Shell Plans Return to Venezuela to Reclaim Gas Billions

Shell is poised to reinvigorate its operations in Venezuela, particularly targeting the lucrative gas fields that lie adjacent to Trinidad and Tobago. The outcome of recent political changes has presented an opportunity for the British oil multinational to advance its Dragon gas field project.

Shell’s Focus on Venezuelan Gas Projects

The Dragon gas field, located in Venezuelan waters, is estimated to contain around 120 billion cubic meters of gas. This figure is approximately three times the UK’s annual gas consumption. With the potential to generate annual revenues of $500 million (£370 million) for up to 30 years, the project represents a significant opportunity for Shell.

Impact of US Sanctions and Political Changes

For years, Shell has faced delays due to US sanctions affecting investments in Venezuelan energy. However, the political shift following Donald Trump’s departure from the presidency has created a favorable environment for renewed exploration and development. Trump had previously encouraged oil companies to invest in Venezuela, signaling a potential reduction in regulatory barriers.

• Dragon gas field could bring in $500 million annually.
• Project holds approximately 120 billion cubic meters of gas.
• Potential partnership strategies with US firms may be necessary.

Competitive Landscape in Venezuela

Industry experts note that while Shell is eager to expand, US companies like Chevron, which are already operating in the region, may have an advantage. Investment bank Panmure Liberum’s Ashley Kelty suggests that American firms could lead the charge in Venezuelan investments, with European firms like Shell and BP potentially being brought on for joint ventures.

BP has shown interest in the area as well. The company received a license for the Manakin-Cocuina field in 2024, though recent political developments led to revocation of its US approvals. BP is actively seeking to have these licenses reinstated.

The Broader Implications for the Oil Market

Venezuela, despite its vast oil reserves, ranks low in global production. The anticipated increase in production from Venezuela poses a challenge to OPEC’s control over the market. The cartel, predominantly led by Saudi Arabia, has historically aimed to maintain high oil prices by regulating output among member countries.

• Venezuela holds the world’s largest oil reserves.
• Market volatility is expected as the political landscape shifts.

Concerns Among Gulf States

The prospect of increased Venezuelan oil production raises alarms among Gulf states about market stability and pricing. Experts predict significant changes in the oil landscape, affecting how nations manage their economic strategies.

Greg Newman, chief executive of Onyx Capital, emphasizes that any increase in Venezuelan output could lead the global markets to oversupply by one to two million barrels a day, thereby exerting further pressure on already declining prices.

The developments surrounding Shell’s renewed focus on Venezuela and the associated gas projects promise to reshape not only the company’s future but also the dynamics of the global oil market.