Shell is actively seeking a long-term licence from the US Government prior to taking an FID on the Dragon natural gas project in Venezuela, reported Reuters, citing sources familiar with the situation.

The Dragon field, situated near the maritime border with Trinidad and Tobago, is estimated to contain up to 4.2 trillion cubic feet of gas, a significant potential source of energy for Trinidad’s liquefied natural gas and petrochemical sectors.

In January 2023, the US granted Trinidad a two-year licence to negotiate and develop the Dragon project, with Shell as the operator. The project also involves state-owned companies PDVSA from Venezuela and Trinidad’s National Gas Company (NGC).

The US licence was amended in October 2023 to extend its validity until October 2025 and to permit Venezuela to receive cash payments from gas sales.

The Venezuelan Government showed its support for the project by awarding a 30-year licence in December, which allows Shell and NGC to produce and export gas to Trinidad.

Trinidad expects the FID for Dragon, the final move in determining whether to proceed with its sanctioning and construction, in 2025.

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The current US licence may expire before the FID and the commencement of gas production, prompting Shell to seek a longer-term US licence to proceed with the FID and co-development of the field alongside NGC. Shell has proposed a 15-year licence, according to two sources.

One source expressed the expectation that the US would grant the licence, highlighting the significant investment involved.

The US officials would not expect Shell to invest more than $1bn (£789.96m) “without certainty of that investment”, the source stated.

Shell, however, has declined to comment on the matter. Requests for comment from PDVSA, NGC, Venezuela’s oil ministry, the US Treasury Department and the US Department of State have not received immediate responses, Reuters reported.

Trinidad’s energy minister, Stuart Young, is actively engaging with Venezuela and the US on the licensing issue.

Young, who spoke to Reuters at the CERAWeek conference in Houston, said: “Obviously, a two year licence has a window and this is a transaction that will take more than two years.”

He also met with US Assistant Secretary of State for Energy Resources Geoffrey Pyatt last month to discuss the project.

The Dragon project, along with Shell’s Manatee gas project in Trinidad’s waters, is poised to be a key supplier of gas to Trinidad, with both projects vying to start production.