The recent summit between the European Union (EU) and the Community of Latin American and Caribbean States (CELAC) in Brussels represented a timely opportunity for Europe to build new alliances on the world stage.
One important but under-reported development from the CELAC nations that merits European support resides in the CRESCII proposal, which would enable Caribbean nations to become co-owners of Venezuela's proven and drilled petroleum and gas fields.
This would represent a paradigm shift in the relationship between Caribbean nations and Venezuela. Instead of being passive buyers and sellers of oil and refined products, participating Caribbean countries would have a vested stake in their development, maintenance, productive capacities and output.
Many of these fields currently lie idle due to insufficient investment and maintenance, representing a missed opportunity for both Venezuela and the region. By investing in ear-marked oil and gas fields on preferential terms, Caribbean nations would assume a stake in the "barrels under the ground," unlocking vast potential for the region's energy security, while also supporting the rehabilitation and development of Venezuela's oil and gas industry.
Once a consortium of participating Caribbean countries has been established, it would enter into negotiations with Venezuela over the specific fields to be made available, and both the size and the terms of the investment required. Although much will depend on the particular fields in question, technical assessments, and the speed of investment, it should be possible for production to begin within an 18-month timeframe.
It is expected that the CRESCII consortium would be free to choose PDVSA as its production partner, or to bring in a third party to fulfil this role. It is also anticipated that until refining capacity in Venezuela has increased and recovered, the CRESCII consortium would be able to access refining capacity for its petroleum elsewhere in the region, with islands that have capacity in the Caribbean turning into logistical hubs.
For Caribbean nations, the CRESCII initiative presents a transformative opportunity. By becoming co-owners of Venezuelan assets, they can secure access to affordable energy supplies, reducing their vulnerability to international oil market fluctuations. This enhanced energy security will act as a catalyst for economic growth, promoting stability and development within the region. Additionally, the partnership offers a chance for technology transfer and knowledge-sharing, enabling Caribbean countries to bolster their own energy industries.
The CRESCII proposal is also a win-win for Venezuela, where years of economic challenges and political turmoil have adversely impacted the oil and gas industry. By welcoming Caribbean nations as co-owners and investors, Venezuela would receive much-needed capital and expertise to rehabilitate and develop its energy sector. This collaboration could revive oil and gas production, leading to economic growth and job creation, while also fostering regional integration and cooperation.
For Venezuela’s embattled energy sector, the proposal would also build on the momentum of the recent agreement the country signed with European energy giants Eni and Repsol, which allows for the export of natural gas liquids - or condensates - to other markets. The deal comes after years of discussions with Italy’s Eni and Spain’s Repsol for an exporting permit on condensates, a by-product of the natural gas production operation in Cardon IV, a venture they jointly run. The Cardon IV project has increased to 500 million cubic feet of natural gas per day in 2023, up 31% from 2019.
However, one critical condition for the CRESCII proposals to go ahead could reside in European support for the lifting of sanctions imposed on Venezuela by the United States. Encouragingly, France's President Macron's statement at the CELAC summit calling for sanctions' relief indicates positive progress towards the removal of these barriers.
A mutually beneficial resolution could even open doors to a more stable and secure energy supply for Europe, but the benefits are far broader than that. Lifting sanctions would alleviate the humanitarian crisis in Venezuela, leading to improved living conditions and social stability in the country. A stable Venezuela benefits both Europe and the US’ broader interests in Latin America and the Caribbean, reducing potential geopolitical tensions. In addition, it would unlock the necessary capital, technology and skilled labour urgently needed to repair and maintain the country’s energy infrastructure, which has been corroding over the last six years, partly for having been left dormant for too long as a result of the sanctions.
The CRESCII proposal, centred on cooperation within CELAC, offers a collaborative means through which to rejuvenate Venezuelan petroleum and gas assets. According to the 2022 BP Statistical Review of World Energy, Venezuela has more proved oil reserves than any other country in the world. Venezuela's 304 billion barrels of proved reserves just edges out Saudi Arabia's 298 billion barrels.
Just 30 miles offshore from Caracas lie the Western Hemisphere’s second-largest reserves of natural gas. Yet Venezuela has never exported a molecule of that fuel. Now, President Maduro is kicking off a long-shot bid to tap those vast deposits to revive an economy devastated by defaulted debt, rampant inflation, and crippling US sanctions.
The world’s eyes now fall on the United States and other Western countries to get behind the French President’s message. The US has applied economic pressure on Venezuela for long enough. It is now time to release the relief valve and enable the Venezuelan government to harness its natural resources to the benefit of its people and the broader region.
By Cyril Widdershoven for Oilprice.com
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