TT and “ensure financial constraints would not be an impediment.”
But it’s not just gas. Rowley mentioned the restructuring of Petrotrin, saying that it had been something in the works for the last year and a half, and one of the outcomes will be a new approach to treating the oil industry in TT.
“In our discussions here…with Venezuela we have also opened the possibility of treating with that intractable problem in TT on the oil side,” he said.
Not on the table though, was Loran Manatee, a cross-border field with 3/10 in TT waters and the rest in Venezuela. For more than a decade, TT, Venezuela and the multinationals who own acreages in the area, Shell and Chevron, have been unable to come to an agreement. The dream of the processing of Venezuelan gas in T&T and its sale to major international markets was one that was articulated by the late prime minister Patrick Manning, and while there have been negotiations on various cross-border blocks to achieve the same objective, nothing has been achieved in more than 15 years.
Dragon, however, is 100 per cent owned by PDVSA, so a deal was easier to negotiate, rather than focusing on Loran Manatee and “another ten years of nothingness,” he said.
Asked how this deal might affect TT’s relationship with the US, which has contentious political relations with Venezuela, Rowley said the US is and will remain TT’s trading partner, just like Venezuela. “TT is a sovereign country and we make decisions based on the best interest of our people,” he said.
The Dragon-Gas Deal will make T&T more attractive to billion-dollar downstream investments in the energy sector.
T&T has experienced gas shortages in the last five years and there has not been a single new investment in the petrochemical sector since.
In what must be considered one of his most significant achievements since coming to office almost three years ago, the Prime Minister beamed with pride as he told reporters that not only would the gas be coming here to support this country’s development but that the cost was less than the National Gas Company (NGC) was paying many of the upstream producers.
“We may have been able to save our industry by getting a secure source of gas for the downstream sector. It may over time also allow us to look at the expansion of the downstream sector and investments there, as long as we can show investors we have a secured stream of gas,” Rowley told journalists on the flight back from the Bolivarian Republic.
Rowley also revealed that the NGC has been able to negotiate a tranche of gas for power generation at an even lower price than the rest of the gas to be used by the petrochemical sector.
To put the deal into perspective, Trinidad would access enough gas to support at least two methanol plants from Venezuela, it will help with the shortfall in natural gas to the Point Lisas Industrial Estate, and would provide a guaranteed source of cash to the Venezuela government.
As President Nicolas Maduro puts it, the deal will lead to money to build schools and provide drugs to Venezuela’s hospitals. The drive from the Simon Bolivar Airport to Mira Flores demonstrated how much the cash is needed as long lines could be seen everywhere in the capital as people struggle to deal with the worst economic crisis in the Americas.
Both Rowley and Maduro acknowledged that the signing of terms of the agreement had come a year and a half after they signed a Memorandum of Understanding for the very project, but both said it was better late than never.
T&T and Venezuela signed a Heads of Agreement (HoA) in March 2017 on a project that will see gas piped run from the Dragon field in Sucre state to the northeast of Venezuela from PDVSA’s Mariscal Sucre project to the Hibiscus platform in T&T operated by Shell and then to the NGC for sale downstream. Rowley met with a high-level delegation from Venezuela on January 24, 2018, as negotiations for the supply of natural gas to T&T continued to progress. In June, Stuart Young, then minister in the office of the
attorney general, had led a delegation to continue negotiations. The Government has promised that the natural gas shortages experienced by the downstream companies will come to an end by 2021. It has based its projections on improved production from the upstream energy companies and on natural gas from Venezuela’s Dragon Field.