IHS Global Insight Perspective | |
Significance | Venezuela and Trinidad and Tobago have signed a treaty that the Trinidadian minister of energy and energy affairs has described as the first reserve unitising agreement in the Western Hemisphere. |
Implications | The agreement is significant as the development of Venezuela's offshore Deltana platform will become more attractive if reserves on both sides of the maritime boundary are treated as a single unit. Under the accord 7.3 tcf of natural gas reserves thought to lie in the Loran-Manatee field were assigned to Venezuela and 2.7 tcf to Trinidad and Tobago. |
Outlook | The deal could pave the way for the joint development of the Loran/Manatee field, although it has yet to be seen whether it will bring Venezuela's frustrated ambitions to become an LNG exporter any closer. |
Venezuela and Trinidad and Tobago Sign Gas Deal
Trinidad and Tobago's minister of energy and energy affairs, Carolyn Seepersad-Bachan, and her Venezuelan counterpart, Rafael Ramírez, yesterday signed an agreement that will allow both countries to develop the natural gas reserves along their maritime border. Discussions between the two countries over the issue have been ongoing since 2003 when they signed a memorandum of understanding (MoU) (see Venezuela-Trinidad and Tobago: 13 August 2003: Venezuela and Trinidad Sign MOU to Jointly Develop Cross-Border Gas Reserves). A framework treaty on the unification of gas reserves that straddle the maritime border between their countries was signed in 2007 by Venezuela's president Hugo Chávez and the then prime minister of Trinidad and Tobago Patrick Manning (see Venezuela-Trinidad and Tobago: 22 March 2007: Trinidadian and Venezuelan Presidents Sign Agreement Unifying Gas Reserves). That treaty has since been ratified by the Venezuelan National Assembly and the latest deal is the first unifying reserves of a specific field as well as the final step before companies present in this area can be given the go-ahead to start production.
Under the new accord the two countries have agreed to split reserves in the Loran-Manatee field, with almost 75% of the 10 tcf of proven natural gas reserves thought to lie in the field assigned to Venezuela, and the remainder to Trinidad and Tobago (see Trinidad and Tobago: 19 February 2007: Trinidad and Tobago and Venezuela Agree to Division of Gas Reserves in Loran Field). The Loran field is in Block 2 in the Deltana platform in the Atlantic Ocean. Chevron was awarded a contract for the block by the Venezuelan government in 2003. The Venezuelan state oil company PDVSA currently has a 61% stake in the block and Chevron 39%. ConocoPhillips was formerly a participant in the project as well, but it sold its stake to PDVSA last year. Venezuela has already approved Chevron's development plan for Block 2 (see Venezuela: 9 April 2010: Venezuela Approves Development Plan for Chevron Gas Project; Electricity Emergency Extended). Meanwhile, Chevron operates an extension of the Loran field—the Manatee prospect in Block 6(d) in Trinidad and Tobago—in partnership with BG. According to a statement released by PDVSA the accord signed yesterday includes three fields, but no details were given with respect to the other fields. However, a report in the Trinidad Guardian said that the two countries will work toward reaching agreements on unifying the Dorado-Kapot and Cocuina Manakin fields, also straddling the maritime border.
Outlook and Implications
An agreement on unitising cross-border gas reserves is considered crucial for the development of Venezuela's offshore Deltana Platform, close to the country's maritime boundary with Trinidad and Tobago. The possibility of treating gas reservoirs that stretch across the border as a single unit would particularly appeal to the companies already operating fields in both Trinidadian and Venezuelan waters, as it would help reduce their costs as well as some of the legal uncertainties. However, the success of the joint development of this area will ultimately depend on what options are available for monetising future gas production.
The 2003 MoU anticipated the possibility of processing some Venezuelan gas at the Atlantic LNG plant in Trinidad and Tobago, while Venezuela built its own LNG facility. Trinidad's former prime minister Patrick Manning even suggested that gas produced from the Loran-Manatee field would form the basis for a fifth train at the Atlantic LNG plant. However, Trinidad's hopes that access to increased reserves could provide the springboard for future expansion of its downstream sector at a time when reserves in its own territorial waters are declining could be dashed if Venezuela decides to go it alone (see Trinidad and Tobago: 15 July 2010: Trinidad and Tobago's New Energy Minister to Review Policy As Gas Reserve Decline Continues). Indeed, the Venezuelan government's position on what to do with gas produced from Block 2 could also have a bearing not just on Trinidad but on Chevron's final investment decision. At the signing ceremony Ramírez said that Venezuela's reserves would go toward the Gran Mariscal Sucre Complex and ensure that Venezuela will have the gas for its internal development, electricity consumption, and for use by the petrochemical and transportation sectors. His comments appeared to suggest that once domestic demand is met there maybe the option to export gas, but he made no mention of the Cigma LNG project in which Chevron was to be a participant. Under this proposal gas from the Deltana platform is to supply a 4.7-million-t/y-capacity LNG train and for Chevron's investment to be worthwhile it will no doubt want assurances that a large share of its future production will still be allocated to the export market.