European corporations could be investing in Venezuela’s natural gas, and changing both business and politics. If the necessary agreements are reached, the result could be a revived economy, cleaner energy exports, and closer relations across the Atlantic. Talks are also immersed in a context of government-opposition dialogue, which could be aided by European commercial and diplomatic interests.
Venezuela still boasts the world’s largest oil reserves. It hardly means anything today, as it is a minor producer. It has even been having problems to source enough petrol for its vehicles in recent years. The nation’s welfare was moreover tightly tied with US oil giants, which operated even after nationalisations in the 1970s.
The fact is, since a golden age between around 1950 and 1980, Venezuela’s oil production, and alongside its economy, has been on a near-steady path decline. While the easier access reserves are depleting, problems of mismanagement, corruption and sanctions have crippled the industry. ExxonMobilXOM +0.3% left after a spite with the socialist government 15 years ago. ChevronCVX -0.2% remained, although it is now severely constrained by rules from the White House.
There is, however, one front where there is hope. As war broke out in Ukraine, Europe has been looking beyond Russia to source fossil fuels. With Venezuela, European energy corporations are opening new opportunities by looking into the natural gas sector. Surprisingly, the Latin American nation never exported this resource, as the state relied instead on mass profits from oil.
Spanish Repsol, Italian Eni, and French Maurel & Prom are the names to look for. The first two were already involved in the South American country. Meanwhile, Maurel & Prom has appeared on the scene just as President Emmanuel Macron offers himself as a mediator. They are making a risky bet, giving the many problems that Venezuela has been facing in recent years. Nonetheless, they are moving into a new market full of potential. British Shell could also get involved through its investments in Trinidad and Tobago. The island nation shares a sizeable undersea gas field with Venezuela, and Shell could expand with a joint venture in the area.
One key element in this collaboration is the plan to recycle methane. The local fossil fuel industry is extremely polluting, more so than even its counterparts, due to underinvestment. However, methane, a by-product, could be turned into liquefied natural gas. This would have the double benefit of reducing atmospheric pollution and generating new revenues. Eni and Repsol would be involved in this $1.5 billion project, while the EU would contribute funding through its “Global Gateway” initiative. The latter fund is the European response to China’s “Belt and Road”, and primarily intends to invest in infrastructure in less developed countries as a form of diplomacy.
For better or worse, the future of this industry remains in the hands of politicians. There are three-way negotiations between Europe, Venezuela’s government, and its opposition. Macron and a group of South American presidents have offered to help in reaching a breakthrough. Elections are due for 2024, and it remains to be seen whether they will have EU observers present. The outcome of these negotiations will determine whether we see a burgeoning industry that produces a degree of cleaner energy to Europe, or the impasse continues.
Source : Forbes