The Evolution of the Dragon Gas Supply: Maduro, Venezuela, Russia and T&T
The government of T&T insisted repeatedly in the public domain that it’s seeking the supply of a daily volume of natural gas from Venezuela which Maduro and PDVSA has insisted will not be supplied fully by the Dragon field of the Mariscal Sucre Project situated offshore north of the Paria Peninsula, Sucre state, Venezuela. The T&T government then stated repeatedly that as the Patao and Mejillones fields of the Mariscal Sucre Project developed gas will be sold to T&T from these fields to satisfy the daily gas supply sought by the T&T government. But Maduro and PDVSA are yet to publicly affirm this position via a public supply agreement. Silence then is now the word on the said gas supply from Venezuela as the visit of Maduro to T&T to sign off on the supply deal is yet to materialise as at December 18, 2017. But Maduro has issued statements from Venezuela and on his foreign travels citing the gas supply deal with T&T as the prime example of Maduro’s embrace of the Caribbean and his new gas driven direction for Venezuela’s energy economy where gas exports via pipelines or as LNG is the new frontier. In these statements the daily gas supply designated for T&T is in line with the daily volume stated by the T&T government in public which means that gas from the Patao and Mejillones fields are in the agreement or what T&T desires will be drawn from the production of the Dragon field. What was clear on Maduro’s pronouncements on the gas supply deal with T&T both local and foreign is that T&T was now his bitch as he has us by the short and curly. In fact, the gas supply agreement with T&T was repeatedly cited by Maduro both local and foreign as the prime indicator of Venezuela’s intent on becoming a reliable gas supplier to its neighbours under the new gas economy. The T&T gas supply arrangement with Venezuela is cited by Maduro as an indicator of his legitimacy as President of Venezuela. Then there was word from Miraflores but we don’t know if that word was in fact accurate or fake news that Maduro had in fact signed off on the gas supply agreement but from the T&T government there is only silence.
On December 17, 2017 the play T&T was now caught in became clearer as Maduro met with Igor Sechin CEO of PJSC NK Rosneft in Venezuela where licences were authorised for Group Rosneft a subsidiary of NK Rosneft to explore and develop the non-associated gas reserves of the Patao and Mejillones fields of the Mariscal Sucre Project. Group Rosneft is authorised by these licences to be the operator of the project and to export all production of these fields as pipeline gas and/or LNG with Group Rosneft and PDVSA each holding 50% of the equity of the project. This event in Venezuela puts in train the Heads of Agreement signed with NK Rosneft in 2016. Russia in the house! T&T in its quest for gas from the Patao and Mejillones fields as of December 17, 2017 now has to dance with NK Rosneft and Putin.
The quest for gas from Venezuela has now sucked T&T into a geopolitical quagmire as gas from a Group Rosneft/PDVSA entity raises the issue of the impact of US sanctions on Russia and Venezuela and how it impacts the conduct of business with Rosneft and PDVSA by T&T entities. Can sanctions placed on Russia by the US be applied to products manufactured from gas sourced from the Rosneft/PDVSA entity in T&T exported to US markets? To step back from embracing Rosneft produced gas can have blow-back on the Dragon supply as the pipeline can slowly go dry. As a step back is a rejection of the business and political model of the gas supplier across the Gulf. Whilst dancing according to the rules of the gas supplier across the Gulf invites the push back from the hegemon in the room summed up in the person of the Donald. Possibly this is the aim of the Maduro dragon dance: to marginalise a geopolitical threat at the underbelly of Venezuela? Consider that in light of the oil play offshore Guyana at present.
T&T is between a rock and a very hard place as we have inadvertently entered a geopolitical game of thrones because of the failure of all ruling politicians of T&T to police the natural resources of T&T to ensure supply that serves the interests of T&T not that of the globalised transnationals. We failed miserably to learn from the Norwegian model. We are now a pawn in a geopolitical battle for regime survival vs regime change powerless to impact and determine the outcome of the game. A pawn to be played to the strategic benefit of the warring parties only. A geopolitical fiasco of our own making. The Dragon will dance on all of us in T&T!
Venezuela’s Position on the supply of Dragon gas to Trinidad and Tobago
In a news report dated March 16, 2017 on the PDVSA website in Spanish stated that the Framework Agreement for the supply of natural gas to T&T was signed in Caracas. This agreement has as its parameter the building, operation and maintenance of a pipeline connecting the Dragon field Venezuela to the Hibiscus field T&T some 30 kilometres long. The report stated that a special project vehicle constructed as a joint venture was signed between NGC of T&T and Shell international at the said meeting in Caracas. It was reported that Luis Prado signed for Shell. The report states that Minister Martinez of Venezuela indicated that Shell will construct the infrastructure necessary in T&T to receive the gas from Venezuela and that the Dragon gas deal involves the negotiation and finalisation of an agreement between three parties to the mutual benefit of all three: Venezuela, T&T and Shell. Minister Young of T&T in the report describes Shell as a “collaborating partner”.
A news report dated March 31, 2017 on the PDVSA website in Spanish reported that representatives of Shell and the NGC had visited Guiria to confirm that that the mechanical completion of the submarine infrastructure of the Dragon field was in fact realised. Necessary for completing the project to supply 300 million cubic feet of dry gas to T&T. The joint coordinating commission formed in T&T comprises Venezuela, NGC and Shell was reported by the news report.
A news report dated May 17, 2017 on the PDVSA website in Spanish reported that PDVSA and Shell held a meeting in Venezuela to discuss matters concerning the gas supply from Dragon to T&T with no member of the NGC and the T&T government mentioned as being present at this meeting in the news story. The president of PDVSA and the president and vice-president of PDVSA Gas were there along with Luis Prado president of Shell Venezuela and T&T and the Shell representative for the Americas and Africa but no mention of NGC representation. The news stated that the PDVSA and Shell officials discussed gas prices, gas volumes and the point of interconnection between the Dragon field gas supply and the pipeline to T&T. The vice-president of PDVSA indicated that they are presently reviewing the gas export base of the field, they have received proposals to complete the project and to increase production from the field to enable an increased gas supply to T&T. The meeting also discussed the joint venture Shell has with PDVSA, the Petroregional del Lago project which is a land based oil producing joint venture project.
Shell has then irons in the fire with the prime agenda being the Petroregional del Lago project as Venezuela needs to raise oil production and PDVSA simply doesn’t have the cash to spend to bring about this increase. On del Lago Shell then announces its intention to invest USD 400 million in the venture and its now Maduro’s sweet heart on both sides of the border. What is Shell’s locus standi in this Dragon gas supply project? Is Shell negotiating gas prices and volumes with PDVSA in our absence simply because Venezuela is selling the gas to Shell who is then selling it to the NGC? Is Shell building the necessary infrastructure in T&T waters in keeping with the task of being the vendor for Dragon gas to the NGC? The news report of March 16, 2017 stated that gas from Dragon will be going to the LNG plant in T&T. The power relations of the geopolitics of the gas supply between Venezuela and T&T are not in T&T’s favour unlike the deal with Aruba and the key to these power relations is Venezuela’s gambit. What does Venezuela intend to achieve in its favour that redounds to the benefit of Maduro with this gas supply deal is the primary question that must be answered realistically. When PDVSA sits in a room with Shell and negotiates only with Shell it’s also negotiating with the largest single shareholder of Atlantic and the Dragon field is a very small field in the arsenal of offshore gas plays of Venezuela. The people of T&T remain in the dark on this reality as we did with the deal negotiated for trains 1 to 3 at Atlantic LNG and as always we’re left holding the dirty end of the stick as the gas economy has become unstuck.
Is the Dragon dancing for T&T or another case of being played by Venezuela?
On December 5, 2016 the gas supply deal from Venezuela to Trinidad was signed in Caracas and they danced with the instance of African Venezuelan culture presented at the signing which led me to ask if they dance and what they dance when the Chinese and Russians are in town signing huge deals? From the outset what is potently apparent is that T&T has hitched its wagon to the Maduro dynasty because of the collapse of the strategy embarked on by all ruling politicians in T&T since the arrival of Amoco. They have all failed T&T singularly and we will now pay the price as the Dragon is dancing upon us.
The Mariscal Sucre project is the brain child of deceased Hugo Chavez where four offshore gas fields: Dragon, Patao, Mejillones and Rio Caribe located to the north of the Paria Peninsula will be developed and the gas piped into an industrial complex at Guiria, Sucre state including a LNG train. To-date only the Dragon field is producing gas, it is 100% operated by PDVSA and the gas is feed into the national gas network. In February 2016 PDVSA and Rosneft of Russia announced that they had signed off on an agreement to develop Patao and Mejillones and possibly Rio Caribe but what is to be done with the gas produced was not placed in the public domain and no work on these fields have started to date by the said joint venture. The question remains: why will a foreign investor invest valuable USD in gas production in Venezuela to sell what it produces in Venezuela when Venezuela is BROKE and PDVSA does not have the money to fund the project on its own? Why invest in a LNG train in Venezuela with the US ramping up shale gas production which is bloating their natural gas stocks in storage and there is a world LNG surplus? Then there is the potent example of Repsol and Eni and the Perla field where with the discovery of conservatively 17 trillion cubic feet of gas you are told you must first supply the Venezuelan gas market at a stated volume per day and in 2016 you have almost covered your daily obligation but what happens next? The gas supply market has so changed in Venezuela in 2016 Venezuela is exporting gas to Colombia a drastic change from begging for gas from Colombia when you are obligated under an agreement to supply gas to Colombia. The closed Colombia-Venezuela border was suddenly opened the truck loads of food started coming into Venezuela and the Venezuelans cross over into Colombia looking for food to purchase with Bolivars that are accepted in Colombia now there is talk of formal exchange convertibility. By comparison what is happening with Maduro’s USD 50 million revolving fund for purchases in T&T? It went Colombia! So the food flowed then the Venezuela gas flowed to Colombia along with all the illicit tankers of gasoline, LPG etc. back to business gangstas rule!
An article in Oil & Gas Journal states that T&T wants 500 million scf/d of gas from Mariscal Sucre but since is only Dragon presently in production only 100 million scf/d will be sold to T&T and the rest when the other fields come on stream. T&T has then to wait on Rosneft time to now kiss up to Putin join the line behind Trump! We are now looking for 500 million scf/d with daily demand in T&T in excess of 3,000 m scf/d. No matter the Maduro gambit the present government has to dance with BP and grapple with the demands BP is making since the last government. Kamla’s strategy of denial and do nothing aren’t working whilst we are now Maduro’s bitch but I wonder what he wants from T&T? And a future Putin bitch then a XI bitch as we might have to go to Beijing to beg for their help with Maduro and whoever follows and with Putin. This is where the politics of race put us!
My article titled “Nicolas Maduro, Venezuela and the end of the Chavez experiment” has been posted to my website. Maduro has made the rounds of the Caribbean island chain sharing out promises as in the case of T&T and the members of Petrocaribe all in one week. At the Petrocaribe council of Ministers held in Caracas last week first gas from the Loran field via T&T was promised to the Caribbean member of Petrocaribe then it was the creation of a gas pipeline from Venezuela to these member islands. Maduro is playing out of Chavez’s playbook drawn up for a match long ended as he is seeking to preempt an imperial agenda by being everything to everybody in an attempt to hopefully distract from harsh realities at home worsened by his unannounced and unexplained austerity medicine applied to Venezuela as Venezuelans labour under Maduro’s austerity that he terms the “economic war”. Maduro is playing survival politics hoping that 2017 will be better but the three card shuffle now you see it now you don’t others are willing to play with Maduro in the quest for gas is a game which potently indicates the unfavourable news received in London town during the visit. Added to this are the news reports that Shell is seeking to sell USD 30 billion in assets including its assets in T&T to pay down on the huge debt they now carry after gulping BG. Maduro is in play, T&T is in play and Shell is in play and can play T&T in the gas play. That is what you call symptoms of a failed paradigm. The article on Maduro is at:
Those who don’t earn foreign exchange/hard currency in T&T insist they are entitled to spend it as if it is their personal property. In a social order where the significant earners of hard currency are energy companies and the government collects its share of this hard currency through taxes and rents on the energy companies the talking heads bump their gums to talk about diversification without spelling out if these non-energy pursuits will at least earn the for-ex they consume. There is a vast difference between creating jobs utilising for-ex you don’t earn and cannot earn and creating jobs whilst being self-sufficient in for-ex needs and paying taxes and rents to the government in for-ex. The local manufacturers are a long way from this state of operation and they must learn from the Jamaican enterprises that are now globalised and self-sufficient in for-ex consumption such as Jamaica Broilers Group. The Caricom market must now be replaced by North Atlantic markets then you can speak of manufacturers before that then you must speak of pampered assemblers living off subsidised inputs and a captive market closed by tariff and non-tariff barriers. Learn from the strategic plan of GraceKennedy. But the abiding reality is that the for-ex collected by the state overwhelmingly comes from the LNG exporters and the world LNG markets are in glut which is expected to deepen in the next five years as new LNG plants come alive in the next five years. It is estimated that by 2021 25% of global LNG production will be homeless as it seeks buyers with the impact on LNG prices being obvious. The May 2016 Asia LNG spot price is USD 4.20 per mmbtu and for June 2016 USD 4.00 per mmbtu. Of the 17 LNG cargoes purchased by YPF of Argentina for mid-year delivery LNG traders dominated the suppliers to the detriment of energy companies because LNG producers are selling homeless production to traders for the cash flow rather than hold stock and seek out buyers. In six cargoes sold to CFE of Mexico traders won 3 of 6 supply contracts. The word among traders is that contracts for June and July shipment were all sold for below USD 4.00 per mmbtu. This reality means that the government of T&T cannot defend a TTD exchange rate below TT7.00 to USD 1.00 without running down the for-ex reserves to dangerous levels and 9 billion USD is no nest egg given the rate entitled citizens love to blow it at. Learn from the experience of other energy economies that the measures announced simply do not protect the reserves in a LNG market reality we are faced with in the next five years and failure to protect is not an option as Haiti beckons.
The present government of T&T has placed in the public domain the nature of the gas supply crisis and the decision of the Maduro government of Venezuela to process Venezuelan gas of the Loran field in Atlantic into LNG. The opposition has long insisted that Loran-Manatee gas can fill the gas supply shortfall in T&T. But there is a deliberate confluence of opposing realities in the discourse for there is T&T’s share of the cross border gas and there is Venezuela’s share and the opposition signed on the dotted line to grant operatorship of the cross-border field to Venezuela. T&T cannot realise its share of the gas save and until Venezuela develops the field and begins production and to do this requires a series of agreements be signed between PDVSA the agent of the Venezuelan state and Chevron as none presently exist. Agreements for the Loran field must then abide by the Organic Hydrocarbon Law and be impacted by the internal politics of the PSUV and the Great Patriotic Pole. Under the hydrocarbon law Venezuela’s share of the gas of the Loran-Manatee field belongs to Venezuela to utilise to the benefit of all Venezuelans. If it is then legal under the law to send Venezuelan gas to Atlantic in T&T to process into LNG then that LNG belongs to Venezuela and an agreement has to be worked out how Chevron is going to share in the value chain. It is illegal to hand all of the LNG to Chevron for Chevron to dispose of as the agent of PDVSA. That is why the original project conceptualisation called for LNG trains in Sucre state built by PDVSA. Why then has the Maduro government at this time played this card? The answer is called Exxon Mobil and the Essequibo border dispute. Note the full court press of Venezuela in the PetroCaribe member states. What must be noted is that as of today I have seen no announcement of the Maduro government’s decision to pipe Venezuelan gas to T&T in the Venezuelan media. What they will say is that they are researching the possibility of doing so and they have in fact said so. The feasibility is yet to be confirmed. Another play unleashed. October 27, 2015 The private media in T&T continues to play mind games given the gas supply crisis that has been going on since 2010 and only now given the urgency it deserves. On the 22/9/2015 an article titled: “Venezuela y Trinidad y Tobago potencian relacion enegetica” appeared on the Spanish language site of PDVSA. In this article Minister Del Pino is reported as indicating the possibility of gas from Venezuela’s Perla field being piped to Atlantic for processing into LNG. The article did not report Minister Del Pino or anyone of the Venezuelan government as saying that gas from Loran-Manatee will be sent to Atlantic and no such statement has appeared on PDVSA’s website since. Given the fact that PDVSA is the operator of the Loran field it is expected that said announcement will come from PDVSA when there is a done deal to announce. PDVSA’s silence is instructive. On the 26/10/2015 and article titled: “Venezuela y Trinidad y Tobago iniciaran operacional conjuntas en campos transfronterizos costa afuera” where the classic language of shuffle was used to say very little. What is T&T giving Venezuela in return? What does T&T have that Venezuela wants right now? On the 27/10/2015 the Spanish language website of PDVSA carried an article titled: “Ministro Del Pino; ‘ Para la incorporacion de barriles se requiere estabilidad de precio’ in which Minister Del Pino who is also in charge of PDVSA was reported as stating that the world price of gas has to be raised in order for the industry to be sustainable. Del Pino was in fact stating the position of Commander Hugo Chavez on exporting Venezuela’s gas as LNG at such low prices as being a waste of the wasting resource of Venezuela. Del Pino stated that daily production of the Perla field was 400 million cubic feet of gas and that under the unitisation agreement of Loran-Manatee 80% of the gas will be sent to Guiria in Sucre state, Venezuela. That is Venezuela’s share of the gas. Del Pino is then maintaining the Chavista line on LNG and the exploitation of Venezuela’s share of Loran-Manatee gas. Those who delude themselves into believing that the Maduro government is homogeneously monolithic will be played. Also note that the present government of Guyana has played itself into a corner like little Jack Horner.
Cheniere Energy the creator of the Sabine Pass LNG manufacturing complex in the US is in the Dominican Republic to finalise plans to place 1 million tonnes of shale gas LNG in the DR per annum commencing the 4th quarter 2015 from its Trains 1 and 2. BG Group and Gas Natural Fenosa amongst other contracted buyers have taken up 16 million tonnes of the 18 million tonnes of the projected annual production of Trains 1 to 4 at Sabine Pass. Apparently Cheniere is placing LNG production that it did not contract out to buyers and the DR is marked as a market for US produced Sabine Pass LNG. A February 20, 2015 report in the Dominican Today stated that 1 million tonnes per annum of US LNG will sell for RD$ 8.00 per MMbtu plus terminal fee. As at February 20, 2015 the exchange rate was 1 USD equals RD$ 44.55 do the math to get the US price per MMbtu. Given the accuracy of the online news report it is now apparent that LNG will become a geo-political instrument in the Caribbean in 2015 and given the model adopted in T&T governing the monetisation of our gas reserves we are by-standers to the affair whilst our national interests are potently assailed. This scenario in the DR is not the entire reality as Crowley is moving to supply US LNG into Puerto Rico for delivery to the end users via new technologies pioneered in the US. Cheniere and Crowley are then moving to dominate specific segments of the market. Cheniere has entered the DR LNG market where T&T LNG is already sold to an electricity generator and seized market share that should have gone to T&T producers whilst Crowley is moving to supply users previously of no interest to LNG producers. The new energy order is then apparent and in this order T&T is trapped in a time warp created by politicians and compliant technocrats. For the week ending February 20, 2015 the LNG price in Asia remained at USD 6.70 per MMbtu where thin trading was the norm influenced by the New Year Holiday. Remember I posted earlier the cost per MMbtu for transporting T&T LNG to Asia. It was reported that LNG from T&T has no choice now but to chase the European premium but so are the other producers as Qatar floods this market with product. The lesson in this for T&T is that the expected revenues from Train 4 will reflect this Asian reality as double digit prices per MMbtu for LNG in Asia is now a memory. This reality will become clear as the 1st quarter winds down and the revenue take is added up. But the contraction in the retail economy is clear since Christmas 2014. Political propaganda cannot trump deprivation.