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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.

On December 19, 2017 President Maduro in a public address spoke of his intention to deal with the smuggling of goods especially subsidised goods from Venezuela to Aruba, Curacao and Bonaire thereby triggering shortages of these goods in Venezuela. Maduro indicated his consideration of closing the Venezuelan border to these islands. This geopolitical play is especially noteworthy given the full court press the Maduro regime has utilised on these three islands to increase Venezuelan influence and their economic dependence on Venezuela. With Curacao it’s the issue of continued PDVSA involvement with the Isla refinery. Aruba has been offered a supply of pipeline gas from Venezuela and PDVSA’s through its subsidiary CITGO involvement with the San Nicolas refinery which is supposed to be a gas fired refinery using Venezuelan gas. PDVSA owns the 10-million-barrel oil storage facility Bonaire Oil terminal (BOPEC) on Bonaire and is embroiled in an issue of the maintenance of the facility with the government. This is then a lesson to T&T on the willingness to use economic links in the pursuit of geopolitical agendas in the game of thrones. This willingness is highlighted in the naming of the Colombian cities of Maicao which borders with Zulia state and Cucuta which borders with Táchira state. Does this signal another closure of the Venezuelan border with Colombia?

What is clear is Rosneft as Novatek is impacted by US sanctions which deny access to US technology, project funding and investment by US companies in projects to exploit the energy resources of Russia in its Arctic, offshore and shale plays. Rosneft is primarily an oil producer and these US sanctions combined with EU sanctions have negatively impacted their efforts in Russia. Rosneft is then devising and applying a sanctions busting strategy one aspect of which is its investment in oil production in Venezuela seen in its USD 6 Billion advance payment in August 2017 for oil to be delivered from 2017 to 2019 made to the Maduro government and its gas gambit in the Mariscal Sucre project which in turn drives a Russian geopolitical strategy of engagement with the US. Rosneft’s involvement in Mariscal Sucre entails the raising of gas to feed at minimum a single LNG train in Sucre state for export. The formula utilised at Yamal LNG in the Russian Arctic can very well be replicated in Venezuela with Chinese financing and the involvement of a western energy company. Geopolitically this development sends a message to the US as the Russians insist that the sanctions applied in 2014 and thereafter upon the Russian energy sector were designed to destroy the Yamal LNG project. The Russians and Putin will then send the message of their operational presence in the west via at least one LNG train facilitating Rosneft exports of LNG from Venezuela. This strategic intent is further illustrated by their energy driven approach to the Cuban government at present where Rosneft has offered to contribute to the supply of oil to Cuba and to invest in the Camilo Cienfuegos refinery recently abandoned by Venezuela. A geopolitical gambit that T&T will now be impacted by in its quest for a pipeline gas supply from the Mariscal Sucre project

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!

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