3rd February 2023

The US Government has approved a request by Trinidad and Tobago to waive ongoing sanctions against Venezuela to allow for the development of the Dragon gas field.

“The US Government has today approved Trinidad and Tobago’s development of the Dragon Field via an OFAC Waiver from sanctions with specific terms to be finalised,” announced Trinidad Prime Minister Keith Rowley.

As reported in a previous issue, since the imposition of US sanctions against Venezuela, countries are required to seek permission from the US Department of Treasury to engage with Venezuelan state-run oil company Petróleos de Venezuela (PDVSA).

With estimated reserves of 4.2tn cubic feet contained in Venezuela’s Dragon field off the country’s eastern coast, Trinidad has been lobbying the US for access through the waiver since mid-2022.

“What this means is that the restrictions on the Dragon gas field development are now relieved and all relevant parties can progress the plans to result in natural gas from Venezuela,” said Rowley.

While the move is largely seen as a continued thawing of relations between the US and the Nicolas Maduro Government, there are questions as to what the former will get out of the deal.

“Today we reinforce the closeness, strength, and depth of our over 200 years of friendship and cooperation… We share Trinidad and Tobago’s urgency in contributing to global energy and food security. We have listened to the Government of the Republic of Trinidad and Tobago’s message that it has the capacity and willingness to ameliorate economic and humanitarian crises around the region and the world,” said US Ambassador to Trinidad and Tobago Candace Bond.

Prime Minister Rowley declined to comment on how the US will benefit from the deal. CNC3 reported that the US imports millions of dollars in urea ammonium nitrate fertilisers from Trinidad and Tobago and could benefit from clean fuel and fertilisers if the Dragon deal goes through. The paper also said that the licence has been granted for two years with the option to extend, despite the Rowley Administration’s request for a 10-year licence.

There are also questions as to the longevity of the waiver, given continued tensions and the fact that the US will go to the polls in 2024. Port of Spain acknowledged that there is a possibility that the US could reverse course or make changes to the sanctions against Venezuela which could impact the deal being negotiated. Rowley said that his government is optimistic, noting that so far there is nothing in the terms of the waiver that the country could not meet.

While the terms of the agreement have not been released in full, Reuters quoted a senior US official as saying that “the Maduro regime will not be permitted to receive any cash payments from this project” and that all other US sanctions would be unchanged and enforced. Analysts warn that this condition could create challenges for Trinidad to agree terms with Venezuela in the months ahead.

The Rowley Administration has said that they will explore payments to Venezuela for the gas in the form of humanitarian supplies like food and medicine in order to comply with the licence. “We have done that before. So, we buy the gas, and we pay for it in a variety of ways,” said Rowley at a press conference, adding that there are a lot of terms to be finalised between his country, Venezuela and Shell but said the highest hurdle has been crossed.

The licence, which was granted to Trinidad and Tobago, will allow the country, PDVSA and Shell to jointly plan and develop a gas-exporting project. Trinidad’s Energy Minister Stuart Young said the state-owned National Gas Company would be used as the vehicle for developing an agreement and processing any transactions.

It has been reported that another condition of the licence is that a portion of the resulting gas must be exported to Jamaica and the Dominican Republic. However, Jamaica’s Energy Minister Daryl Vaz said that neither his Ministry nor PetroJam, the country’s lone refinery had knowledge of the development. He said that efforts are ongoing through the Foreign Ministry to get up to speed.

While Venezuela’s PDVSA will still own the field, it is likely that Shell, which operates the neighbouring Hibiscus field in Trinidad will be the operator. “Whatever license we get from Venezuela to operate the field, Venezuela would be involved in that,” confirmed Prime Minister Rowley.

“From the perspective of opportunities, PDVSA does not have better options at this time to sell that gas under sanctions, even if it means relinquishing operations,” said Latin American energy expert at the Centre for Energy Studies at Rice University, Francisco Monaldi in an interview with Reuters. He noted that there would likely be conversations about how to compensate PDVSA for past exploration and infrastructure at the Dragon field which was last active nearly ten years ago.

Photo by Patrick Hendry

This is a lead article from Caribbean Insight, The Caribbean Council’s flagship fortnightly publication. From The Bahamas to French Guiana, each edition consists of country-by-country analysis of the leading news stories of consequence, distilling business and political developments across the Caribbean into a single must-read publication. Please follow the links on the right-hand side of this page to subscribe, or access a free trial.