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Critical issues with cross-border gas deal

Thursday, April 5, 2018

The cross-border gas agreements now on the cusp of full implementation between T&T and Venezuela have been in the works for two decade or more. Over that time, the geo-political landscape in which both countries operate has changed significantly.

At the time of the signing of the memorandum of understanding for unitising cross-border gas reserves, different political administrations were in power and economic and social conditions in the two countries were much healthier.

Those changing circumstances may have altered the environment somewhat but the exploiting those energy reserves for the benefit of the two nations is now more important than ever.

Bear in mind that even in more ideal circumstances cross-border deals tend to be complex, requiring protracted, delicate negotiations. In addition to government-to-government transactions there are, particularly in the case of energy-related deals, the interests of the multinational and state-owned companies to be considered.

The fields that are the subject of the arrangements between T&T and Venezuela are already been developed, with various energy entities holding stakes for exploration and production.

Once properly executed, the arrangements will yield great economic benefits for both countries.

But there are many challenges still to be faced—many not directly related to oil and gas—which have to be properly navigated.

While both governments have demonstrated willingness to work together for he success of these cross-border deals, there are some political and economic situations brewing for some time that could put matters beyond their control.

In the decades that these crucial T&T-Venezuela energy negotiations, there have been three prime ministers and two different political administrations in power in T&T. Luckily, both recognised the value of the agreements, so there was some continuity in the talks.

For both countries, both heavily dependent on energy for economic survival, the decline in oil prices was devastating. T&T is still facing painful adjustments, although prices have stabilised because they are nowhere near the levels which previously yielded sustainability.

But the fallout has been more severe in Venezuela where political turmoil has exacerbated a precipitous decline, with out of control inflation, shortages of basic foods and medicines, almost daily protests and a mass exodus of citizens in search of safer places to live.

This is now the fourth year of a crippling recession in Venezuela and there seems to be no end in sight.

It doesn’t help that President Nicolas Maduro lacks that charm and charisma that helped his predecessor Hugo Chavez win over millions of Venezuelans to his concept of a Bolivarian utopia.

Sadly that ideal, which had so many swept up in the Chavista movement, died with Chavez. The various opposition forces have gained more traction.

In this atmosphere of uncertainty and instability, the cross-border gas talks are now in their critical final stages. A regime change, or a complete collapse into chaos in Venezuela would be disastrous for both nations.

The instability has already resulted in heightened activity; most of it illicit in and around the waters where cross-border assets and infrastructure are located.

In those narrow straits, piracy, smuggling and increased movement of migrants are causes for concern. This raises questions about security.

Apart from properly securing the offshore rigs, pipelines and storage facilities, the safety of personnel should be paramount.

Particular arrangements are needed for the subsea line that will take gas extracted from the cross-border fields to established facilities in Trinidad for commercialisation in LNG, as well as for domestic purposes.

Hopefully, these concerns are properly addressed in the agreements already signed. If not, time is of the essence.

The bottom line is that no aspect of an arrangement so vital for T&T’s floundering gas industry can be left to chance. A rock solid agreement is the only way forward given the volatile conditions all around.


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