Shell's Venezuela Gas Venture: Navigating Sanctions and the Countdown to 2025

The Dragon gas field, straddling the maritime border between Venezuela and Trinidad and Tobago, has emerged as a geopolitical and economic flashpoint. With shell and Trinidad’s National Gas Company (NGC) racing to complete seabed surveys by late 2024, the project’s fate hinges on a U.S. sanctions timeline that could either unlock billions in natural gas reserves or leave both nations in an energy limbo.

The Dragon’s Technical Race Against Time
Shell’s progress in the Dragon field has been methodical yet fraught. By mid-2024, the company finalized seabed surveys using the Colombia-flagged vessel Dona Jose II, mapping potential drilling sites and pipeline routes. These surveys are critical to the project’s final investment decision (FID), expected in 2024, which could commit $30 billion or more to develop the field’s 4.2 trillion cubic feet (tcf) of gas reserves. Initial production targets of 200 million cubic feet per day (MMcf/d) could escalate to 1 billion MMcf/d when integrated with Shell’s Manatee project in Trinidad.

However, the clock is ticking. The U.S. Office of Foreign Assets Control (OFAC) revoked licenses for Shell’s operations in Venezuela in late 2024, setting a wind-down deadline of May 27, 2025. This reversal, part of broader sanctions targeting Venezuela’s government, has thrown Trinidad’s energy security into question. The island nation relies on Venezuelan gas to fuel its liquefied natural gas (LNG) plants and petrochemical industries, which account for 30% of its GDP.

Sanctions as a Sword and Shield
The U.S. sanctions regime, which requires special licenses for dealings with Venezuela’s state-owned PDVSA, has been both a barrier and an opportunity. Until 2023, Shell operated under a temporary license that allowed in-kind payments to PDVSA, but the 2024 revocation stripped this flexibility. Trinidad’s government now seeks an extension, arguing that the Dragon project is critical to regional energy stability.

Investors, however, remain cautious. Shell’s stock has fluctuated amid geopolitical risks, dropping 12% in late 2024 amid news of the OFAC decision. Yet, the company’s long-term strategy suggests confidence: the Dragon-Manatee duo could diversify its LNG portfolio and reduce reliance on higher-cost projects in other regions.

The Economic Stakes
The Dragon field’s success promises significant revenue streams. Trinidad could earn $30 million monthly from gas exports, with 20% of royalties flowing to Venezuela—a lifeline for Caracas’s cash-starved PDVSA. For Trinidad, delays beyond 2025 risk a gas supply crunch by 2027, threatening its LNG exports and industrial base.

Pathways Forward: Diplomacy vs. Deadlines
Trinidad’s Energy Minister, Stuart Young, has framed the U.S. sanctions as a “strategic misstep,” emphasizing the project’s role in curbing regional energy poverty. The Energy Chamber of Trinidad & Tobago is lobbying for a compromise, such as a phased licensing extension or carve-outs for humanitarian gas sales.

Meanwhile, Shell’s deferral of public comments underscores the complexity: the company must balance Trinidad’s needs against U.S. enforcement risks. A May 2025 cutoff would likely force a pause in preparations, but Trinidad’s diplomatic push—paired with Shell’s technical momentum—hints at a possible eleventh-hour deal.

Conclusion: A High-Stakes Gamble
The Dragon gas field represents a pivotal test of how geopolitical tensions intersect with energy economics. With 4.2 tcf of reserves at stake and Trinidad’s economy on the line, the May 2025 deadline is more than a bureaucratic cutoff—it’s a make-or-break moment for regional stability.

Key data reinforces the urgency:
- Trinidad’s LNG plants require 200 MMcf/d of feedstock by 2026, 80% of which would come from Dragon.
- Venezuela’s PDVSA could gain $360 million annually in royalties if production begins in 2026.
- Shell’s Caribbean LNG exports, bolstered by Dragon gas, could rival Qatar’s market share in Europe and Asia.

For investors, the calculus is stark. A license extension beyond 2025 would position Shell as a strategic player in a gas-hungry world, while a missed deadline could trigger a write-down of exploration costs and geopolitical fallout. The next six months will determine whether the Dragon’s gas flows—or becomes another casualty of sanctions and timing.

Ask Aime: What is the impact of the Dragon gas field's development on the energy sector and the economies of Venezuela and Trinidad and Tobago?