Trinidad-Venezuela: Unitising cross-border reserves

The discovery of five trillion cf of natural gas in Venezuela's block 1 in the Loran field by ChevronTexaco and the recent start of drilling of the Manatee-1 well on the Trinidad side in block 6(d) has put the issue of cross border unitisation of reserves firmly back on the agenda.
We have heard little on this issue since the signing of the Memorandum of Understanding between the Government of Trinidad and Tobago and the government of Venezuela in August of 2003.

Unitising cross border gas reserves is a very complex issue and one that requires a careful weighing of logistical, economic and political considerations to arrive at the best possible formula for all parties involved. Such a formula has to take into consideration factors like price, supply-demand relationships and financing.
The arrangement is all the more complex when one considers that while the MoU is essentially a Government to Government agreement, it must also take into account the various multi-national and State companies operating in both Trinidad and Tobago and in Venezuela's waters.

In the case of Trinidad and Tobago and Venezuela, Plataforma Deltana's blocks 1, 2 and 4 share borders with Trinidad and Tobago offshore blocks. This includes bpTT's Kapok field, block 6(d) and block (5b).
The Loran field, where ChevronTexaco's recent discovery was made, straddles block 6(d) on the Trinidad side of the border in which British Gas and ChevronTexaco are the operators and Block 2 of the Venezuelan side, operated by ChevronTexaco. The Loran field is located in the north-eastern section of the Plataforma Deltana. In February 2003, PdVSA awarded ChevronTexaco and Statoil 35-year licenses to appraise and develop two of its five offshore blocks located in the Plataforma Deltana. The Plataforma Deltana blocks are estimated to contain proven natural gas reserves up to 38 tcf. In December of last year, when President Hugo Chavez announced the ChevronTexaco discovery, he noted that it would provide the impetus to speed up Venezuela's own LNG ambitions which have been sagging for some time now.

Venezuela's long awaited Mariscal Sucre LNG project is partnered by PdVSA (60 %), Shell (30 %), Mitsubishi (8 %) with 2 % coming from Venezuelan investors. According to the Energy Intelligence Agency, (EIA) the proposed start up date of the Mariscal Sucre project is sometime in 2008. However, the September 3, 2004 issue of Upstream noted that the project has been on the drawing board in one form or another for almost 20 years and other international commentators have expressed their reservations about the 2008 date, given the investment climate in Venezuela.
The situation with the Mariscal Sucre project contrasts sharply with the Trinidadian LNG experience. From the signing of a MoU in 1992 between Cabot and NGC to the first shipment on April 30, 1999, it took Trinidad and Tobago less than seven years to get its LNG industry going.

Later this year, Trinidad and Tobago will reach another milestone when ALNG Train IV (the largestsingle LNG train in the world) is commissioned. The November issue of the Petroleum Economist noted that Trinidad and Tobago had all but run away with the Atlantic LNG market, with the domestic political situation in Venezuela and Bolivia stalling projects in those countries.
Given its close proximity to Trinidad and Tobago, and given that a well established LNG industry exists in this country, it may one day, in the not too distant future, make sense for Plataforma Deltana gas to be monetised in Trinidad and Tobago. Trinidad and Tobago's Energy Minister, Eric Williams, has hinted at this possibility on numerous occasions, and has been quoted as saying that "Venezuela's best hope for short-term monetisation of its Plataforma Deltana gas assets lies in doing so through Trinidad, which already has the LNG infrastructure".

In the case of bpTT's Kapok field that borders with Plataforma Deltana's block one; negotiations between bpTT and PdVSA are currently in progress. It is estimated that 2 tcf of gas are shared by Kapok and Block One reservoirs. The idea is that bpTT would produce gas from block 1 together with gas from the Kapok field, which would then be processed at the ALNG complex in Trinidad.
This agreement is seen as critical since it may set the stage for future discussions and agreements between Trinidad and Tobago and Venezuela in the area of cross border reserves.

The MoU for unitisation of cross border reserves indicates the willingness of the respective Government to work together to get the best out of their respective oil and gas industries. However, there is a very long distance between a government-to-government MoU and actual contractual terms to supply gas cross border to an LNG project.
As the Venezuelan LNG experience indicates, government-company negotiations can become very protracted and agreements can be years in the making. Nevertheless, if Trinidad and Tobago is to expand its LNG business to include a fifth and sixth trains, gas from Plataforma Deltana may play a criticalrole in making this happen.