Shell is in advanced talks with Venezuela about more gas fields, sources claim

Shell has advanced discussions with Venezuelan government about developing four large areas in the vicinity of Trinidad and Tobago in two of South America's largest offshore gas fields. Two people familiar with these discussions confirmed this.

The London-based ?energy major has been trying for years to advance ?the 4.2-trillion-cubic-feet Dragon gas field in Venezuelan waters and could make ?a ?final investment decision on the flagship project by the end of this year.

Shell wants to expand its operations in OPEC country under interim president Delcy Rodriquez, according to sources.

Shell wants to gain access to three fields, including Dragon, that are part of a 12-tcf project, Mariscal Sucre, off Venezuela's east coast. The people also said that the Loran offshore field, which is 7.3 tcf, is part of the cross-border area that extends to Trinidad. This would total 20 tcf in combined reserves.

Shell executives signed preliminary agreements in Caracas, Venezuela with Rodriguez's government to advance Dragon and potentially develop two onshore oil fields called Carito and Pirital.

TRINIDAD WILL PROCESS GAS

Shell plans to ship the?Venezuelan natural gas to Trinidad to be processed into liquefied gas for export. This is a major push for its Atlantic LNG joint project which has not been able to reach its installed capacity because of insufficient gas supplies.

Shell has already started developing Trinidad's Loran-Manatee portion. The British company is responsible for the Trinidad area, while Chevron has stakes in the two blocks on the Venezuelan side that includes the Loran field.

Chevron has relinquished its interests in these?areas, as part of an agreement to expand extra heavy oil projects in Venezuela's main crude area, the Orinoco Belt. This was reported last month. Loran will be re-offered soon, according to two sources.

Shell confirmed its interest in these additional areas in an email on Tuesday. "The proximity of Manatee?makes Loran a very attractive investment opportunity," Shell said.

Requests for comment from the Trinidad and Tobago Ministry of Energy, Chevron, Venezuela's Oil Ministry, PDVSA and Trinidad and Tobago’s Ministry of Energy were not answered.

Once we have the rest of our field, the plan is to drill subsea holes on the Loran side to tie back to the Manatee platform at Trinidad. One person familiar with the negotiations stated that it was a simple fix and made sense to produce the whole block.

Looking for Gas

Shell owns 45% of the Atlantic LNG Project in Trinidad. This is Latin America's largest LNG plant. Due to a lack of gas, the project's original capacity was 15.5 million tons per year. It has now been reduced down to 12 mtpa. According to LSEG, the facility shipped less than 9 mtpa in 2013.

Shell's chief executive Wael Sawan told the CERAWeek Conference in Houston last week that the company may approve up to two Venezuelan projects this year, if fiscal and legal circumstances improve.

Sawan explained that they are currently looking for ways to add value in Venezuela. "I would say that it is more focused on gas and specifically gas which can be monetized by LNG."

Trinidad and Shell are seeking to increase domestic gas production and secure a supply from Venezuela. Venezuela is only six miles away from Trinidad. The Mariscal-Sucre fields, including Dragon, Rio Caribe and Patao, are closer to Trinidad's infrastructure than Venezuela, which has vast offshore gas reserves that remain largely undeveloped.

PDVSA previously signed agreements giving Russia Rosneft interest in Patao, Mejillones and other areas. PDVSA has been looking for a partner to develop Rio Caribe as part of a joint production contract since last year. It is unclear whether it had signed any preliminary agreements.

Rosneft assets in Venezuela have been?transferred in 2020 to Russia's Roszarubezhneft, the state-owned company. However, the fields are still untouched. The people claimed that Russian involvement in these areas is a barrier to finalizing the Shell agreement.

"We're making progress. Yes, assigning the fields to a Russian company is problematic, but we'll get past it." Shell source: "I am certain." (Reporting Curtis Williams, Marianna Pararaga and Sheila Dang from Houston. Editing by Nathan Crooks, David Gregorio and David Gregorio).

(source: Reuters)