Exclusive: U.S. issues license to Trinidad and Tobago to develop Venezuela offshore gas field

WASHINGTON/PORT OF SPAIN, Jan 24 (Reuters) – The Biden administration has granted Trinidad and Tobago a license to develop a major gas field in Venezuelan territorial waters, U.S. and Trinidad officials said on Tuesday, This marks a further easing of some sanctions in Venezuela.

The license, issued by the U.S. Treasury Department at Trinidad’s request to bolster energy security in the Caribbean, means the island nation can do business with Venezuela’s heavily sanctioned state oil company PDVSA related to the Dragon gas field.

Trinidad expects to receive 350 million cubic feet of gas from the Dragon field, Trinidad Prime Minister Keith Rowley told a news conference in Port of Spain.

He said he applied for the license in mid-2022 and was granted it after discussions with senior U.S. officials, including U.S. President Joe Biden, while also maintaining lines of communication with Venezuelan President Nicolas Maduro.

A senior U.S. official, speaking on condition of anonymity, told Reuters that “the Maduro regime will not be allowed to receive any cash payments from the project” and that all remaining U.S. sanctions will remain in place and continue.

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“This decision is the result of extensive diplomacy between Vice President Kamala Harris and Caribbean leaders, who have made it clear that granting this particular license will help ensure their energy security and reduce the region’s scrutiny, including that of Russia. Dependence on energy resources of other countries within the country,” the official said.

PDVSA has discovered 4.2 trillion cubic feet (TCF) of reserves in the Dragon field on the Venezuelan side of the maritime border with Trinidad. The project started production more than a decade ago, but was stalled by a lack of funding and partners, as well as sanctions.

Under U.S. sanctions, companies and governments must obtain authorization from the U.S. Treasury Department to do business with PDVSA. Since taking office in January 2021, the Biden administration has granted only a handful of such licenses, mostly on a strictly limited basis.

The permit issue follows a November round of negotiations between Maduro’s socialist government and the opposition aimed at finding a path to new elections. But Maduro, whose re-election in 2018 was widely derided as a sham by Western governments, has since refused to bring his negotiating team back to the negotiating table.

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With the opposition divided within and Latin America’s diplomatic isolation weakening, Maduro has strengthened, and it is unclear whether the new U.S. license will help lure him to a new round of talks in Mexico.

District energy needs come into focus

One of Washington’s main goals appears to be responding to U.S. partners in the Caribbean who have called for help with rising energy prices following Russia’s invasion of Ukraine last year.

“The vice president communicated to the prime minister that Treasury will take action to help meet the region’s long-term energy needs,” a statement from Harris’ office said, referring to a call with Raleigh on Tuesday.

The license allows PDVSA, Shell (SHEL.L) and Trinidad to jointly plan and develop the gas export project, Rowley said, adding that details would be finalized in the coming days. Under the terms of the two-year license, some of the gas produced must be exported to Jamaica and the Dominican Republic, he said.

Trinidad is Latin America’s largest exporter of liquefied natural gas (LNG), with an installed capacity to process 4.2 billion cubic feet per day (bcfd) into LNG, petrochemicals and electricity. But its gas production is just under 3 bcfd.

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Even if Washington accedes to Trinidad’s request, it could take years of investment and development to bring Venezuelan gas to Trinidad and facilitate LNG exports, experts said.

Also, Trinidad may struggle to reach a deal with Caracas without authorizing payments to Venezuela.

Cash-strapped PDVSA is expected to operate the Dragon project on the Venezuelan side. The US authorization could open the door to moving forward with another gas project with Trinidad at the Loran-Manatee field.

In November, the United States granted Chevron Corp (CVX.N) a six-month license to expand operations in Venezuela and ship oil to the United States.

The Chevron license is one of Washington’s first major steps toward easing sanctions to encourage Caracas to cooperate with opposition leaders.

Reporting by Matt Spetalnick in Washington, Marianna Parraga in Houston and Curtis Williams in Port of Spain, Editing by Rosalba O’Brien

Our Standards: The Thomson Reuters Trust Principles.

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