KEVIN RAMNARINE
I have gotten many questions about the Dragon field since “something” was signed in Caracas last week. I say “something” because no one is quite sure what was signed. For that reason, I decided to state some of the facts and ask some more questions.
Let me first say that should Venezuelan natural gas ever come to T&T that would be a good thing. In T&T our demand for natural gas will exceed our ability to meet that demand into the foreseeable future. Efforts by bpTT, EOG and BHP in the period 2014 to 2017 will help but it won’t be enough to close the gap.
One solution has been to look to Venezuela with its vast resources of natural gas in Mariscal Sucre to our north west and in the Plataforma Deltana to our south. To this end, successive governments have worked with Venezuela on cross border fields since 2003.
There are three known cross border gas fields the most popular of which is Loran/Manatee.
In all these talks, the 800-pound gorilla in the room has been: Will Venezuela send its gas to T&T for liquefaction or processing into ammonia and methanol? On the surface, it makes good economic sense. Venezuela is, however, not always driven by economics.
From my first meeting with former Venezuelan Minister of Petroleum Rafael Ramirez (2011) the Venezuelans maintained an intractable policy position that Venezuela’s gas goes to Venezuela.
By 2015, towards the end of my tenure as minister, the Venezuelan policy had shifted significantly. They signalled (in a letter) that they would not have an issue with their natural gas coming to T&T.
That shift took four years of strategic diplomacy.
The recent developments with Dragon, therefore, comes as no surprise. Venezuela needs cash and T&T needs natural gas. It’s a win-win scenario. Unlike Loran/ Manatee, the Dragon field is not a cross border field.
It is totally in the territorial waters of Venezuela, located 25 miles north of the Paria Peninsula, in a water depth that ranges from 328 to 427 feet.
Dragon is operated by the state oil company of Venezuela Petroleos de Venezuela which is better known as PdVsa. This reduces the level of legal and commercial complexity that is a feature of Loran/Manatee.
Furthermore, according to information from a reputable source, the Dragon field has proven and probable reserves of around 3.9 trillion cubic feet of natural gas. That is a significant amount of natural gas.
Depending on who you speak to in the industry in both T&T and Venezuela, the volumes that could come to this country range from 200 to 300 million cubic feet per day.
The field will be connected to Shell’s infrastructure off the north coast, namely the Hibiscus Platform which connects to the LNG facility via a 24-inch subsea pipeline.
The agreement has generated a lot of questions. What for example is the price the gas will be sold at? This will of course remain confidential. Who will pay for the pipeline? How much will it cost?
In terms of timeframes, the Prime Minister said he would be happy with 30 months for first gas. We also have the issue of energy security. When we commence natural gas imports from Venezuela an element of our energy security will be in the hands of a foreign country. I don’t think this is a major risk but nonetheless it’s a risk that ought to be flagged. Ukraine learnt that lesson the hard way.
Apart from commercial and technical questions, other issues have emerged that question the legality of the agreement. Last Wednesday, the T&T Opposition asked Prime Minister Dr Keith Rowley whether the agreement had been approved by the Venezuelan National Assembly.
The Prime Minister in his reply said he was only responsible for T&T’s business. The following day in Caracas, the Venezuelan Opposition held a press conference and condemned the agreement as “null and void.”
Opposition spokesperson Elias Matta said the agreement violated Article 150 of the Venezuelan Constitution, which requires that “No contract in the municipal, state or national public interest determined shall be entered into with foreign States or official entities, or with companies not domiciled in Venezuela, or transferred to any of the same, without the approval of the National Assembly.”
Matta is the deputy chairman of the Energy and Petroleum Commission. The Dragon story gets more interesting when you consider that the Venezuelan Opposition has control of the National Assembly.
Another strange thing is the fact that our Prime Minister did not sign the agreement with President Nicolas Maduro.
PM Rowley signed the agreement with Eulogio Del Pino the Minister of Petroleum. Normally a head of Government signs with his equal. Was the T&T Ministry of Foreign Affairs briefed on this by the Venezuelans? Why didn’t Maduro sign the agreement?
In the medium to long term, it is inevitable that natural gas from Venezuela will come to T&T. The economic logic of that arrangement is overwhelming.
The future of this country will be one where we use our infrastructure to process natural gas from Venezuela and oil from Guyana and French Guiana and perhaps Suriname. For now, this future might be a hostage to the political instability next door but change is inevitable.
KEVIN RAMNARINE is a former Minister of Energy of Trinidad and Tobago.
