Mini Series: Venezuela’s PDVSA continues to build momentum

Venezuela is to produce and export gas for the first time following a signing of an historic agreement for the OPEC country which will allow Shell and Trinidad’s National Gas Company (NGC) to import natural gas from the Dragon Field in Venezuelan waters before it gets sent to Europe.

As with the deals made with Repsol and Curaçao’s Refineria di Kòrsou (RdK), arrangements navigated by Dentons Europe’s Sovereign Advisory Practice, the granting of the licence to the joint venture is the latest example of the continued commitment to revitalise the national economy of Venezuela by significantly boosting overall production. PDVSA’s settlement with RdK settle disputes puts an end to multiple arbitrations and court proceedings between the two entities as they resume their commercial relationship.

The Dragon Field reserves, which are near the maritime border between the two countries, has not been commercially developed despite having been discovered more than a decade ago amid lack of partners, investment and, more recently, U.S. sanctions. The license provides for an initial output of 185 million cubic feet per day of gas to be sent to Trinidad for producing liquefied natural gas (LNG) and petrochemicals, PDVSA said in a release.

Since 2017, Venezuela’s most important economic sector had been targeted by the US Treasury Department and consumed with measures including financial sanctions and an oil embargo in an effort to strangle the country’s income.

Following the easing of sanctions by the U.S. on Venezuela, global markets are now able to tap into the world’s largest oil reserves at a point in time when European companies welcome a more secure alternative considering the rising instability surrounding oil-producing countries in the West.

With its proximity to the Caribbean Sea, Venezuela is ideally placed for direct maritime routes to European ports and enabling a potentially more cost-efficient means of oil and gas transportation.  Venezuela starting to ramp up production, coupled with its strategic geographic location, means the sanctions easement are a timely necessity for the world’s global oil supply, as well as for Venezuela’s economy.