For Rennie Sarabjit, president of the Agricultural and Marketing Co-operative Society, securing a loan from commercial banks is almost impossible.
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Dragon gas field: what can go wrong?
The Dragon gas field deal signed last week between T&T and Venezuela seems to be technically legit, but it doesn’t add up ethically, politically or environmentally. Venezuela is the western hemisphere’s most volatile country. It has a history of expropriating foreign oil and gas assets, a collapsing economy and a sidelined opposition-controlled congress that may call into question the validity of any energy export contract when government changes hands in Venezuela. It is not wise to build T&T’s economic future on such loose foundations.
The Dragon gas field lies directly to the north of the Bocas del Dragon, or the Dragon’s Mouths, that separates Trinidad from Venezuela. It contains an estimated 12 to 13 trillion cubic feet of gas, which is in short supply in T&T. The plan is simple: build a 17 km pipeline to link Royal Dutch Shell’s existing pipeline infrastructure in the Dragon gas field with Trinidad’s Hibiscus gas field. It makes perfect sense: Trinidad gets the gas it needs and Venezuela the much-needed US dollars. What can go wrong?
The first objection must be the need to keep it in the ground. Climate change is a planetary threat that will affect a small island developing state like T&T especially hard. Scientists tell us that to keep global temperature rise below 1.5C we must keep untapped fossil fuels in the ground. We can’t ignore the signs of climate change anymore: 2014, 2015 and 2016 each set increasingly high temperature records, spring fell 26 days early in the northern hemisphere, warming oceans are killing the coral reefs and glaciers melt faster than ever which will result in higher sea levels.
The Dragon gas field is a part of the much larger Mariscal Sucre offshore gas project. For the historically curious, Mariscal Sucre refers to Grand Marshal Antonio Jose de Sucre, who was a Venezuelan independence leader. The Paria Peninsula that lies on the Venezuelan side of the Bocas del Dragon is part of Sucre state, named after the Mariscal.
The Mariscal Sucre Project has so far encountered spectacular failure. A March 15 article in the Wall Street Journal, Venezuela alleges fraud in $1.3 billion oil-rig lease, quotes Antero Alvarado, Caracas based analyst at consultancy GasEnergy Latin America as saying: “Mariscal Sucre is PdVSA’s (the Venezuelan state owned oil company) eternal white elephant.
“They sank billions on it with nothing to show for it.”
The Dragon gas field is however already producing. From what I understand, Shell has not yet committed to the details of the deal. The company must be wary as Venezuela’s socialist government has a long history of expropriating anything from rice mills, gold mines and cement factories to oil rigs and holdings in the Orinoco heavy crude belt worth US$30 billion. Size doesn’t matter. They’ve done it to Exxon, ConocoPhillips and Total. With such a track record, what guarantee does Shell have? They will be the ones to take the hit in the next expropriation drive. The T&T government must be wise enough to not assume any risk, if this project ever gets off the ground.
Venezuela suffers from industrial gas shortages too. It has the eighth largest gas reserves in the world but this has not resulted in major production. PdVSA has invested a lot on processing infrastructure and pipelines from Dragon. To justify sending all that gas across the border will be difficult politically.
From what I’m told, T&T’s government wants the gas to go towards the domestic downstream industries at controlled prices while the Venezuelans want their gas to go to Atlantic LNG where it will get the best price.
Presidential elections are due in Venezuela in 2018. The sidelined opposition controls congress and it’s unlikely that President Maduro will survive a democratic vote. Two scenarios emerge. Either the opposition takes over the presidency or Maduro suspends all pretense of democracy. If the government changes then that creates a possible problem as there may be a legal challenge to the exportation of gas. If democracy is totally suspended in 2018, then T&T’s economic fortunes will be tied to the political whims and survival of an undemocratic state.
The urgency with which the Dragon deal is pursued by T&T is worrisome. It is risky. Chasing it has the potential to cause more harm than good. A better economic growth strategy is to privatise faltering state-owned entities like Petrotrin, reduce waste from electricity generation, invest in solar and wind power, cut government spending and introduce reforms to the economy so that private business and innovation can thrive.