Caught Between the Dragon & the Deep Blue Sea

US president Joe Biden signed more than 60 executive orders in his first 100 days of office, 24 of these were direct reversals of policies taken by his predecessor Donald Trump, by the end of April 2021. The position taken by the US government to approve T&T’s development of the Dragon Field via an OFAC waiver from sanction with specific terms to be finalized should be of concern since a US presidential election is due in November 2024. A change in the US presidency could impact the Dragon Field project completion since, at best by November 2024, it will be at the early construction phase given the timeline and the required front-end work to be done. The risk at that point would be lower to the main investor Shell, as opposed to having the infrastructure completed and sanctions reinstated if a new US president reverses the waiver.

In October 2022, Venezuelan opposition leader Juan Guaido called on the authorities to schedule a date for Venezuela’s next presidential election. The Maduro led government in Venezuela has already committed to the elections in either 2023 or 2024. This is a significant development since it would be the first election that the opposition will participate in since 2013. The election was boycotted by the opposition in 2018 when they cited a biased electoral system by the Maduro regime.

Should there be a change in the Venezuelan government, state owned PDVSA who is charged with executing the Dragon Field development from the supply side could very well upset the deal if there is a shift in the direction and policies at PDVSA.

With the piping infrastructure already in place from the Hibiscus platform on the North Coast of Trinidad to the Atlantic LNG facility in Point Fortin, and Shell being a shareholder in Atlantic LNG coupled with lack of gas supply to the Train 1 facility, it seems likely that the gas from the Dragon Field is headed to Point Fortin.

Considerations to the design of LNG and petrochemical plants are given according to the composition of the gas supply. The facilities in Trinidad were designed based on the predominantly low Sulphur content in the gas. Sulphur is an inherent poison to catalysts and there are provisions for certain levels of Sulphur, with engineering designs to facilitate its removal. It is well-known in the fraternity that gas coming out of Venezuela tends to have a higher Sulphur content, it is not yet known the chemical composition of the gas to be derived from the Dragon Field so this remains an unknown risk.  A key point to note is that the process of removing Sulphur from LNG is quite costly.

The Dragon deal places Trinidad & Tobago as the proverbial ‘middleman’ in the value chain. In my opinion, this does not auger well for the sustainability of the country. I also firmly believe that there isn’t any plan hinged on any revenue that would be realized from this venture which would provide sustainable development for Trinidad &Tobago, since an estimated dollar value has not been disclosed.

During the press conference, Prime Minister Dr. Keith Rowley harped on the point that energy (referring to fossil fuels) is required to ensure food security in the region. As of 2020 Jamaica was producing 11% of its energy derived from renewable sources. In 2019 Jamaica commissioned an LNG import facility which diversified its energy supply for the first time. By 2019 Barbados was generating 4% of its electricity from renewable sources with a goal to be fully utilizing renewable sources by 2030. Guyana and Suriname are the new beacons in the Caribbean for the energy sector. It is my opinion, based on the population and lifestyle coupled with absent government policy and lack of implementation where policy exists on energy security, if any country in the Caribbean region desperately requires an injection of energy support – it is undoubtedly Trinidad & Tobago.

The only direct foreign investment that is apparent from this project is the construction of the 17-kilometer pipeline from the Hibiscus platform to access gas from the field. Legal agreements for the new structure of Atlantic LNG where the National Gas Company has a 10% stake in Train 1, which is currently offline, is due to be completed in early 2023, according to the government. All of this means very little for the ordinary citizen of Trinidad & Tobago. The dependencies and circumstantial scenarios amount to lowered revenue for the government. This, in my opinion, will not independently solve the problem of energy nor food security.

The burning question remains whether it is a good idea to go forward with this project. Given the state of the economy and the lack of alternative or additional opportunities, we are caught between the dragon and the deep blue sea. I have little choice in supporting the efforts to bring the Dragon gas field to fruition as meagerly outlined by the government of Trinidad & Tobago.