Analysis: Venezuela and Trinidad and Tobago planned to announce this past Tuesday an agreement to jointly develop major subsea natural gas reservoirs beneath the waters of the Gulf of Paria. The reservoirs, three in all, straddle the boundary between the two countries. Also, Trinidad and Tobago will begin processing Venezuelan natural gas and exporting it along with its own liquefied natural gas (LNG). This agreement allows Venezuela to market new gas years before it completes a 4.7-million-ton LNG processing facility planned for the port city of Guira. Details are being worked out now between the two countries.
These two pending agreements were the highlights of a State visit by Venezuela's president Hugo Chavez to Trinidad and Tobago on August 9. They sound a rare positive economic note for Venezuela, which has been struggling to raise oil production and increase revenues since a two-month general strike ended in February.
And certainly for Chavez they must come as a welcome relief from an almost constant battle for political survival: He is currently fighting a recall petition after surviving the strike, as well as a two-day coup early in 2002. The agreements may very well help his survival chances.
The Cross-Border Fields
Three major gas fields straddle the subsea borders between the two countries, each of which has production on its side.
One of the fields is Block 1 where Venezuela has drilled an exploratory well on its side of the border believed to indicate reserves of more than 1 trillion cubic feet (tcf) of gas. On the Trinidad side is the Kapok field already producing and with more than 3.5 tcf estimated reserves. This field is operated by BP Trinidad & Tobago LLC (BPTT).
The second field is called Block 2 in Venezuela and Block 6d in Trinidad. British Gas PLC and ChevronTexaco operate block 6d. Block 2 will be operated by ChevronTexaco and ConocoPhillips. ChevronTexaco said last month that it would spend over $2.1 billion to develop Block 2.
The third field is Block 4 in Venezuela and Manikin 1 on the Trinidad side, a discovery made in 1983 by BPTT. PDVSA discovered shallow, cross-border gas reserves there. On the Trinidad side, BPTT's discovery well identified 2 tcf in gas reserves.
The Chavez Era in Venezuela
Venezuela's president Chavez says he feels a great debt of gratitude to Trinidad because it helped Venezuela survive the general strike by supplying it with 500,000 barrels of gasoline. Chavez said that he will offer Trinidad and Tobago's National oil company a share of reserves free in the Platforma Deltana area, but he has to survive politically to do so. In that department, his record is good. He has already survived a coup and faces a recall election at the hands of his political opponents.
Hugo Chavez was an army officer in 1992 when he himself tried to seize the Miraflores Presidential Palace in a failed coup attempt against the Accion Democracia, one of the two political parties that had casually traded office in Venezuela over a period of 40 years. (The other was Capei, the Social Christian Party.) Chavez was imprisoned and released after a short term.
He then entered politics, presenting a strong appeal to Venezuela's poor--a position that helped earn him a leftist label and brought him up on the U.S.'s radar screen. He was elected in 1997. By then, the country was reeling from $25 billion in foreign debt and running a $6 billion deficit. Multimillion-dollar embezzlements, bank frauds, and kickbacks by the ruling parties had combined with low oil prices to bring the country to its knees. Accion and Capei did not even field candidates.
Chavez entered office as a hero to Venezuela's rank and file and poor, but a pariah to the former ruling political parties and not at all favored by the United States. His election was widely expected to be bad news for business interests, but that has not happened. Surprising many people, he carefully restored business confidence and, working with OPEC, helped increase and stabilize oil prices. In particular, he brought about improved conditions at PDVSA.
Chavez says he wants to remodel Venezuela according to one originated by Simon Bolivar. He carries with him copies of the new "Bolivarian" constitution, which he has translated into several of the many indigenous populations' languages so he can discuss it in their native tongue.
Like many a politician before him, Chavez seems to hold contradictory positions. He has become a fast friend of Cuban dictator Fidel Castro, yet maintains he is not a communist but a friend to all indigenous people.
He has begun supplying Cuba with substantial amounts of oil on favorable terms. Cuba, in turn has sent doctors and educators to Venezuela to work mostly in poor neighborhoods. Venezuelan educators and physicians have not generally welcomed this.
In very long speeches (for which he commandeers Venezuela's electronic media), Chavez has among other topics severely criticized the U.S. bombing in Afghanistan and Iraq and showed photos on Venezuelan TV. This drew a scolding from the U.S. State Department, which cast it as an example of "incessant hostility," and said his economic policies have brought Venezuela to the "brink of ruin." Chavez insists his political opponents and the aftermath of the general strike are the cause of the country's economic woes and that his opponents are amplifying legitimate differences with the U.S. for their effect on Venezuelan internal policies.
Chavez's political opponents have kept right after him. In March of 2002, a group of conspirators including a former oil minister took him from the presidential quarters and into a helicopter and announced that he had been deposed. The attempt created massive protests, forcing the conspirators to return him to power. In December and January, Chavez's opponents tried again, calling the general strike to attempt to rid the country of Chavez, but the strike did not hold. The results were disastrous. Many jobs in the private sector disappeared. PDVSA fired 18,000 oil workers--more than half its workforce--and said they would not receive any severance pay.
Now Chavez faces the recall hurdle--a referendum aimed at removing him from office. The recall was demanded by opposition leaders who gathered petitions and called in the Organization of American States, with support from a six-nation "Group of Friends of Venezuela" (Brazil, Chile, Mexico, Spain, Portugal and the United States). The recall referendum is currently stalled, with power struggles in the National Assembly where Chavez supporters and opponents are arguing over the makeup of the National Elections Council. This body must oversee the approval of the recall referendum and the conduct of the election. This is an extremely contentious process with many other issues still to be resolved before the recall can be held. If it doesn't end soon, however, Venezuela's court system may try to force a decision--if it can. Its jurisdiction, too, is in question.
Just this week, in an abrupt and unexplained about-face, PDVSA president Ali Rodriguez announced that the fired strikers would receive severance pay--despite the fact, he said, that some had sabotaged equipment during the strike.
Rumors in Caracas had it that Rodriguez himself would be fired by Chavez and replaced by Diosdado Cabello, Infrastructure Manager. However, Rodriguez appears to still be in favor with Chavez--he has been credited with restructuring PDVSA after the strike.
A PetroAmerica in Our Future?
With production at PDVSA, Venezuela's main industry, gradually coming up to pre-strike levels, the new deal with Trinidad and Tobago may gain Chavez political credit for an improving economy.
But Chavez has made it clear that this agreement is more than a way to gain income from natural gas: It is a logical first step in what he sees as inevitable growing collaboration among all the oil and gas producing countries of Central and South America. This includes his overriding vision: a multinational or super-state oil company combining the national oil companies of Trinidad and Tobago, Venezuela, Colombia, Ecuador, Brazil, and Peru. This, too, he sees as a model of the Bolivarian vision of unity among Latin American and Caribbean countries. He suggests the company be called PetroAmerica or PetroSud. "In this age of globalism, countries need to go beyond local interests," he says.
It's going to get more interesting from here on.
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