Venezuela’s Natural Gas: Questions Endure

Venezuela’s Natural Gas: Questions Endure

link to page 1 link to page 2

July 7, 2023
Venezuela’s Natural Gas: Questions Endure
Venezuela, with its large and relatively untapped natural
Trinidad, it would allow Venezuelan natural gas to reach
gas resources, has taken initial steps in developing and
markets in a much shorter amount of time. (See CRS In
possibly exporting natural gas. The war in Ukraine has
Focus IF10914, Trinidad and Tobago, by Karla I. Rios).
highlighted the important role of natural gas in the world’s
energy mix and the need for diverse sources to enhance
Figure 1. Select Regional Natural Gas Assets
global markets and improve supply security. In the medium
term, Venezuelan natural gas could provide another non-
Russian source of gas for Europe and elsewhere.
Venezuela’s ability to develop its natural gas resources is
limited by a lack of expertise, equipment, and financial
capital within Petróleos de Venezuela (PdVSA), the corrupt
and debt-ridden state oil and gas company. U.S. sanctions
on the authoritarian Nicolás Maduro government and
PdVSA also likely limits the country’s ability to develop its
natural gas sector. The Biden Administration eased some
energy sanctions on Venezuela in late 2022. Some analysts
and Members of Congress oppose further relief given
President Maduro’s failure to negotiate with the opposition
and to take steps to allow free and fair elections in 2024.
Venezuela’s Natural Gas Potential
Venezuela has vast natural gas reserves, estimated at 6,300
billion cubic meters (BCM), the seventh largest in the

world. As part of Venezuela’s first steps to developing its
Source: Compiled by CRS using IHS 2019 data and 2017
large natural gas resources, the country announced that two
Department of State data.
internal licenses for the export of natural gas would be

issued in June 2023, which had not happened as of the date
The Dragon natural gas field in Venezuela (see Figure 2)
of publication. Two major European oil and natural gas
currently is not producing and would require additional
companies—ENI of Italy and Repsol of Spain—have been
development to start production. It is located relatively
working in Venezuela since the 1990s and eventually began
close to Trinidad. Industry estimates that the Dragon Field,
producing natural gas primarily for domestic use. The joint
which would include companies from Venezuela, Trinidad
venture between ENI, Repsol, and PdVSA, known as Perla,
and Tobago, and Europe, could be producing approximately
is located in the western part of Venezuela and is producing
1.5 BCM a year within two years. Additionally, there are
approximately 3.1 BCM a year of natural gas, which is not
other fields in the area of Dragon, both in Venezuela and
a lot compared to the major U.S. fields, but it is enough to
Trinidad and Tobago, that may provide additional
export. (See Figure 1.) This could be increased if the
production in the future.
necessary conditions, such as Venezuelan reforms and U.S.
licenses, are put in place by the Maduro government and
Venezuela also flares (burns natural gas that cannot be
the international community, including the United States.
captured) a large amount of natural gas. About 80% of
Venezuela’s natural gas production is associated with its oil
Getting a license to export is a necessary step toward
production, meaning it is produced whether or not there is
exporting natural gas from Venezuela. However,
demand for it. If this natural gas could be captured, it could
developing the natural gas resources and increasing
be exported as well. Utilizing Venezuela’s natural gas more
production may take legislative and regulatory reform in
fully may help reduce its emissions, which ranked in the top
Venezuela, as well as significant time, money, and other
five last year according to the World Bank, by decreasing
infrastructure, including pipelines.
flaring.
There may be an opportunity to send Venezuelan natural
Another factor in developing Venezuela’s natural gas
gas to Trinidad and Tobago for export. Trinidad and
resources is that the Maduro government, including
Tobago has been a liquefied natural gas (LNG) exporting
PdVSA, is subject to extensive U.S. economic sanctions.
country for many years and has a partially idled LNG
While the United States has imposed targeted sanctions on
export terminal, which could become operational if
Venezuelan officials and individuals for more than 15
additional natural gas were supplied. By sending this gas to
years, the Trump Administration expanded economic
https://crsreports.congress.gov

Venezuela’s Natural Gas: Questions Endure
sanctions in response to the increasing authoritarianism of
Venezuela has enough natural gas, at its current production
President Nicolás Maduro, who came to power in 2013.
rate, to last over 300 years. For comparison, the United
U.S. sanctions, for example, restrict Venezuela’s access to
States has just under 14 years-worth of proven reserves. If
U.S. financial markets; impose full blocking sanctions on
Venezuela were to produce at the same rate as the U.S.
PdVSA and Venezuela’s central bank, among other entities;
ratio, its annual production would be about 450 BCM
and enable the imposition of secondary sanctions on foreign
compared to its almost 19 BCM per annum, currently. At
entities that assist or support the Maduro government.
the higher rate, it would also leave a large amount of natural
gas for export, if domestic consumption did not rise to the
In January 2023, Trinidad and Tobago received a two-year
same level. It could also be a new source of significant
license from the U.S. Treasury Department to engage with
revenue for Venezuela. However, ongoing corruption and
Venezuela on developing the Dragon Field. However, some
mismanagement by the Maduro government makes this
uncertainty surrounds the project. The Maduro government
scenario unlikely in the near future.
is not permitted to receive any cash payments from the
project, which hampers Trinidad’s relationship with
U.S. Policy and Natural Gas
Venezuela. Instead, Trinidad and Tobago provide
In 2022, the Biden Administration sought to support
humanitarian supplies to Venezuela as payment.
negotiations between the Maduro government and the
democratic opposition. In November 2022, the Department
Figure 2. Dragon Field Export Project Rendition
of the Treasury issued a license to allow Chevron to
conduct business with PdVSA as an incentive for Maduro
to make progress in negotiations aimed, in part, at making
the presidential elections due in 2024 freer and fairer. While
some in Congress supported that move, others opposed the
license and introduced legislation that would prohibit U.S.
imports of Venezuelan oil.
Chevron has resumed shipments from Venezuela to the
United States and recouped some of the billions in debt
PdVSA owes it, but political negotiations in Venezuela
appear to remain stalled. On June 30, 2023, the State
Department expressed “deep concern” about Maduro
officials’ decision to bar a leading opposition candidate
from competing in elections. On July 6, Secretary of State
Antony Blinken said that disqualifying opposition
candidates is “deeply unfortunate” and that international
efforts to press for free and fair elections will continue.

Despite these developments, some energy analysts have
Source: Compiled by CRS from the 2019 IHS database and the 2023
urged the Administration to issue a license for ENI and
Sovereign Limits database.
Repsol to work with PdVSA to export gas. They argue that

such a license could contribute to global markets and
European energy security while supporting negotiations.
Trinidad and Tobago’s government is reportedly petitioning
Skeptics doubt such a move would incentivize Maduro to
the U.S. Treasury Department to be allowed to pay PdVSA
negotiate in good faith, particularly since some neighboring
in cash. In March, the governments of Venezuela and
countries have restored relations with his government
Trinidad and Tobago signed confidentiality agreements,
without criticizing its antidemocratic actions. Congress may
which are needed to establish a negotiating framework.
consider requesting more information about any Biden
They were scheduled to meet again in June, which has not
Administration efforts to grant sanctions relief to Venezuela
happened as of the publication date. If negotiations go well,
Trinidad’s energy minister stated that natural gas could
in the natural gas sphere and then either encourage or
discourage such actions.
begin flowing to international markets in two years.
More Gas Resources than Production
See: CRS In Focus IF10230, Venezuela: Political Crisis
and U.S. Policy; CRS In Focus IF10715, Venezuela:
Although Venezuela is an important player in global oil
Overview of U.S. Sanctions; and CRS Report R44841,
markets, it has not been for natural gas. Venezuela has
Venezuela: Background and U.S. Relations.
generally been self-sufficient in natural gas for decades,
producing all the natural gas it consumes, but never
exporting. Between 2007 and 2015, Venezuela imported
Michael Ratner, Specialist in Energy Policy
small volumes of natural gas from Colombia to meet its
Clare Ribando Seelke, Specialist in Latin American
needs. Regardless, Venezuela is a member of the Gas
Affairs
Exporting Countries Forum, a nascent cartel referred to as
“
IF12448
Gas OPEC,” a reference to the oil cartel.

https://crsreports.congress.gov

Venezuela’s Natural Gas: Questions Endure

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF12448 · VERSION 1 · NEW