Venezuela is poised to approve a major offshore natural gas license for Shell and Trinidad and Tobago’s National Gas Company (NGC), as confirmed by Trinidadian President Keith Rowley to Reuters on Monday.
Trinidad’s Energy Minister, Stuart Young, is expected to travel to Caracas later this week to resume licensing negotiations for the Dragon natural gas field, situated in Venezuela’s territorial waters and estimated to contain 4.2 trillion cubic feet of natural gas.
A deal is expected to be signed “in coming days” to permit Shell and NGC to operate the field under a 70%-30% ownership agreement. The Venezuelan state will receive an undisclosed portion of the project’s revenue, either directly in cash or indirectly through royalty taxes, offering a much-needed source of foreign capital.
Initially explored by Venezuela’s state oil firm, PDVSA, the project was paused in 2013 due to a lack of operating capital and was further halted in 2020 by U.S. sanctions on the Venezuelan oil sector. The U.S. Office of Foreign Asset Control (OFAC) granted a sanctions waiver for the project in January 2023, before further rollbacks of U.S. sanctions on the Venezuelan oil sector in October.
Trinidad and Tobago harbor substantial natural gas reserves and an LNG terminal. Natural gas, their third most substantial export product in 2021, accounted for $1.34 billion in exports that year, according to the Observatory of Economic Complexity.
Trinidad’s annual gas output has declined by nearly 50% since 2014 due to indefinite pauses in new exploration projects in shared waters with Venezuela.
The proposed exploration license aims to add 300 million cubic feet per day of natural gas production by late 2026. Trinidad’s natural gas processing capacity is at 4.2 billion cubic feet per day, accounting for plans to open a second LNG terminal in 2027, compared to the current production output of 2.7 billion cubic feet per day.
The proposed exploration license for the Dragon field could face further delays if the current political conditions in Venezuela persist. The Biden Administration’s sanctions relief is explicitly contingent on the Maduro government holding free and fair elections in 2024.
A U.S.-imposed deadline for Venezuelan authorities to confirm the candidacy of opposition leader Maria Corina Machado is on Nov. 30. On Oct. 30, Venezuela’s Supreme Justice Tribunal suspended the results of the opposition primary, which Machado won convincingly, and has yet to formally reinstate her candidacy.
Another potential risk to the Dragon field project is the upcoming vote by Venezuelans on Dec. 3, deciding whether to formally annex a portion of Guyana—a move widely expected to be condemned by international legal authorities.