Hi energyplay and KastelCo, can you see Vermillion ( uk.finance.yahoo.com owns majority share in Aventura uk.finance.yahoo.com ) in your Trinidad and Tobago dreams yet:0) cooking with gas, protected by the US, sucking up the gas that rightfully belongs to Venezuela, 'LNG' it, and selling it up north, to the Americanos ... "From the point of view of Trinidad and Tobago, the recent development paves the way to fantastic wealth. Natural gas prices in the United States are more than double the global average, and no country is better positioned to profit from that than Trinidad and Tobago"
Natural Gas, Venezuela and Trinidad
Aug 12, 2003
stratfor.biz
Summary
Venezuela has signed an energy agreement with neighboring Trinidad and Tobago that will allow petroleum companies to ship Venezuelan gas to the island of Trinidad for processing. These projects are likely to begin fairly soon, assuming that some of Venezuelan President Hugo Chavez's more creative ideas do not gum up the works.
Analysis
Following a brief weekend trip to Trinidad and Tobago by Venezuelan President Hugo Chavez, the two states formalized an agreement on Aug. 12 to treat the offshore hydrocarbon resources between the two states as a "common oil reservoir." Barring an unwelcome application of some of Chavez's more creative ideas to this vector of Venezuelan foreign policy, there is bound to be a surge in foreign investment into regional energy projects -- with the lion's share of the profits flowing into Trinidad and Tobago.
At the core of the Venezuelan/Trinidadian issue is a set of offshore natural gas deposits between the Venezuelan mainland and the islands of Trinidad and Tobago that hold an estimated 2.0 trillion cubic meters of natural gas, slightly more than half of which is on the Venezuelan side. Trinidad and Tobago, already having developed a number of fields in its own national maritime sector, has been pushing aggressively for some sort of joint agreement to develop the border fields. Meanwhile, Venezuela also has tried to attract foreign investment, but outsiders, leery of Chavez's nationalist sentiments and the country's political instability, have been willing to make only the most cosmetic of commitments.
Under the new deal, the border deposits will be treated as a singular project, allowing anyone tapping them to ship the extracted gas to either country for processing and re-export. This guarantees that most, if not all, of the gas exploited will flow to Trinidad instead of the South American mainland.
The reasoning for this is simple. Volatile Venezuelan politics aside, Venezuela has minimal natural gas processing capabilities and no ability to export liquefied natural gas (LNG).
Trinidad and Tobago, on the other hand, is the Western Hemisphere's second largest natural gas exporter. The tiny Caribbean country already has facilities to cool some 36 percent of its gas production into LNG for export. Its top customer is the United States: In 2002 Trinidadian LNG supplied two-thirds of the total U.S. imports of LNG. Trinidad and Tobago also has an advanced chemicals industry that uses natural gas as a feedstock. By the end of 2004, the country will boast the world's two largest methanol plans, and it is already the world's largest exporter of ammonia and methanol.
Unlike tumultuous -- and investment-hungry -- Venezuela, Trinidad and Tobago has proven the darling of international investors in the Latin American region. Terms are clear, contracts are honored, deadlines are met and royalties are paid. In contrast, Venezuelan state-oil company PDVSA has fired most of its managerial staff for political reasons and has not been able even to file its taxes or bill many of its customers.
If the Venezuelan-Trinidadian deal is implemented as stated, then Trinidad and Tobago will need to massively expand its LNG capacities, currently at 9 million metric tons per year and already in the process of being expanded to 12 million. Once regasified, that translates into 16.5 billion cubic meters of dry gas, or 2.5 percent of total U.S. consumption.
The question all this begs is why in the world would Chavez agree to such a thing? If foreign multinationals can simply pipe the gas to Trinidad for processing and export, then nearly all of the investment will go into Trinidadian facilities with only some drilling and pipeline construction in the Venezuelan sector. Aside from some admittedly substantial royalty checks, the Venezuelan mainland would receive nothing and the natural gas from PDVSA's longstanding Deltana Platform project -- which would have developed the Venezuelan side of the border -- would be transported to Trinidad. Sending Venezuelan natural gas to Trinidad for processing and export also effectively kills any hope for Venezuela to become an LNG exporter in its own right.
Stratfor sees two sets of reasoning for Chavez's action. First, Chavez is desperate. He realizes that PDVSA is Venezuela's cash cow and that he and his supporters have milked it into a hospital bed. The company's days as a leading global energy player are over, and its production capacity is withering week by week. Chavez knows that, even under the most positive circumstances, it would take years to rebuild the investor confidence that mismanagement and nationwide strikes have shattered.
By this logic, Chavez is being realistic about his country's prospects -- or lack thereof -- for attracting the multi-billion dollar investments it would take to move the Deltana Platform project, which is his country's best chance for reliable income, forward. Bringing in Trinidad and Tobago as a player might mean that the construction will not happen in Venezuela, but it will guarantee signing bonuses and steady income for Caracas as the project moves ahead. By this thinking Chavez may be desperate, but he is also being realistic.
Unfortunately, whether Chavez actually is being realistic is a call Stratfor does not feel it can make. That brings us to the second, and more likely, reasoning for the decision: the president's version of Bolavarianism (a hodgepodge of populism, nationalism, Marxist rhetoric, indigenous activism and poor-rich class warfare).
As one of Chavez's many policies for turning Bolivarian ideology into policy, he has put forward the idea of a pan-Latin American state-owned oil company that would include all of the oil-assets in Latin America. To this end, he has directed PDVSA to work out a number of cooperation agreements with the state oil companies of Ecuador, Colombia, Cuba, Brazil and, of course, Trinidad and Tobago.
The problem (well, one of the problems) of such an agglomeration is that no state willingly would surrender control of its energy resources to an outside player without receiving an extremely large amount of cash. This would be doubly the case if Chavez and Co. were part of the management team. During the five years Chavez has held the reins in Venezuela, he and his team have driven PDVSA, the largest company in Latin America, into the ground. The Venezuelan economy has lost 40 percent of its bulk over the same period.
The mixes in a large dollop of worry with Trinidadian officials' joy over the Aug. 12 deal. In the same series of statements in which Chavez extolled the benefits of the "common oil reservoir," he also clearly indicated that the deal was a step toward the formation of a multi-state oil firm. He even came up with a name for it ("Petrosud") and said, "This is not a far-fetched idea at all. It is entirely feasible and it can be done, but it is an idea that disturbs some people. It is time for us to return to the Bolivarian vision of unity among Latin American and Caribbean countries."
From the point of view of Trinidad and Tobago, the recent development paves the way to fantastic wealth. Natural gas prices in the United States are more than double the global average, and no country is better positioned to profit from that than Trinidad and Tobago. But this will happen only as long as the deal and Chavez's Bolivarian vision remain linked in no more than name. Should Caracas try to make the maritime border project contingent upon the creation of some sort of multinational conglomerate, then Trinidad and Tobago will have to go back to developing its own resources and cease sharing with the eccentric president just across the water. |
