Energy analyst: Guyana-Venezuela tensions could delay Dragon deal

AN escalation of tensions between Guyana and Venezuela over the former's Essequibo region, could cause delays in the implementation of the Dragon gas deal between TT and Venezuela.

But Guyana-Venezuela tensions will not affect the delinking of the Loran/Manatee field which straddles the TT-Venezuela maritime border and TT's ability to access natural gas from Manatee.

Energy analyst Gregory McGuire expressed these views on Thursday.

He said delays to the Dragon deal's implementation could happen if Venezuela decided to seize the Essequibo region in violation of the International Court of Justice's (ICJ) ruling on December 1 that it should not.

"As the problem escalates, the US seems likely to reimpose sanctions which would of course heighten political risks of investing in that project."

The US$1 billion deal was signed between TT and Venezuela in August 2018. Those involved included energy giant Shell, Venezuela’s state oil company PDVSA, and the National Gas Company (NGC).

The Dragon deal will see TT developing the field, which is estimated to produce approximately 150 million standard cubic feet of gas a day. The gas will be imported through a billion-dollar pipeline to the Hibiscus platform off the northwest coast of TT. The platform is jointly owned by the Government, NGC and Shell.

The deal was left in limbo after the US imposed sanctions on Venezuela in 2019.

On January 24, the Prime Minister announced that the US had lifted sanctions to allow TT to extract gas from Venezuela. This waiver came after almost four years of lobbying led by Dr Rowley and supported by other Caricom leaders.

Rowley said the waiver came with stipulations, one being a two-year licence with an optimistic view of an extension and priority given to Caribbean countries, except Cuba.

In October, OFAC offered an extension of the licence it issued to TT to access natural gas from the Dragon gas field and the ability to pay for that gas in different ways.

Energy Minister Stuart Young announced the extension of the licence to October 31, 2025 at a news conference on October 17.

He said the extension also allows Government to pay for gas from the field in “fiat currency, as well as US dollars, as well as (Venezuelan bolivares), as well as via humanitarian measures.”

Young said the OFAC licence was a full green light for the government.

He said there had been several virtual meetings with the Venezuelan government and PDVSA “as we now get into the granular level of detail for the pricing of the development of the gas from Dragon."

McGuire saw no problem with the initiative to access gas from the Manatee field if Guyana-Venezuela tensions were to escalate.

"The Manatee field is in TT waters and this project will likely proceed in accordance with the unitisation agreement."

Speaking in the Senate on November 28, Young said Shell announced it had awarded a contract to McDermott to build the infrastructure to bring natural gas to TT from Manatee.

"That is a direct result of the work that we (Government) have done."

Young said that work involved successful negotiations with Venezuelan President Nicolas Maduro to delink Manatee from Loran, at a time when the US imposed sanctions against Venezuela.

He added, "That Manatee gas will come."

Young said in September he signed an agreement with his Venezuelan counterpart to explore the possibility of TT accessing natural gas from the Loran field, which lies in Venezuelan waters.

"For Venezuela, it is the first time that they are looking to export offshore gas in this type of arrangement."