The Great Oil Grab
By Daurius Figueira
Petroleumworld.com
28 October, 2003In November 2001 President Hugo Chavez-Frias of Venezuela passed fifty laws, one of which was the Hydro Carbon Law. These fifty laws were the catalyst for the launch of the covert/ overt strategy to remove President Higo Chavez-Frias from state power by any means necessary. The nature and focus of the Hydro Carbon Law would pit the elite, which managed the state owned energy monopoly of Venezuela, Petroleos de Venezuela or PDVSA against the regime of Chavez-Frias.
Whilst the Hydro Carbon Law envisaged foreign investment in the Venezuelan energy sector, the law raised the cost of such investment by raising royalties to 30% from 16.7% and compulsory shareholding of PDVSA in all such energy projects ranging from 1% to 35%. The elite of PDVSA revolted against the vision of the Hydro Carbon Law, which insisted that the people of Venezuela must reap a greater return from the exploitation of its wasting energy assets.
It was therefore apparent that the ruling elite of PDVSA, who was not supportive of the process of change initiated by President Chavez- Frias, was at the leading edge of the covert/ overt strategy to remove Chavez-Frias by any means necessary. By December 10th 2001 the first work stoppage against the President's November 2001 Laws took place. On April 8th, 2002 the trade union body CTV and the business association Federcamaras declared a second general strike and a lockout respectively against the politicisation of PDVSA. The general strike and lockout culminated in a march through the streets of Caracas on the 11th April 2002, which was the precursor, the objective condition created for the launch of the coup d'etat against President Chavez-Frias.
The coup d'etat against Chavez-Frias launched on the 11th April 2002 was defeated by the 14th April 2002 with the return of Chavez- Frias to office once again wielding state power as the duly elected President of the Bolivarian Republic of Venezuela.
The return of Chavez-Frias to state power meant in fact that the PDVSA card had now to be played. The failure of the coup d'etat resulted in the choice of strategy to bring oil production to a standstill thereby previously harming the Venezuelan economy with the express hope of fomenting societal collapse and rebellion against the Chavez-Frias presidency since oil revenue accounts for one-third of Venezuela's gross domestic product, one half of government revenue and 80% of export receipts. On the 10th October 2002, the anti- Chavez-Frias forces took to the streets of Caracas in their numbers. Also on October 10th, 2002 CTV and the Federcamaras carded a general strike and lockout for October 21st, 2002. On October 22nd 2002 military officers, mutineers, came out in open public rebellion against Chavez-Frias and occupied Plaza Altamira, a square in Caracas, clearly seeking to create a focal point for the rebellion.
The overt strategy to remove Chavez-Frias from October 2002 involved the use of various international institutions to force Chavez-Frias to call general elections immediately, or to hold a revocatory referendum or to simply have Chavez-Frias resign and quit Venezuela. On November 4th, 2002 the covert strategy involved the use of public protest to demand a revocatory referendum in 2002, which was constitutionally due in August 2003. By the week of November 11th 2002, the response of the government was executed via the militarisation of Caracas and on the 16th November 2002, the Metropolitan Police of Caracas was placed under direct Presidential rule. The mass protest of November 19th 2002 in the streets of Caracas succinctly indicated to the anti- Chavez forces that the military was firmly on the side of the President and was willing and able to share body music on the streets of Caracas against all marchers and protestors of whatever political origin. The hope of another anti- Chavez coup d'etat by the military was receding into the recesses of the minds in denial. Secondly Chavez was willing and able to fervently resist all attempts to hold early general elections, call an early revocatory referendum or to resign and flee Venezuela. Clearly with the military on his side Chavez had the testicular fortitude to gamble to ensure his political survival.
The failure of the strategy of November resulted in the release of the final strategic move planned by the anti- Chavez forces. On the 2nd December 2002 the fourth general strike and lockout in one year commenced. The December general strike and lockout would now play the PDVSA card. Petty bourgeois executives of PDVSA under the public/ overt leadership of Juan Fernandes would openly agitate for a complete shut down of PDVSA and the disruption of production of the multinational energy companies in Venezuela. Clearly the level of desperation of the anti Chavez forces unleashed a scorched earth policy for they were willing to destroy the energy institutions of Venezuela to remove an elected public official. These forces were unwilling to utilise the Bolivarian constitution to remove Chavez-Frias. By December 14th 2002, the December protest peaked on the streets of Caracas. By December 21st 2002, the military intervened into the operations of PDVSA and the protests slid downwards until January 31st 2003 when the general strike and lockout were called off.
At the time of writing (September 29th, 2003) President Chavez-Frias is still holding office; the rules governing the revocatory referendum have been proclaimed by the Electoral Council and the anti- Chavez forces are divided. One section of the opposition is not only calling for a revocatory referendum but for a constitutional amendment to ensure that Chavez-Frias is banished from government and Venezuelan politics with his expected defeat in the referendum.
This paper then intends to explore the impact of the anti- Chavez-Frias rebellion in PDVSA upon the attempt to exploit the gas reserves of the Deltana Platform by the Chavez-Frias administration with subsequent questions arising over the role of the multinational energy corporations in the rebellion against Chavez-Frias especially within PDVSA, and the impact such developments in Venezuela had upon the lng industry in Trinidad especially with reference to the cross border gas reserves which straddle the maritime border of Trinidad and Venezuela especially those reserves of the Deltana Platform.
The Deltana Platform is configured into five blocks consisting of 27,000 square kilometres with estimated proven reserves of 20 trillion to 30 trillion cubic feet of gas. The bidding process for the five blocks was carded to commence on December 16th 2002 with the winners announced on December 20th 2002. British Petroleum was the sole bidder chosen for Block 1 of the Deltana Platform, which adjoins the BPTT Kapok field in Trinidad waters. The preferred bidders for Block 2 of the Deltana Platform were Chevron Texaco and British Gas Group PLC. Total Fina Elf and Statoil were invited to bid on Blocks 3 and 4. Exxon Mobil was the sole preferred bidder for Block 5. The successful bids were not declared on December 20th 2002 as was carded. The strike at PDVSA as part of a wider anti Chavez movement would wash over the Deltana Platform bidding process.
On Thursday 26th December 2002, the then Governor of Sucre State, Ramon Martinez would accuse multi- national energy companies Shell, Exxon Mobil and Phillips Petroleum of being involved in the anti- Chavez conspiracy to bring down PDVSA and Chavez- Frias. Some government officials were also of the view that bidders to the Deltana Platform project were using anti Chavez protests to underbid on the Deltana blocks.
By January 2003, it was clear that British Gas Group PLC had pulled out of the bidding for Block 2. Total Fina Elf made a bid of $100,000.00 USD for Block 3, which was laughably way too low. Chevron Texaco Corp bid 19 million USD for Block 2 whilst Statoil's bid for Block 4 was 33 million USD. BP Plc the preferred sole bidder did not finalise negotiations for Block 1 as at January 2003 and Exxon Mobil walked away from Block 5. The Chavez- Frias government, which expected some 1.3 billion, USD from the auction bids for the Deltana Platform blocks in fact, realized some 60 million USD from the said auctions.
It must be noted that Total Fina Elf, Statoil and Chevron Texaco are the three largest multi- national energy companies involved in the Venezuelan energy sector. Both Statoil and Chevron Texaco took the decision to invest in Venezuela in spite of the turmoil and uncertainty from April to December 2002. TotalFinaElf clearly took the decision to pass on the first round of bidding by bidding ridiculously low.
British Gas Group PLC who had aggressively lobbied for the contract to exploit Block 2 of the Deltana Platform allegedly pulled out of the bidding for Block 2 on the grounds that the terms and conditions of the Hydro Carbon law that reserved 1% to 35% of the equity of the joint venture company to develop Block 2 for PDVSA was a stumbling block given the proposed venture between British Gas and Chevron Texaco to develop Block 2 would result in three operators rather that the preferred two operators. Moreso BG insisted that the gas raised from Block 2 be fed into the existing gas pipeline network in Trinidad's waters that supplies gas feedstock to Atlantic LNG at Point Fortin, Trinidad. The Chavez- Frias government insisted in December 2002 that all gas raised in the Deltana Platform must be used as gas feedstock at the Mariscal Sucre LNG project.
By February 2003 it became clear that the initial auction for the five blocks of the Deltana Platform was in shambles. The dramatic change in fortunes is succinctly indicated via the televised broadcast 'Hello President' of the 3rd November 2002 made by President Chavez-Frias. In that broadcast the President indicated that November 2002 was carded to be the month in which exploration licenses for the Deltana blocks would be handed out to the following energy companies: BP, block one/Dorado Field with an initial investment of 250 million USD. British Gas, block two/ Loran Field with an investment of about 1.25 billion USD.
Statoil would participate in block three/ Laulau field and block 4/Cocuina field. President Chavez did not mention Chevron Texaco Corp. and TotalFinaElf as players in the Deltana Project on November 3rd 2002. Clearly on the 3rd November 2002 BP and BG were the frontline players in the Deltana Project. What then happened and/ or what was the strategy that resulted in BG's withdrawal from the bidding process and BP's refusal to seal the deal which to date is yet to be finalised. The US energy giant Chevron Texaco secured the contract to exploit and develop Block 2 on a winning bid of 19 million USD which compares poorly to the bid of 200 million USD expected by the Chavez- Frias government. The British Gas pullout and the ridiculously low bid of TotalFinaElf set up Chevron Texaco's successful bid. Statoil of Norway won the bid for Block 4 of the Deltana Platform over TotalFinaElf's bid of 5.15 million USD with a bid of 34 million USD. Block 1 was not settled, as negotiations were ongoing with BP Plc whilst there were no successful bidders for Blocks 3 and 5.
Of the five blocks of Deltana Platform by February 2003 only two were now subject to exploration licenses. The total winning bids amounted to 51 million USD rather than the forecasted 400 million USD. President Chavez- Frias would announce in February 2003 that the government would now invite bids from international energy interests for the exploration and development of the Topomoro Oilfield in Block viii of Lake Maracaibo in what was a serious about face on energy policy of the Chavez- Frias government. For the oil reserves of Block viii of the field is some 2 million barrels clearly PDVSA post December 2002 can in no way handle the cost of investment to develop the field. The political enemies of Chavez-Frias insist that PDVSA does not have the expertise to implement such a project. Moreso besides blaming the Chavez- Frias government for the collapse of PDVSA, they are continuing to insist that the Hydro Carbon law of November 2001 is anathema to foreign investment and must be amended or better yet repealed in its entirety.
The question that must now be answered is whether prospective international investors in the Venezuelan energy sector are in fact agitating to have the Hydro Carbon law amended or repealed? The opposition to Chavez-Frias systematically destroyed the illusion of PDVSA as a leading edge world-class energy company and are now shouting from the rooftops the structural weaknesses and vulnerability of PDVSA and by extension the Venezuelan national energy sector. They are now insisting that Venezuelan energy assets must be exploited by international energy interests at the lowest possible rate of return to the owners of the energy assets of Venezuela: the Venezuelan people. To call for the repeal of the Hydro Carbon law is to surrender, to invite colonial plunder to slap Simon Bolivar in the face.
By July 2003 the Venezuelan Ministry of Energy and Mines of the Chavez-Frias government was on the offensive seen in the Venezuelan energy symposium held in Washington, DC. At this energy symposium it was announced that blocks 3 and 5 of the Deltana Platform were reopened for bids and some eight companies were already pre-selected to bid. At the energy symposium the policy governing foreign investment in the oil and natural gas sectors was reiterated. The gas sector is 100% open to foreign investment; all downstream oil sector activities are 100% open to foreign investment and foreign investment in upstream oil projects is limited to 49.9% of any investment.
It is noteworthy that British Gas Plc was one of the companies that chose to bid for blocks 3 and 5. In total some 13 companies signed the framework agreement governing the bid process for blocks 3 and 5. They are: (1) Exxon Mobil, (2) Chevron Texaco and Conoco Phillips, (3) Lukoil of Russia, (4) Statoil of Norway, (5) TotalFinaElf, (6) British Gas Plc, (7) BP, (8) Royal Dutch/ Shell Group, (9) Repsol YPF, (10) ENI, (11) Petro Canada, (12) Vinccler Oil and Gas.
It is apparent from the list of bidders that (a) companies who dodged commitment to phase 1 of the Deltana Platform bidding process are back such as British Gas and Total Fina Elf. (b) That negotiations for awarding block 5 to Exxon Mobil collapsed and the block was offered up for bidding. (c) That BP for the first time is involved in bidding for blocks of the Deltana Platform other than block 1. (d) That Statoil and Chevron Texaco/ Conoco Phillips who have already been awarded licenses to block 4 and block 2 respectively of the Deltana Platform are now seeking to add increased acreages of the Deltana Platform clearly for the maximisation of productive capacity.
Chevron Texaco announced in June 2003 that a partnership had been formed with Conoco Phillips towards the development of block 2 of the Deltana Platform. Both companies are involved in oil production in Venezuela and have possibly created a consortium that is inward looking rather than one which looks across the waters to Atlantic LNG at Point Fortin. The decision to walk away from the bidding process for block 2 in November 2002 maybe has done irreparable damage to BG's strategic quest to raise and transport Venezuelan gas from the Deltana Platform to Atlantic LNG in Trinidad.
The question that arises is whether the other bidders for blocks 3 and 5 can cheaply outbid Statoil and Chevron Texaco/ Conoco Phillips. Chevron Texaco/ Conoco Phillips has already committed some 2 billion USD for the exploration and development of block 2 commencing in 2004, Whilst Statoil has earmarked some 3 billion USD for exploration and development of block 4 with some 60 million USD in expenditure budgeted for phase 1 of the project. Both companies have therefore indicated their commitment to the development of the Deltana Platform without any public agitation against the Hydro Carbon law. Both companies continue to publicly indicate their acceptance of the stipulation that PDVSA reserves the right to some 35% of the equity of the commercial ventures of blocks 2 and 4.
At the energy conference in Washington, DC it was also revealed that negotiations with BP on the license to develop block 1 were still to be finalised. Carlos Barbieri of the Ministry of Energy and Mines indicated it was still open to negotiations on block 1. In fact BP earlier in 2003 had quitted its Venezuelan presence moving negotiations over block 1 to BPTT (BP Trinidad and Tobago). This was a strategic move clearly in keeping with the Venezuelan engagement with the Trinidad and Tobago government since December 2002 for a memorandum of understanding over cross border gas reserves between Trinidad and Venezuela. But in response to the declarations made at the Venezuelan energy seminar in July in Washington DC, BP moved to show renewed interest in the downgraded Venezuelan presence by August 2003. Guillermo Quintero was appointed President of BP Venezuela and BPVP Cliff Brook visited Venezuela in early August 2003.
It is then clearly apparent that since December 2002 the configuration of the Deltana Platform has changed dramatically from that envisaged in early 2002. From early 2002 BP Plc and BG were envisaged as the major players in a globalized gas basin that straddled Venezuela and Trinidad. The fact that BP was the sole selected bidder for block 1 fed the speculative projections of Venezuelan gas feeding up to six trains of Atlantic LNG. The full court press employed by BG in Caracas to secure the license for block 2 simply heightened the feeding frenzy in early 2002 until its pull out from the bidding process in November 2002. Why then did BP move its center of operations responsible for negotiating with the Chavez- Frias government for the license to explore and develop block 1 from Caracas to Trinidad?
Clearly this was a move that reeked of imperial arrogance at best as it was a move to pressure the Chavez- Frias government to accept BP's terms and conditions. It is then a game of good cop/ bad cop premised upon brinksmanship. BP clearly cannot miss out on exploration opportunities in Venezuela both on and offshore as the government opens up once excluded fields and acreages to foreign investment. Secondly BP cannot willingly walk away from the Deltana Platform until such time as it is convinced that no opportunity exists to raise and transport Deltana gas to Atlantic LNG. BP would play hardball with both the Trinidad and Venezuela governments in a bid to achieve its desired aim of a cross border gas supply to Atlantic LNG, at the lowest possible cost per BTU, to the point where one or both governments blink/ submit.
The war plan is then to apply a multi-level strategy of engagement/ disengagement given the dependence of the Trinbagonian government at present upon gas revenues to push Trinbago into developed country status by 2020, the Trinbagonian government is then obligated to intervene and engage with the Chavez-Frias government to at least realise the desire for Venezuelan gas to be transported to Atlantic LNG. While at the same time this dance is ongoing BP is playing hardball on the terms and conditions that apply to their license to explore and develop block 1 of the Deltana Platform.
In an Express Business article of the 24th September 2003 titled "BPTT, PDVSA square off" it was reported that BPTT has refused to continue negotiations on block one because of the non- existence of a heads of agreement governing the unitisation of the cross border gas reserves of Trinidad and Venezuela. BPTT's position is clearly in response to two realities: (a) the failure of the Chavez-Frias government to grant the terms and conditions BPTT has demanded concerning exploration/ development of block 1. (b) The hardball strategy of the Chavez-Frias government.
In a visit to Trinidad and Tobago in early August 2003, President Chavez- Frias indicated the willingness of his government to now send to Atlantic lng a portion of Deltana gas for processing into LNG. The President's visit and announcement in Trinidad came after the July energy symposium in Washington DC which announced the outstanding state of negotiations with BPTT over block 1 and the decision to invite negotiations over the license for exploration/ development of block 1.
The Business Express newspaper article posits a window of opportunity over block 1 as the heads of agreement governing unitisation of cross border gas is carded to be signed before November 2003 the month in which the successful bids for blocks 3 and 5 are declared. In clearly what is a game of brinksmanship over the minute details of a unitisation and exploration / development agreement it is apparent that it is a done deal in the favour of BPTT and Venezuelan gas processed into lng at Atlantic LNG, Trinidad. What is noteworthy about the said Express Business article was the reported imperial arrogance of the BPTT sources reported.
In apparent denigration of the Deltana Platform project the BPTT sources are reported as insisting that the timeframe for development of block 1 gas without the involvement of BPTT and Atlantic LNG is five to ten years and that even though BP loses block 1, the operator of the license must deal with BPTT to realise unitisation of the cross border gas fields. With all discourses of truth there are counter discourses namely:(a) a five to ten year framework for monetisation of block 1 Venezuelan gas without BPTT and Atlantic LNG is to the long term strategic benefit of Venezuela and to the long term strategic disadvantage of Atlantic LNG and BPTT.
(b) There is no compulsory imperative to unitise block 1 with BPTT's Kapok fields save and except to send gas to Atlantic LNG. Block 1 gas can be raised and processed into lng at the Mariscal Sucre LNG plant bypassing BPTT and Atlantic LNG. It is then a strategic imperative that BPTT unitise block 1 with its Kapok field for its strategic benefit i.e. lng to the eastern seaboard of the US. Any reality other than that can very well result in BPTT walking away from block 1.
From the outset BP faced no competitive bidding for block 1 Deltana and BP's refusal to bid until "negotiations" were completed both between BP and the Venezuelan government and between the Venezuelan and Trinbagonian governments meant in fact that BP's involvement in block 1 was always premised upon unitisation of the gas reserves of block 1 Deltana and the Kapok. Unitisation would in fact result in conversion of the gas raised on the Venezuelan side of the maritime boundary into lng at Atlantic LNG, Trinidad. It is then apparent that the Chavez-Frias government attracted BP to block 1 of the Deltana Platform from the outset with visions of a unitised block 1 with the Kapok Field to supply Atlantic LNG. The game of brinksmanship and hardball between BP and the Venezuelan government is simply the means to acquire ends with the best possible package of benefits attained for one or both parties. Rhetoric aside BP would be denied the opportunity to unitise block 1 with the Kapok Field by the Venezuelan government when it is clearly apparent that the package BP refuses to negotiate does not meet with the minimum expectations of the Chavez-Frias government. There is a political price to pay and selling the gas resources of block 1 cheaply to BP has little or no benefit to the Chavez-Frias' political survival agenda.
The Trinidad and Tobago government commenced negotiations with the Chavez- Frias government in December 2002 for a memorandum of understanding on the unitisation of cross border gas reserves. From the outset the memorandum of understanding proposed by Venezuela was rejected by the Trinbagonian government. The PDVSA strike would result in an appeal from President Hugo Chavez-Frias to the Trinbagonian government for gasoline supplies. The Trinbagonian government responded with some 500,000 barrels of gasoline, which supposedly/allegedly influenced a change of stance by the Chavez-Frias government on the issue of Deltana gas, and the unitisation of cross border gas reserves. Indication of this were the visit of Rafael Ramirez to Trinbago in March 2003 closely followed by two seminars on business opportunities in Trinidad with emphasis on the energy sector sponsored by the Trinidad and Tobago Embassy in Venezuela. The early August 2003 visit by President Chavez- Frias to Trinidad and Tobago for the express purpose of discussing and finalising energy issues was the potent indicator that the heads of agreement was now a priority of both governments especially the Venezuelan government.
One of the major stumbling blocks to the unitisation negotiations for blocks 1 and 2 is the issue of the question of the quantum of gas reserves on the Trinidad and Venezuelan sides of the maritime boundary. The Venezuelans have insisted in the past that the reserves of the Kapok fields are way over estimated and what is being in fact attempted is to unitise a much larger Venezuelan field with that of a smaller BPTT field for the strategic benefit of BPTT and Atlantic LNG. The counter view that has appeared in the Chavez Opposition is that block 1 of Deltana is in fact a dud gas field, which the Chavez-Frias government is attempting to offload on BP.
Similar agitation existed between the Venezuelans and BG over proven reserves of block 6D in Trinidad waters versus the reserves of the Loran field or block 2 of the Deltana platform. Again the counter view of the anti-Chavez opposition insists that whilst the Dorado 1x well proved the high potential of that area of the Deltana Platform, the second well drilled Dorado 2x produced poor results therefore exonerating BG's withdrawal from the bidding process for block 2 in December 2002. Both the Trinbagonian and Venezuelan governments have insisted that the private operators of offshore gas fields that extend cross border must be guided in their negotiations to unitise such gas fields by the heads of agreement signed by both countries. Furthermore, these operators are not to participate in those said negotiations. Clearly BP and BG would have preferred to negotiate such unitisation agreements between PDVSA, BP and BG simply governed by a rubric agreed to by both governments. This clearly has not happened and the future of BP and BG as operators of unitised gas fields with a hegemonic presence on both sides of the maritime boundary between Trinidad and Venezuela is now up for grabs.
In October 2002 whilst opening the BGTT headquarters Prime Minister of Trinidad and Tobago Patrick Manning indicated that his government was willing to pull the plug on future expansion of Atlantic LNG including train 4 unless the return to the people of Trinbago from the conversion of gas to lng was increased. The major target of the Manning government was raising the royalty at the wellhead that BPTT paid the government of Trinbago for gas so raised.
The move to raise the royalty rate for well head gas produced by BPTT was made possible by two realities: (a) the precedent set by the Hydro Carbon law of Venezuela, and (b) the fact that BPTT needed the active intervention and continuous engagement of the Trinbagonian government with the Chavez-Frias government on the issue of unitisation of cross border gas and the supply of Deltana Platform gas to Atlantic LNG under the control of the international energy companies who were shareholders of Atlantic LNG and operators of gas fields in both Trinidad and Venezuela's maritime areas that adjoin each other.
The Trinbagonian government had to intervene and engage with the Chavez-Frias government not only because of the fact that the said government bought into the vision of Deltana Platform gas being processed into lng at Atlantic LNG for export to the eastern seaboard of the USA. The Trinbagonian government was seeking to re-open negotiations on the royalty rate charged on well head gas after the contract was renewed unchanged at the ridiculously low royalty rate by the previous government of the United National Congress (UNC). The UNC government had then taken the decision to renew the rate originally agreed to between a Peoples National Movement government (PNM) and AMOCO decades earlier. The royalty rate established in 1963 between the then PNM government and AMOCO was 1.5 cents per mmbtu or .003 percent with a wellhead gas price of 1USD at the July 2003 exchange rate. The present PNM government was then seeking to force an issue that was legally closed by threatening to scuttle train 4 at Atlantic LNG. BPTT agreed to open negotiations on the royalty rate with a final agreement reached which signaled government's approval of the train 4 expansion of Atlantic LNG.
Agreement reached with BPTT meant the engagement of the Trinbagonian government with the Chavez-Frias government, which culminated with the visit of President Hugo Chavez-Frias to Trinidad in early August 2003. The terms and conditions of the heads of agreement between Venezuela and Trinidad and Tobago would now determine the course and structure of any unitisation of cross border gas reserves realized. As it presently stands block 2 is presently licensed to the consortium of Chevron Texaco/ Conoco Phillips. Chevron Texaco is a partner of British Gas in the adjoining block 6D in Trinidad waters raising the possibility of British Gas purchasing gas from the Chevron Texaco/ Conoco Phillips consortium providing the Chavez-Frias government changes its present policy position on reserving block 2 gas production solely for the Mariscal Sucre LNG project.
The next question is whether the consortium exploring and developing block 2 sees it as a strategic imperative that they surrender enhanced profitability by selling gas to BG for the production of LNG at Atlantic LNG? The third question is whether the infrastructure exists in the block 6D field in Trinidad waters to transport block 2 Deltana gas to Atlantic LNG? Would Chevron Texaco in concert with BG invest in such infrastructure without the contractual assurance of the Chavez-Frias government that block 2 Deltana gas would now be sent to Trinidad for processing into lng? Finally is unitisation of block 2 Deltana with block 6D Trinidad with gas processed in Trinidad in the interests of Chevron Texaco/ Conoco Phillips Venezuelan operations?
In terms of maximising sustainable profits it is in the interest of the said consortium to be shareholders in an LNG producing facility in Venezuela exporting LNG to the eastern seaboard of the USA. Statoil of Norway holds the license for block 4 Deltana, which adjoins the Manikin field in Trinidad waters, operated by BPTT/ Repsol. Statoil is in no way organically connected to the players of the Trinidad gas sector but by 2003 Statoil was putting in place the necessary infrastructure to become an exporter of LNG to the eastern seaboard of the US. Statoil has leased one third of the capacity of the LNG terminal at Cove Point, which it shares with BP and Shell and has contracted to buy from a unit of Tractebel a billion cubic metres of gas per annum for three years. Statoil is already set to supply up to 2.4 billion cubic metres of gas as lng annually to the Cove Point, Maryland LNG terminal and re-gasification facility from its Snoevhit gas field in the Barents sea from 2006-2023.
From 2003-2006 Statoil would then be purchasing lng to cover its market obligations via the Cove Point facility. The question again arises if Statoil would strategically seek to unitise block 4 with the Manikin field? At present the Manikin field is infrastructurally underdeveloped. Statoil is then an aggressive new player on the supply side of the lng market of the northeastern USA. Would it then be a sustainable strategic move that ensures profit maximisation to surrender to BP's strategic imperative vis a vis Atlantic LNG and the US market?
On June 16th 2003 it was announced that the government of the Republic of Trinidad and Tobago (GORTT) had finally given permission for the construction of train 4 of Atlantic LNG. This decision of the GORTT raised the contentious issue of the reserves to production (rtp) ratio of the Trinidad gas sector. Various expert sources have publicly sounded alarm bells over the impact of train 4 of Atlantic LNG on the rtp ratio of the sector. One source at the Ministry of Energy and Energy Industries has calculated an rtp of 15 years in a post train 4 scenario.
The four trains of Atlantic LNG would consume in 20 years some 15tcf of gas. Ryder Scott Company of Houston, Texas has placed the country's proved reserves at 20tcf of gas. A crisis of proved reserves of gas given the growing demand for feedstock gas from the gas sector of Trinidad now exists in the Trinidad gas industry. The Ryder Scott Company estimated unrisked exploration resources of some 58tcf and an additional 13tcf from probable and possible reserves. But when risked factors are applied the quantum of exploration resources could be reduced to 10tcf and probable and possible reserves to less than 6tcf. Proven and possible reserves could be less than 36tcf, which is clearly inadequate to sustain the gas sector for its design life as configured in 2003 and beyond.
The gas suppliers to the Trinidad gas sector predominantly BPTT have therefore the following choices: (1) radically and dramatically increase the quantum of proven reserves under its control from its fields in Trinidad waters. (2) Radically and dramatically increase the proven and possible reserves of BPTT by accessing Deltana Platform gas to be supplied as gas feedstock to Atlantic LNG at minimum. (3) Radically and dramatically increase its supply of gas feedstock by purchasing or joint processing agreements for supply to Atlantic LNG at minimum from the Deltana Platform.
The RTP ratio of Trinidad post train 4 of Atlantic LNG indicates the strategic reality that the basis of the creation of four trains and more at Atlantic LNG is the premise and imperative that Deltana Platform gas must be the dominant gas feedstock to Atlantic LNG. The Deltana Platform and Trinidad's marine gas reserves would then be linked to specific energy markets of the North Atlantic, especially the energy market of North Eastern USA, via and through Atlantic LNG. Trinidad with its rapidly depleting gas reserves would simply run the first leg of the relay which was the creation of Atlantic LNG with at minimum but not confined to 4 trains. Successive Trinbagonian governments have bought into this vision and have facilitated the implementation of the strategy to capture Venezuelan gas for processing at Atlantic LNG thereby retarding the development of the Deltana Platform and the Mariscal Sucre projects.
The strategic importance of Venezuelan energy exports to the US and moreso the growing strategic importance of lng produced in Trinidad and exported to the North East USA market have been publicly attested to by the State Department of the US Federal Government in 2003. The question then arises is if the strategic importance of lng in the Trinidad/ Venezuela gas basin demands and merits ongoing covert operations by agencies of the US and Britain to realise the strategic plan of a globalised Trinidad/ Venezuela gas basin exporting lng to Spain and the US?
Chavezistas and others since April 2002 have repeatedly insisted that the successive attempts to remove President Chavez-Frias from power were and are being driven by a covert operation of US Federal agencies as the CIA. The questions that arise on this issue are as follows: (1) Is there an ongoing covert operation to assault the state power of President Chavez-Frias to ensure among other things his government's submission to the Trinidad structures of lng production for export to the US and Europe. In this covert operation the plan of the Deltana Platform/ Mariscal Sucre projects has to be frustrated and sabotaged to the extent where the horizons of the financing burden become extended to the point where the project collapses resulting in surrender to Trinidad structures. (2) In the tied general election of December 2001 in which the UNC and the PNM both received 18 seats out of a 36 seat House of Representatives was the decision announced by then President Arthur Robinson on the 24th December 2001 to appoint the political leader of the PNM and representative for San Fernando East as Prime Minister influenced in any way by the covert operation to realise a globalised gas basin embracing Venezuela and Trinidad?
The UNC renewed the 1963 gas royalty contract on gas during its term in office from 1995-2000 by leaving the royalty unchanged for another 20 years all to the benefit of BPTT. In addition the said UNC government permitted the sale of 30% of the assets of BPTT to Repsol YPF tax-free and approved the addition of trains 2 and 3 to Atlantic LNG at very favourable terms and conditions to the shareholders of Atlantic LNG. Clearly the UNC during its first term in office was extremely supportive of the BPTT agenda in Trinbago. But what if the government of President Chavez-Frias had serious problems with dealing with the Panday led UNC in government much less with negotiating a heads of agreement governing unitisation of cross border gas fields in the waters separating Trinidad from Venezuela? What if at that crucial juncture in the development of the Trinidad/ Venezuela gas basin in 2001 the political system of Trinidad and Tobago was now in gridlock? A gridlock that must be broken in favour of the success of the strategic energy plan. Was the appointment of Patrick Manning as Prime Minister one of a series of mechanisms utilised by the covert agenda to ensure that President Chavez- Frias would at least sit at the bargaining table?
(3) Were the April 11th2002 coup d'etat and the December 2002 emasculation of PDVSA mechanisms utilised by the covert operators to ensure that a pliant, weakened, desperate president Chavez- Frias would now give the Trinidad structures the supply of Deltana gas they so desperately need to cover firstly the 20 year supply contracts of 4 lng trains, secondly further possible expansion of Atlantic LNG or thirdly the creation of single supply trains at La Brea in Trinidad, and at Lowlands in Tobago?
(4) Was then the willingness of BPTT to re-open royalty discussions with the present PNM government as a result of the pressures exerted by the current covert operators? The application of the agreed upon 10% royalty has been delayed for 15 years from 2003 the new royalty rate actually kicks on in 2017 a point in time in which BPTT can be simply an importer of Deltana gas making the new royalty rate of little operational relevance to BPTT and the people of Trinbago. For the period 2003 to 2017 the people of Trinbago would receive in lieu of paying the 10% royalty gas from BPTT, which is clearly a win- win scenario for BPTT.
(5) How is PDVSA going to finance its shareholding in the five blocks of Deltana? Failure to raise the financing under favourable terms means the surrender to the operators of these five blocks. Is this the final sting in the tail of the covert operation to trap Deltana gas for the Trinidad structures? Is it now becoming increasingly apparent that the opposition to the government of President Chavez-Frias has focused their attention on the Deltana Platform exerting every resource they possess to ensure the collapse of the project envisaged by the Chavez-Frias government? If the revelations of the anti-Chavez forces on the inside details of the Deltana Platform project turn out to be true, what is the level of complicity, if any, that exists between these forces and the multinational energy companies that are players in the two bidding processes to date for Deltana blocks? Clearly the strategy of the anti-Chavez forces calls for the de legitimisation of the praxis of the Chavez government on the Deltana Platform project but to whose benefit? It is certainly not to the benefit of the poor and dispossessed of Venezuela. Does the strategic importance of lng to the US energy market then merit complicity with the anti-Chavez forces to the benefit of the North Atlantic gas/ lng cartel? Does hog love mud?
In so doing the Anti-Chavez forces are sending loud and clear signals that they are willing to buy into the vision of Venezuela being a subservient gas supplier to Atlantic LNG rather than creating an indigenous Venezuelan lng sector rooted in Deltana gas. This subservient position adopted is a direct result of a series of failed attempts to remove a duly elected President by a series of illegal and illicit means, which have all failed. Clearly in the case of Venezuela the baby has been thrown out with the bath water and the vision of bringing an appreciable change in the standard of living of the Venezuelan people of Delta Amacuro and Sucre states today stands precipitously perched on the edge of the precipice of underdevelopment, exploitation, hopelessness and human misery. The mechanism of hope, Venezuelan gas is in danger of being sucked out of the ground to serve the interests of the North Atlantic energy cartel to the detriment of the people of Venezuela.
References:Acedo, Carlos Eduardo: "The Venezuelan Crisis" http://www.veninvestor.com/images/
The %20 Acedo %20 Document.http: www.bg-group.com/news/archive_2003/170603-pr.htm
http://www.bp.com/centres/press/p_r_detail_p.asp?id=993
http://www.bp.com.centres/press/p_r_detail_p.asp?id=985
Dow Jones Business News. November 1st, 2002. "Venezuela set terms for Natural gas bid process- Report" by Fred Pals.
Express Business July 16th 2003: "Reserves dangerously low" by Energy Correspondent.
http://www.trinidadexpress.com/print.asp?dontshowlinks=don't&mylink=2003-09-24
/expressbusiness/top%20stories/oil1%20andExpress Business July 23rd 2003: "Is it really free gas" by Energy Correspondent.
Express Business October 1st 2003: "We are not in any war with PDVSA".
Express Business May 7th 2003: "Cross border gas- no easy deal for T&T, Venezuela" by Energy Correspondent.
Newsday August 15th 2003: "Manning: Energy talks with Chavez 'very successful'."
http:ojg.onlinearticles.printthis.clickability.com/pt/cpt? action=cpt&expire=&uriid=7190
Issues October 8th 2002 www.petroleumworld.com/issues.htm
Issues January 15th 2003: "Report on Deltana's gas offshore project" petroleumworld.htm
Petroleumworld.com November 4th 2002 by Elio Ohep.Petroleumworld.com February 10th 2003.
http://petroleumworld.com/Edit July 10.htm
http://petroleumworld.com/issues 386.htm
http://petroleumworld.com/issues 381.htm
http://petroleumworld.com/issues 384.htm
http://petroleumworld.com/issues 476.htm
Reuters. October 31st 2002: "Statoil buys access to US gas market" by Alister Doyle.
Reuters. November 30th 2002: "Venezuela signs to develop LNG project".
http://story.news.yahoo.com/news?tmpl=story&u=/one world/20030409/wi_oneworld/1334
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030610/bs_nm/energy_natgas_d
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030701/bs_nm/energy_venezuel
Trinidad Guardian July 11th 2003: "Greenspan calls for US LNG expansion".
www.vheadline.com/209/13336.asp
www.vheadline.com/0210/13722.asp
www.vheadline.com/0211/14094.asp
www.vheadline.com/0212/14122.asp
www.vheadline.com/0212/14123.asp
www.vheadline.com December 28th 2002: "Foreign oil cos in Venezuela attract wrath of government" by Fred Pals.
www.vheadline.com January 6th 2003: "Venezuelan government's offshore gas deal appears delayed" by Marc Lifsher.
Vheadline.com February 10th 2003: "Deltana Platform gas contracts offered."
Vheadline.com February 11th 2003: "Chevron Texaco confirms award of Deltana Platform contract."
www.vheadline.com February 11th 2003: "Foreign companies support the new PDVSA" BY Patrick J. O'Donoghue.
www.vheadline.com February 13th 2003: "Opposition deputy claims TSJ may cancel Deltana Platform contracts" by Robert Rudnicki.
www.vheadline.com February 13th 2003: "LNG seen as essential to future US supply- Analyst" by John Edmiston.
www.vheadline.com February 16th 2003: "New Venezuela 2 billion oilfield open to foreign oil co. Deltana licenses awarded" by Elio Ohep.
www.vheadline.com February 17th 2003: "Statoil to invest 3billion in Deltana Platform development" by Robert Rudnicki.
www.vheadline.com February 18th 2003: "The skeptic: next step for Statoil may be shopping spree" by Brian Truscott.
http://www.vheadline.com/readnews.asp?id=7547
http://www.vheadline.com/readnews.asp?id=7541
http://www.veadline.com/readnews.asp?id=7857
http://www.vheadline.com/readnews.asp?id=8811
http://www.vheadline.com/readnews.asp?id=8999
http://www.vheadline.com/readnews.asp?id=7900
http://www.vheadline.com.readnews.asp?id=9618
http://news.yahoo.com/news?tmpl=story2&u=/nm/20030829/fin enr/venezueladeltana/&printer=1
http: news.yahoo.com.news? tmpl=story2&cid=1137&u=nm/20030909/fin enr/statoil lng 2&printer=1
Daurius Figueira is a Trinitarian and holds a BA and an MPhil (Sociology) from the University of the West Indies, Trinidad campus. Presently he is a doctoral candidate in Government at the same University. He has published books on the illicit drug trade, race relations, and Islam in Trinidad and Tobago. His research into the illicit drug trade has led him to develop an interest in Venezuelan politics hence his interest in the move to globalise the stranded gas reserves of Venezuela that border Trinidad's gas reserves. Its views are not necessarily those of PETROLEUMWORLD.