01 November 2024

A recent ruling by Trinidad and Tobago’s Supreme Court has granted US energy giant ConocoPhillips the authority to seize payments directed to Venezuela’s state-owned oil company, PDVSA from the cross-border Dragon Gas project.

The court’s decision to uphold earlier rulings marks a critical milestone in ConocoPhillips’ long-standing dispute with Venezuela over expropriated assets.

The ruling, delivered in late September, allows ConocoPhillips to pursue its US$1.3bn claim against PDVSA by appointing a receiver over funds owed to the Venezuelan company through the Dragon Gas field venture, meaning that PDVSA’s revenue under project could now be redirected to ConocoPhillips in partial settlement of an arbitration award.

“The order gives to the claimant a green light to be able to enforce the judgment in Trinidad if they can establish there are assets held by the defendants or there is money which is owed to the defendant by entities in Trinidad and Tobago,” said Judge Frank Seepersad, noting that PDVSA’s past actions—such as relocating its European headquarters from Lisbon to Moscow—raise concerns about potential asset transfers out of reach of creditors.

Despite the ruling’s implications, the Trinidadian government appears undeterred in its commitment to the Dragon Gas project. Earlier, Energy Minister Stuart Young addressed concerns by affirming that the ruling would not derail Trinidad and Tobago’s gas dealings with Venezuela, emphasising the project’s importance to the energy sector.

“The recognition of the International Chamber of Commerce (ICC) award dated 24 April 2018, does not affect the 30-year Exploration and Production Licence for the Dragon gas field which was granted to Trinidad and Tobago (Shell and NGC) in December 2023,” Young stated, further criticising opposition claims that the project’s viability is in jeopardy.

Francisco Monaldi, Director of the Latin American Energy Programme at Rice University’s Baker Institute for Public Policy, also downplayed the impact of the ruling on the Trinidad-Venezuela energy relationship, characterising it as largely strategic leverage for ConocoPhillips in its negotiations with PDVSA.

“It is mostly about a negotiation between ConocoPhillips and PDVSA. They have done this in the past in Curacao and other Dutch Caribbean islands and basically this allows ConocoPhillips to have leverage in the negotiations of payments with PDVSA that has been ongoing,” Monaldi observed.

According to him, the payments to PDVSA from the Dragon field are minimal at this stage, estimated at around US$1mn monthly for social contributions and taxes. The bulk of the project’s revenue generation is expected further down the line, which means immediate disruptions are unlikely.

On the Venezuelan side, officials have expressed optimism about the ongoing development of the Dragon Gas field despite the ruling. Vice President and Energy Minister, Delcy Rodríguez, hailed the arrival of the survey vessel Doña José II to commence technical assessments at the Dragon field.

However, some energy experts remain sceptical about Venezuela’s willingness to move forward with the Dragon Gas project if payments are jeopardised. Anthony Gonzales, former director of international relations at the University of the West Indies, questioned PDVSA’s motivation to continue if payments are not guaranteed.

“I am not clear on the Court’s decision and whether it will apply in this case where Shell, a foreign company, is to make the final investment decision to invest in developing and exploring Venezuela’s Dragon gas. Shell has to pay either PDVSA or the Venezuelan government for that gas,” argued Gonzales, highlighting that there is still some uncertainty about the ruling.

ConocoPhillips’ remains committed to reclaiming billions in expropriated assets. Since Venezuela nationalised ConocoPhillips’ oil projects in 2007, the company has actively pursued compensation through multiple arbitration awards, totalling over US$10bn in damages. The company’s strategy has included various legal actions across multiple jurisdictions, including moves to seize assets in the Caribbean and a high-profile bid to auction shares in PDVSA’s US-based subsidiary, Citgo, to recoup its losses.

The outcome of this case could have lasting implications on how energy companies approach Venezuela and other countries with complex legal and economic landscapes. For now, the leaders of Trinidad and Tobago and Venezuela remain focused on advancing the Dragon Gas project, recognising its potential to fortify the region’s energy security amidst an ever-evolving geopolitical context.