Venezuela, Trinidad and Tobago sign gas supply deal

Venezuela on Dec. 5 reportedly will sign an agreement with neighboring Trinidad and Tobago to supply the Caribbean twin-island nation with as much as 500 MMcfd of natural gas from its fields in the Mariscal Sucre region.

Trinidad and Tobago Prime Minister Keith Rowley said he will be travelling to Caracas to sign the agreement saying it was important to the island’s continued presence as a powerhouse in the methanol and ammonia global markets.

“Some of the plants on the Point Lisas industrial estate have been operating at between 20-30% below capacity and they need to operate above 90% to be profitable…. Therefore we need to ensure that they have the natural gas necessary.”

Trinidad and Tobago is the largest exporter of methanol in the world as well as the largest exporter of ammonia to the US. It is also the sixth-largest global exporter of LNG. However, it has over the last 4 years been plagued by gas curtailments because of the slow production of reserves.

OGJ has learned that the start of gas production from Dragon field will only allow for 100 MMscfd to be supplied to Trinidad and Tobago because Venezuela needs the additional gas for electric power generation.

Agreement details

The agreement, however, calls for gas from Patao, Mejillones, and Rio Caribe fields when they are developed. The Mariscal Sucre project includes four gas fields: Dragon, Patao, Mejillones, and Rio Caribe. The Mariscal Sucre Dragon field is about 25 miles north of the Paria peninsula, Sucre state, in 328-427 ft of water.

The agreement, sources say, will lead to a joint pipeline project between Petroleos de Venezuela SA (PDVSA) and Trinidad and Tobago’s National Gas Co. (NGC). There is no final decision of the route, but it is going to either go to the north of Trinidad and tie into Royal Dutch Shell PLC’s Hibiscus platform in the North Coast Marine Area or through the south to NGC’s pipelines at the Point Lisas Estate.

This agreement is separate from the cross-border agreement the two countries have to develop the 10-tcf Loran Manatee gas field, which they share.

Loran Manatee field is expected to start gas flow in 2022. Most of that gas will be sent to Trinidad and Tobago to be produced. OGJ has been told that while the governments of Trinidad and Tobago and Venezuela are pushing for the first by 2020, negotiators from Shell and PDVSA have said it is unlikely to occur.

Gas not for export

Multiple sources also tell OGJ that there is almost certainty that when the gas comes it will go to fueling domestic users and not go to LNG export.

One source told OGJ, “While LNG is certainly an option, thus far LNG has not been a real discussion point. What I will say is that the companies have said they want to sell the gas to the market that they will get the best return on their investment and when you look at the reality often that is the local market and furthermore, the cost of further LNG expansion may negate against it.”

A development plan for the production of gas from the Loran-Manatee also is expected to be presented to the governments of Venezuela and Trinidad and Tobago by the second quarter of 2017.

Shell and PDVSA have been working with the teams from the two countries to ensure that when they produce the joint development plan, it is closely aligned with the thinking and goals of the two governments. However even when the development plan is presented, there will still be gaps until the front-end engineering and design study is conducted.

Recently teams from the companies and the two governments met for 3 days in Port of Spain negotiating a number of agreements.

OGJ has been told that the unitization and unit operating agreement (UUOA) has been completed and the Venezuelans are now awaiting a response from Trinidad and Tobago. The island nation is likely to respond by the end of the month after receiving comments from the lawyers at the Office of the Attorney General and the technocrats at the Ministry of Foreign Affairs.

It is likely both countries will sign off on the UUOA by first-quarter 2017 and once the UUOA is complete it automatically triggers a 90-day limit at which time they will have to put forward a development plan for the two fields.

Negotiations between Venezuela and Trinidad and Tobago have continued for the last 13 years starting in 2003 with the signing of a memorandum followed by 5 years of technical studies of several reservoirs to determine if they crossed and to what extent they crossed the border.

A framework treaty was then signed and a unit operator selected. The consortium is now working on a UUOA after which a development plan will follow and after then approvals will have to be sought and the financing determined.

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