Minister Eric Williams told journalists last week that the
negotiations between T&T and Venezuela on cross-border
gas were going very well and presumably this means
that some finality will be brought to the matter soon.
Two pairs of blocks are involved here: BGTT/ChevronTexacos
6d acreage and ChevronTexaco /Conoco Phillips block
2 over the border in Venezuelan waters and bpTTs Kapox
field and block 1 in Venezuela.
I suspect that 6d and 2 will be the first on which agreement
is reached, if only because the private sector partners are
so keen for it to happen.
The three exploratory wells ChevronTexaco, the operator on
the Venezuelan side, drilled in the Loran structure indicated
about five to seven trillion cubic feet (tcf) of potentially
recoverable gas reserves. The Manatee well on the Trinidad
side, also drilled by the US major though BGTT is technically
the operator, was expected to identify around 1.5 tcf. Being
cautious and taking, say, around six tcf as a more realistic
figure of potential gas reserves, this is a huge discovery
in any language.
The US$64,000 question, however, is: what to do with it?
How do you best commercialise such a large tranche of gas
sitting out there in the Atlantic ocean, hundreds of miles
from landfall in Venezuela, with no pipeline infrastructure
yet in place to carry it to any sort of market on the mainland?
The immediate answer is to bring it to Trinidad where the
Columbus Basin pipeline network, which now gets as far as
the Kapok field, can easily be extended into 6d and hook up
with a platform, preferably on the Trinidad side, which can
be utilised to tap into the gas reservoirs in Venezuelan territory.
What seems the obvious solution, however, does not find favour
with the Venezuelans, presumably for reasons of national pride
rather than economics.
We have seen evidence of this before, when BG, ChevronTexacos
original choice of partner in block 2, tried to wring a commitment
out of Pdvsa that cross-border gas would be monetised in Trinidad,
at least in the early years, but was turned down flat. BG
eventually withdrew, leaving an opening for ConocoPhillips.
Ali Moshiri, president of ChevronTexaco Latin America Upstream,
which includes Trinidad was, no doubt, echoing the Venezuelan
governments line when he said in Port-of-Spain a few
months ago that the current plan is for gas on the Venezuelan
side to be monetised in Venezuela and for the Trinidad gas
to come to Trinidad.
The hard fact, however, is that reserves of the size of Loran/Manatee
can really only be economically exploited via a large, high-priced
market opportunitynamely an LNG plant which uses around
500 mmcfd of gas. It would be pointless developing six tcf
of gas reserves to service, say, a methanol plant, which requires
only 60 mmcfd; even three methanol plants in the same location
would not cut it.
Why not an LNG plant in Venezuela itself, so the gas can find
a home there? Why not, indeed, but the reality is that Venezuela
has, so far, not succeeded in moving such a project forward.
You will recall that I said in my column last week that LNG
for Venezuela had first been mooted by Exxon in 197035
Our large South American neighbour is still no nearer the
realisation of that goal today than it was then. The Mariscal
Sucre LNG plant, of which my readers will be aware, has yet
to be finally signed off.
In any event, the current thinking is to feed that proposed
4.7 million tonne a year plant with gas from the four fields
north of the Paria peninsula where the plant is expected to
be located. These fields, which are all on the Venezuelan
side of the border, are said to contain around 14 tcf of gas
based on previous exploratory drilling in the area by Pdvsa.
Thats twice as much as Loran/Manatee gas reserves and,
whats more, they are sited much closer to the Guiria
industrial complex earmarked as the site of any LNG project.
My friend, Francisco Bello, formerly Pdvsas unitisation
manager for Plataforma Deltana where the cross-border blocks
are located, who was mistakenly sacked by Chavez and is now
Latin American and Caribbean regional manager for IHS Energy
in Houston, told me that Petrobras has now been brought into
the Venezuelan LNG mix and handed a mandate by Chavez/Pdvsa
to develop a gas supply from the Paria Norte fields.
The Brazilian petroleum giant has been given 10 months to
come up with a plan, the options for which seem severely restricted,
being confined, in effect, to LNG.
Even ConocoPhillipss gas discovery in the Corocoro field
in the Gulf of Paria West (GOPW) block, said to be about two
to three tcf would be more sensibly commercialised through
Venezuelan LNG than the far-away Loran/Manatee reserves.
Petrobrass insertion into the LNG mix could have the
effect of further disrupting the already erratic path of the
35-year-long effort to add LNG to the Venezuelan energy exporting
As soon as Royal Dutch Shell, which holds 30 per cent in the
Mariscal Sucre project and has been its main international
sponsor, heard about Petrobrass involvement, it sought
assurances from Pdvsa that it still had an integral role to
Bello says Shell was assured that it did though clearly some
damage must have been done to its confidence.
The other shareholders in the LNG plant, as distinct from
the development of the gas supply, are Pdvsa, with a majority
60 per cent share and Japans Mitsubishi (eight per cent),
with the remaining two per cent reserved for interested Venezuelan
Bellos view, and he is very knowledgeable about the
way Chavez and Pdvsa think in these matters, is that Pdvsa
will end up with 51 per cent of the plant (if, and when, it
goes ahead), yielding nine per cent to Petrobras, a share
that Venezuela once tried to interest Qatar in taking.
All of the above is manifestly not good news for Plataforma
Deltana gas, which can not be exploited by either side unless
both agree on a development plan.
With Plataforma Deltana reserves a distant third in the ranking
for supplying Venezuelan LNG, therefore, I strongly suggest
to Mr Moshiri (who, I believe reads this column on the Internet)
that he persuade Caracas to reconsider its desire for Loran
gas to be monetised in Venezuela and accept the unemotional
reality that the only near-term course of action is really
to allow it to come to Trinidad where pipelines and, more
importantly, a thriving LNG complex already exist and are
poised for further expansion.