The impact on LNG markets

In addition to its extensive oil reserves, Venezuela holds the world’s seventh largest natural gas reserves, estimated at 6,300 billion cubic meters (bcm) — ranking just below China and surpassing both Saudi Arabia and the UAE. Despite this, current production stands at approximately 30 bcm/year and is entirely consumed domestically, with virtually no exports. This suggests the evolving situation in Venezuela has significant potential to impact the global LNG market, subject to conducive policies and infrastructure investments.

Firstly, Venezuelan gas has long been considered a backfill option for Trinidad and Tobago’s LNG facilities, which are currently facing declining domestic feedstock. Trinidad and Tobago has a total operational LNG liquefaction capacity of 16 bcm/year across three operational trains, and one train is currently being decommissioned due to a lack of feedgas. Major foreign shareholders have been actively seeking upstream backfill projects to offset the decline in production, including Venezuelan gas fields. The U.S. has already granted preliminary permission to negotiate with PDVSA (the state-owned oil and gas company of Venezuela) to develop the Dragon field of Venezuela, with the mandatory involvement of U.S. companies.

“Given recent developments in Venezuela, we believe this initiative is gaining the necessary momentum for further advancement and represents the most immediate opportunity for Venezuelan gas to impact the global LNG market. Should the project succeed, we estimate that Trinidad and Tobago’s LNG exports could increase by up to 6 bcm/year — or by as much as 10 bcm/year if the decommissioned train is brought back online,” said Otar Dgebuadze, who specializes in European Natural Gas and Global LNG research at J.P. Morgan.

Secondly, Venezuela could export natural gas to neighboring countries, reducing their reliance on imported LNG. Colombia is the most likely candidate, as the two countries are already connected via a pipeline. While the pipeline has been idle since 2015, recent statements from both Colombian and Venezuelan officials have suggested a potential revival, indicating its operational readiness. “With a nameplate capacity of 5 bcm/year, this pipeline could offset Colombia’s current LNG needs of 2.5–3 bcm/year, which will likely increase as domestic production continues to decline,” Dgebuadze noted.

Over the medium term, Venezuela could even revisit its LNG export ambitions, which have long been discussed but have never materialized. “With the right partners and legislative framework, the development of an LNG export project in Venezuela is not inconceivable,” Dgebuadze added.