Geopolitical tensions buffet Trinidad’s vaunted gas revival

In line with a global swing back toward fossil fuels, the small Caribbean nation of Trinidad and Tobago is not letting climate concerns get in the way of oil and gas development, but it has no control over the geopolitics that might.

Oil and gas “are the mainstay of our economy and will remain so for the foreseeable future,” energy minister Stuart Young told delegates at the Trinidad and Tobago Energy Conference in Port of Spain this week.

“Our strategy has been to accelerate the exploitation of our oil and gas resources, which is in keeping with industry trends and market requirements.”

At the conference hosted by the country’s Energy Chamber, Trinidad showcased its latest licensing round, this time for 26 deepwater blocks off its northern and eastern coasts, in water depths ranging from 1,000 meters to 2,500 meters. Bids are due on July 2nd.

Potential bidders are monitoring the progress of Australian firm Woodside’s Calypso deepwater project that would develop 3.5 trillion cubic feet of gas from two blocks in 2,100m of water. In its  latest earnings report issued in January, Woodside said it was advancing fiscal negotiations with Trinidad’s government and continuing commercial discussions “to evaluate options to monetise the resource.”

Woodside operates Calypso with a 70% stake. Its 30% partner is BP, which is Trinidad´s top gas producer and a main shareholder in the country’s Atlantic liquefaction complex, along with Shell.

One new incentive for upstream investors is a recent restructuring of Atlantic that opens the complex to third-party gas. “The lack of access to the LNG trains has been an impediment in attracting new upstream operators,” Prime Minister Keith Rowley told delegates. “With this impediment removed, we anticipate a greater interest in deep water, which, due to the high cost of exploration and development, requires the pricing that LNG typically provides.”

The restructuring also changed the index of Atlantic’s LNG pricing formula from the U.S. Henry Hub price to a more representative basket of international prices, adding to its commercial appeal for producers.

Trinidad’s gas production has been tumbling for years. The 2024 average through October was 2.5 billion cubic feet per day, according to the latest Energy Ministry data. A decade ago, the country produced more than 4 bcf/d.

The long-term decline translates into routine supply curtailments to Trinidad’s industries, including numerous methanol and ammonia plants that supply global markets. “We face a daily challenge with gas supply and most of our plants run at reduced utilisation rates,” said Ricardo Mohammed, executive director for group operations at petrochemicals giant Proman. He noted that many of these are vintage plants that are difficult and costly to retrofit for greener production.

Venezuelan supply

Trinidad is banking on gas supply from nearby Venezuela to further offset its shortfall at home. Venezuela has a plentiful gas resource base, but onshore much of this is flared following years of underinvestment, mismanagement and U.S. sanctions imposed by President Donald Trump in 2019, under his first term. Except for the underperforming Cardon IV gas project owned by European firms Repsol and Eni, Venezuela’s offshore dry gas is barely touched.

That was supposed to change in 2018 when Trinidad reached a preliminary agreement with Venezuela to develop the shallow-water Dragon gas field in the Gulf of Paria. Then the sanctions hit. After intense lobbying in Washington, Trinidad secured a U.S. license that allowed Shell and Trinidad’s state-owned NGC to negotiate a gas deal with Venezuela. The companies now have a 30-year license to develop Dragon and export the gas to Trinidad. Pending a final investment decision, first gas from Dragon could get underway by 2027.

A project to develop the cross-border Loran-Manatee field, similarly hamstrung by sanctions, was revived after Trinidad and Venezuela agreed to delink the two sides of the deposit, freeing up Shell to develop Manatee on Trinidad´s side of the border. Production, also due to begin in 2027, is estimated at 600mn cf/d. “The development of the Manatee field provides a pathway for the monetisation of the Loran field, with its reserves of 7.2 tcf of gas, in the future,” Rowley said.

Trinidad hopes to access still more Venezuelan offshore gas from the cross-border Manakin-Cocuina field. In May last year, the U.S. issued a license for the project to proceed. In this case, the operator is BP.

With a mercurial Trump back in the White House since January, Trinidad is working to ensure that Washington won’t pull the rug out from under its gas plans in Venezuela.

“We will be seeking to engage and apprise the new US administration of the importance of these projects, not only to Trinidad and Tobago, but to energy security in the region,” Rowley said.

Threat of tariffs

Trinidad faces more geopolitical uncertainty around Trump’s cascade of tariffs that threaten to raise gas industry costs. Like many small countries, Trinidad is trying to stay off of Washington’s radar for now.

The U.S. is not Trinidad’s only geopolitical sore spot. From the European Union, Trinidad is worried about a planned Carbon Border Adjustment Mechanism (CBAM). The looming CBAM, which will impose a tax on carbon-intensive goods entering the EU, is one of the drivers behind Trinidad’s ongoing decarbonisation campaign.

BP is expected to start up Trinidad’s first utility-scale solar energy project, the Brechin Castle facility with peak capacity of 122 megawatts, later this year. The government is also studying onshore wind potential, and a green hydrogen pilot plant is scheduled to be commissioned in 2026.

But there are limits. Trinidad is currently dealing with “more sticks than carrots” on energy transition, said Proman chief executive David Cassidy. More than anything, companies want long-term stability. “While I think the key players in the industry recognise this, the market has yet to realise it. Nobody is willing to pay the premium for the products that really will drive us all the way to green.”

For LNG exporters like Trinidad, the international turbulence seems likely to perpetuate the gas market volatility ushered in by the Covid-19 pandemic in 2020-2021 and by Russia’s full-scale invasion of Ukraine in 2022. Amid the uncertainty, it would behoove Trinidad to ensure regulatory stability and carry forward pro-investment policies into the next administration, several of the speakers said.

“Climate change, geopolitical tensions, and technological advancements are reshaping how we produce, consume and think about energy,” said Young, who is tapped to succeed Rowley as Trinidad’s next prime minister. “The path forward requires not just vision, but concrete investment and a belief in our destiny.”