Gas, oil deals cast politics aside in wake of Venezuela presidential election
Just days before Venezuela’s presidential election on July 28th, BP signed a long-term gas deal with the Venezuelan government headed by autocrat Nicolas Maduro, locking in access to the planet-warming resource regardless of the electoral outcome.
The outcome of the Venezuelan presidential election is now in profound dispute. And many Venezuelans, enduring years of economic hardship and family ties torn apart by migration, are taking to the streets to express their discontent. Maduro is doubling down. But for BP and its partner, state-owned NGC of Trinidad and Tobago, the political uncertainty consuming Venezuela seems like background noise for a long-term contract that they had been lobbying for years to secure.
The new exploration and production license for the Cocuina offshore gas field highlights the fossil fuel industry’s success in decoupling its business interests from the political tumult in Venezuela, one of the world’s last big domains for oil and gas, with a blessing from Washington. At least for now.
In a July 24th statement announcing the new gas deal with Venezuela, David Campbell, who heads BP’s business in Trinidad, said the new contract “will allow us to move forward with our planning” to develop the field and help replenish gas supply to Trinidad. NGC acting president Verlier Quan-Vie celebrated the “ongoing engagement and collaboration with Venezuela” in reaching the “milestone” agreement.
Cocuina is the name of the Venezuelan side of the gas deposit that straddles the maritime border with Trinidad. On the Trinidadian side, the field is known as Manakin. In 2015, the two governments agreed to jointly develop Manakin-Cocuina, allocating 66% of the gas resources to Trinidad and 34% to Venezuela.
On May 28th, Trinidad obtained a greenlight from the U.S. government to forge joint development plans for Manakin-Cocuina as an exception to its broad sanctions on Venezuela. This “specific license” is one of several that the U.S. Treasury Department has quietly granted since April, when it revoked a broader general license that had allowed oil and gas business with Venezuela to proceed subject to the Venezuelan government’s fulfilment of electoral commitments. When Caracas was deemed to have only partially complied — by disqualifying opposition presidential candidates for example — the U.S. withdrew the general license but encouraged companies to seek case-by-case approvals.
Earlier, BP competitor Shell and NGC lined up U.S. authorisation to develop the Dragon gas field in Venezuelan shallow waters. Like BP, Shell plans to tie production back to Trinidad, whose own gas production has been declining for years.
Shell and BP are the leading shareholders in Atlantic, a four-train liquefaction complex in Trinidad that is partly closed because there is not enough gas to run it. The Venezuelan gas is meant to replenish that supply, allowing Trinidad to expand exports of LNG as well as methanol and ammonia that have been similarly starved of gas. The extra LNG exports derived from Venezuelan gas will help Europe to pivot away from Russian gas, Trinidadian officials have said.
The list of oil and gas companies cleared by the U.S. government to operate in Venezuela is diverse. Maurel and Prom, a French company controlled by Indonesia’s state-owned Pertamina, is licensed to produce oil in a deal modelled on Chevron’s trail-blazing 2022 contract with Venezuela’s national oil company PDVSA. A group of U.S companies recently obtained a license to capture Venezuela’s enormous volume of flared gas and convert it into LPG. And India’s Reliance Industries, a major oil refiner, got a nod from Washington to resume imports of Venezuelan crude. Even though Reliance is not a U.S. company, it has a U.S. financial nexus that would have otherwise exposed it to secondary sanctions.
Reliance was among the biggest lifters of Venezuela’s heavy crude after the U.S. government, under former president Donald Trump, imposed sweeping sanctions on Caracas in January 2019. Under current outgoing U.S. president Joe Biden, Washington dialled back the sanctions in an effort to prod Maduro into restoring democracy.
Neither sticks nor carrots
That U.S. approach, like Trump’s “maximum pressure” strategy, now appears to have failed. After midnight on July 29th, Venezuela’s national electoral council (CNE) declared that Maduro had won re-election to another six-year term with 51.2% of the vote, sliding past his opponent Edmundo González who was said to have garnered 44.2%. The official result flew in the face of multiple polls that had given González a comfortable lead of as much as 30 percentage points. The opposition, led by María Corina Machado, is vowing to publish tally sheets, collected by its poll station witnesses, showing that Maduro was trounced. In a July 30th press conference, she declared that Gonzalez is Venezuela’s legitimate president-elect.
International reaction has been swift but measured. The results are “hard to believe” and the world needs full transparency to prove them up, Chile’s president Gabriel Boric tweeted shortly after the CNE declared the results. Similar reactions have since rolled in from a host of Latin American countries, the EU and the U.S. Among the few nations that have recognised Maduro’s victory are Cuba and Russia.
Maduro announced the withdrawal of its diplomats from six Latin American countries that refuse to recognise him, and demanded that they do the same. The government has also suspended flights to Panama and Dominican Republic, the main conduits for international service into the country. Foreign minister Yvan Gil has blamed the protests on “fascist gangs.”
Privately, oil industry executives and analysts close to them, inside and outside of Venezuela, have been saying for months that Maduro is a “more stable option” for business. A narrow margin of victory for Maduro would be harder to dispute than an outright power grab, and it will be difficult for the opposition to summon sustained protests, they said before the election.
The unrest that erupted across Venezuela on July 29th is now testing that assertion. Meanwhile the opposition is vowing to stay the course. “We won…we have unity, we have a coherent leadership, and we have a country that has spoken loud and clear,” the opposition’s UN envoy Miguel Pizarro said on an Atlantic Council panel on July 29th.
Behind the scenes, many analysts are expecting political negotiations ahead of the Venezuelan presidential inauguration in January 2025, the same month that the next U.S. president will be sworn in.
U.S. officials have said they are willing to “calibrate sanctions” in response to Venezuelan actions ahead of a transition, but it’s unclear if any talks would matter before U.S. voters go to the polls themselves in November to decide whether they want Trump back in the White House.