US Cancels Licenses for Gas Projects in Trinidad and Venezuela

Oil rigs within sight of land. Public domain image.

Background

The United States has cancelled two licenses that allowed companies to work on gas projects in waters on the South American continental shelf between Trinidad and Venezuela, according to Trinidad’s Prime Minister, Stuart Young.

Trinidad is the biggest exporter of liquefied natural gas (LNG) in Latin America and also exports a lot of ammonia and methanol. But its gas supplies are running low. To fix this, it planned to work with Venezuela to develop gas fields offshore and at the border.

Affected Projects

The now-cancelled licenses had let Shell, BP, and Trinidad’s state-run National Gas Company prepare projects even though Venezuela is under U.S. sanctions. These companies must now stop work by May 27.

One of the cancelled projects, run by Shell, involved Venezuela’s Dragon field, which holds 4 trillion cubic feet of gas. It was expected to begin sending gas to Trinidad next year to be turned into LNG. BP had a similar deal for a nearby field called Manakin-Cocuina.

US Sanctions and Influence

The United States does not have direct legal jurisdiction over trade between Venezuela and Trinidad, as both are sovereign nations. However, the U.S. can indirectly influence or effectively block such commerce through its sanctions regime—especially when companies involved (like Shell or BP) operate in or do business with the U.S., and thus must comply with U.S. sanctions to avoid penalties.

So, while the U.S. cannot directly stop Trinidad and Venezuela from working together, it can make it nearly impossible for multinational firms to participate in or finance those projects.

Recent Developments

Just two weeks ago, Young sounded hopeful about the Dragon gas field after meeting with U.S. Secretary of State Marco Rubio in Jamaica. He told Rubio that the Dragon project was important not only for Trinidad & Tobago, but also for the Caribbean.

Rubio seemed open to the idea and mentioned that the U.S. licence allowing work on Dragon was valid until October, according to what the prime minister said earlier. Young also admitted things could change quickly because of international politics.

He had been hoping that if everything went smoothly, gas could start flowing from Dragon by 2027.

Reasons for Cancellation

Because of U.S. sanctions against the government of Venezuela, where President Maduro clung to power despite apparently handily losing an election, any company working with Venezuela’s state oil company, PDVSA, needs a U.S. license.

Last month, the U.S. also began cancelling other licenses for companies like Chevron, Eni, and Repsol.

As well as the issue over the election, the US argues that Maduro hasn’t done enough to stop illegal migration to the U.S.

Reactions and Next Steps

Shell refused to comment. BP and Venezuela have not yet responded.

Prime Minister Young of Trinidad said Trinidad wants to talk with the U.S. government about these issues and also new tariffs on Chinese shipping, which could also hurt Caribbean countries, as CARICOM head Mia Mottley of Barbados has already pointed out.

Sources: Reuters, Upstreamonline.

Conclusion

The cancellation of licenses for gas projects in Trinidad and Venezuela has significant implications for the energy sector in the region. The move is likely to exacerbate the already dire gas supply situation in Trinidad and may have far-reaching consequences for the Caribbean economy.

FAQs

Q: Why did the US cancel the licenses for gas projects in Trinidad and Venezuela?

A: The US cancelled the licenses due to sanctions against the government of Venezuela and concerns over illegal migration to the US.

Q: Which companies were affected by the cancellation?

A: Shell, BP, and Trinidad’s state-run National Gas Company were affected by the cancellation.

Q: What are the implications of the cancellation for the energy sector in the region?

A: The cancellation is likely to exacerbate the already dire gas supply situation in Trinidad and may have far-reaching consequences for the Caribbean economy.