On January 24, 2023, the U.S. Department of the Treasury's Office of Foreign Assets Control's ("OFAC") reportedly issued a specific license to Trinidad and Tobago to develop a major gas field located in Venezuelan territorial waters (the "Trinidad and Tobago License"). According to recent media reports, the Trinidad and Tobago License is "intended to enhance Caribbean regional energy security" and "means the island nation can do business related to the Dragon gas field with Venezuela's heavily sanctioned state-run oil company," Petroleos de Venezuela, S.A. ("PdVSA").
The U.S. government's issuance of the Trinidad and Tobago License follows the government's issuance of General License ("GL") 41, which permitted a U.S. company to resume limited natural resource extraction operations in Venezuela. Accordingly, the issuance of the Trinidad and Tobago License may represent a step toward further, more general, U.S. sanctions relief in Venezuela, depending on the progress of events, including negotiations concerning free and fair Venezuelan elections and related matters.
Background
On January 28, 2019, OFAC designated PdVSA on its Specially Designated Nationals and Blocked Persons ("SDN") List. According to an OFAC press release, "[t]he United States [wa]s holding accountable those responsible for Venezuela's tragic decline, and w[ould] continue to use the full suite of its diplomatic and economic tools to support Interim President Juan Guaidó, the National Assembly, and the Venezuelan people's efforts to restore their democracy . . . ."
As a result of PdVSA's designation as an SDN, all property and interests in property of PdVSA subject to U.S. jurisdiction is blocked and U.S. persons are generally prohibited from engaging in transactions with PdVSA. Furthermore, pursuant to OFAC's "50% Rule," these restrictions apply to any entity owned 50% or more by PdVSA.
According to media reports, representatives of Venezuelan President Nicolas Maduro's government and representatives of the Unitary Platform opposition engaged in several rounds of political discussions until October 2021.
On November 26, 2022, the Unitary Platform and the Maduro regime announced the resumption of political discussions in Mexico City, a humanitarian agreement, and an agreement on the continuation of discussions focused on the 2024 elections. On the same day, OFAC issued GL 41. According to an OFAC press release, OFAC issued GL 41 pursuant to "longstanding U.S. policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy." Several months later, the U.S. government issued the Trinidad and Tobago License.
Scope of the Trinidad and Tobago License
Media reports indicate PDVSA has found reserves of 4.2 trillion cubic feet (TCF) in Dragon, on the Venezuelan side of its maritime border with Trinidad. In addition, the Dragon project "was headed for production over a decade ago, but stalled over lack of capital and partners, as well as sanctions." Trinidad and Tobago Prime Minister Keith Rowley "applied for the license in mid-2022 and won approval after discussing it with top U.S. officials, including U.S. President Joe Biden, while also keeping open a channel of communication with Venezuelan President Nicolas Maduro."
Although it does not appear that the ultimate and complete terms of the Trinidad and Tobago License are finalized, media reports suggest that "[t]he license will allow PDVSA, Shell [] and Trinidad to jointly plan and develop a gas-exporting project after agreeing to pending details in coming days," and "[a] portion of the resulting gas must be exported to Jamaica and the Dominican Republic . . . ." Furthermore, "the Maduro regime will not be permitted to receive any cash payments from this project and all remaining U.S. sanctions would be unchanged and enforced." Finally, it appears that the terms of the license will expire after two years.
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