Venezuela gas price beats home rate: Trinidad PM

The price that Trinidad and Tobago agreed to pay for Venezuelan natural gas is "extremely competitive" and lower in some cases than what state-owned NGC pays domestic producers, Trinidad's prime minister Keith Rowley said yesterday.

Rowley spoke a day after his government signed a long-awaited agreement with Venezuela to purchase 150mn cf/d of gas from Venezuelan state-owned PdV's offshore Dragon field.

Describing the deal as a "government-to government-arrangement," Trinidad's energy minister Franklin Khan said yesterday that the price is confidential. One part of the agreement sets out the commercial terms, while the other commits both governments to implement and complete the project, he said.

Neither government nor company officials have specified the gas price. A June 2018 attempt to sign the deal failed because PdV and NGC could not agree on the price. An executive in PdV's onshore Gas Anaco division told Argus that PdV had been seeking $5/mn Btu, while NGC was pressing for $2.50-$3.00/mn Btu, around the US Henry Hub benchmark. The executive, who is privately critical of the new agreement, said it is bad deal for Venezuela, because it deprives domestic industries such as steelmaking, petrochemicals and power generation of much-needed supply.

The key parties to the agreement are PdV, NGC and Shell whose facilities in Trinidad will receive the gas and tie it into the national distribution network managed by NGC.

Shell and NGC will construct a $150mn flowline of 17km that will deliver the gas across the maritime border to Shell's existing Hibiscus platform off northwestern Trinidad starting in 2020. Volumes are eventually slated to double to 300mn cf/d.

Shell did not reply to a request for comment.

According to Trinidad's energy ministry, the agreement was signed in Caracas by Rowley, Venezuelan president Nicolas Maduro, NGC chief executive Mark Loquan and Shell's vice president for commercial operations in South America and Africa Mounir Bouaziz.

For Trinidad, the Venezuelan gas is fundamental to ending nearly five years of supply curtailments to key gas-based industries, including Atlantic LNG in which Shell is a leading shareholder, along with BP. Both majors are Trinidad's top gas producers. The terms of their domestic gas supply agreements with NGC are not public.

Other gas-based industries affected by Trinidad's gas shortage are methanol and ammonia.

Trinidad's gas production has been falling since 2012, when it averaged 4.1 Bcf/d. Output began to rebound in November 2017 on the back of two BP-led projects that are delivering a combined 790mn cf/d. National gas production averaged 3.68 Bcf/d in January-June, up by 12.5pc year on year, according to energy ministry data.

For Venezuela which is in the throes of a severe economic crisis, the gas supply agreement will bring in desperately needed hard currency. Politically, the deal with Trinidad helps Maduro to counter international efforts to isolate his autocratic government. Venezuela's opposition and detractors inside PdV say the Trinidad agreement will be revoked after Maduro is swept from power, because it was struck without the approval of the opposition-controlled national assembly, which Maduro replaced with a rubber-stamp constituent assembly in 2017.

Trinidad's political opposition group UNC is also critical, contrasting the "glitz and glamour" of Rowley's trip to Venezuela with what it says are sparse details about the agreement. "This deal has immense local and international ramifications, and we are putting a great deal of experience and expertise behind it, so we must be given the details to ensure that this good deal for Trinidad and Tobago."

Dragon forms part of Venezuela's 14.7 trillion cf Mariscal Sucre complex, which also encompasses the Patao, Mejillones and Rio Caribe fields.

The pricing and template of the Dragon agreement will allow Trinidad and Venezuela to restart negotiations on sharing cross-border gas, Khan said.

Venezuela and Trinidad have been trying for eight years to reach an agreement to tap 10 Tcf of gas in the Chevron-operated Loran-Manatee field – the biggest of three cross-border deposits.

In his remarks yesterday, Rowley said the Dragon agreement will not be affected by US financial sanctions on PdV. The US will remain Trinidad's trading partner, just like Venezuela, and "Trinidad is a sovereign country and we make decisions based on the best interest of our people," he said.