Venezuela struggles with gas shortages ahead of key presidential vote

Despite its vast oil reserves, Venezuela faces a critical challenge with its underdeveloped natural gas sector.

Venezuela is largely recognized as a struggling oil producer despite holding the world's largest oil reserves, Caliber.Az reports citing the foreign media.

However, the country also boasts significant natural gas reserves that remain underdeveloped. Venezuela urgently needs investment in its gas sector to address this critical issue.

With Venezuelans heading to the polls on July 28, gas supply has emerged as a key issue for voters. As production plummets and many are forced to rely on wood-burning stoves, the need for a robust gas investment plan is evident.

In 2016, Venezuela produced approximately eight billion cubic feet of natural gas, according to data from consultancy Gas Energy Latin America. Today, production has dwindled to about four billion cubic feet, and without substantial new investment, this trend is unlikely to reverse.

The Maduro administration is aware of the urgency and is taking steps to address the shortfall. This week, the government signed a deal with BP and the National Gas Company of Trinidad and Tobago to develop the Venezuelan portion of a shared offshore gas field, signaling a potential turning point in efforts to revive the country's gas production.

With an estimated one trillion cubic feet of reserves, the Cocuina-Manakin field could significantly boost Venezuela's natural gas production. The project is poised for advancement, especially after the US Treasury Department granted it an exemption from the energy sanctions imposed on Caracas. Negotiations are nearing completion, and stakeholders are hopeful for final approval before the upcoming elections, particularly after BP secured a 20-year license for the development.

Another promising venture is the Dragon field, shared with Trinidad and Tobago, which holds an estimated four trillion cubic feet of natural gas reserves. Last year, Venezuela and Trinidad and Tobago awarded a 30-year license to Shell and the National Gas Company of Trinidad and Tobago for its development. First production from Dragon is expected next year, with an anticipated output of 185 million cubic feet daily, destined for liquefaction in Trinidad and Tobago.

However, these projects may not substantially address Venezuela's domestic gas supply issues. The government is actively seeking additional deals with international oil companies. Yet, challenges persist, including ongoing sanctions—although exemptions have been granted for certain projects—and significant debt owed by PDVSA, which could deter potential investors from re-engaging with the country.

Venezuela, despite its vast oil reserves, is struggling with underdeveloped natural gas resources. The country, holding an estimated 200 trillion cubic feet of natural gas, has faced significant declines in gas production. From a peak of around eight billion cubic feet daily in 2016, production has plummeted to approximately four billion cubic feet. With the upcoming presidential elections on July 28, voters are prioritizing solutions to the gas supply crisis, as many are forced to rely on wood-burning stoves due to insufficient gas.

The Maduro administration is attempting to address the issue through partnerships with international energy firms. Recently, Venezuela signed an agreement with BP and the National Gas Company of Trinidad and Tobago to develop the Cocuina-Manakin field, which holds an estimated one trillion cubic feet of gas. This project received a boost when the US Treasury Department granted an exemption from the sanctions imposed on Venezuela, allowing the initiative to proceed.

Another significant project is the Dragon field, shared with Trinidad and Tobago. A 30-year license was awarded to Shell and the National Gas Company of Trinidad and Tobago to develop this field, which contains about four trillion cubic feet of reserves. Production is expected to start next year at a rate of 185 million cubic feet daily. However, this gas will be exported and liquefied, providing little immediate relief to Venezuelans.

While international projects offer hope, the Venezuelan opposition, represented by Edmundo Gonzalez in the upcoming elections, advocates for a different approach. They propose opening the energy sector to private and local companies, focusing on small-scale midstream projects. Analyst Antero Alvarado from Gas Energy Latin America highlights that developing midstream infrastructure could significantly boost production given Venezuela's current distribution network shortcomings.

As Venezuela seeks to enhance its gas production, the implications extend beyond its borders, with neighbouring countries and Europe eyeing Venezuela as a potential new source of gas for global markets.