By Curtis Williams

(Reuters) -Venezuela is close to approving a license for Shell and the National Gas Company of Trinidad and Tobago to develop a promising offshore natural gas field and export its production to the Caribbean country, two people close to the matter said.

Trinidad and Tobago’s Prime Minister Keith Rowley on Monday confirmed that the parties were negotiating the license and added that Energy Minister Stuart Young was expected to visit Caracas this week.

The license could set in motion a long-running effort by Trinidad to boost its gas processing and petrochemical exports, while providing Venezuela with a much-needed extra source of cash.

The two countries aim to speed cross-border energy development since the U.S. in January issued a two-year authorization allowing the Dragon field’s development.

Venezuela, which holds Latin America’s biggest gas reserves, and neighboring Trinidad, the region’s largest liquefied natural gas (LNG) exporter, would complement each other’s needs to produce and export gas.

Both nations are discussing a 25-year exploration and production license for the Dragon field, which holds up to 4.2 trillion cubic feet of gas and lies in Venezuelan waters near the maritime border between the two countries.

Some terms are still to be settled, but if all goes well a deal could be signed in coming days, the people said.

Shell would operate the project with a 70% stake and Trinidad’s NGC would hold the remaining 30% under proposed terms, the people said.

Venezuela’s state-run oil firm PDVSA, which discovered Dragon’s reserves and paid for existing infrastructure, would not have a stake in the project, but Venezuela would receive cash or a portion of gas production as royalties.

PDVSA in 2013 finished testing gas output at Dragon, but the field has never been commercially active due to the company’s lack of capital and, more recently, U.S sanctions.

The U.S. last month temporarily eased sanctions on Venezuela and amended the authorization for Dragon, allowing Caracas to receive proceeds from gas sales. Since then, negotiations have moved faster, a third person said.

Shell declined comment. NGC referred questions on the talks to Trinidad’s energy ministry. The ministry, PDVSA, and Venezuela’s oil ministry did not reply to requests for comment.

Rowley also said he hopes a long-running dispute between Venezuela and its neighbor Guyana over a potentially oil-rich territory does not have implications for projects with Trinidad.

“I would not like to see the relationship between Venezuela and Guyana ever get to a point where consequent actions will negatively damage us”, the prime minister said.

VOLUMES, PRICES, PIPELINES

The proposed license would allow an initial volume of 300 million cubic feet per day (mcfd) of Venezuelan gas to go to Trinidad for LNG production, starting in late 2026, and an additional 50 mcfd to petrochemical plants, the people said.

Trinidad and Tobago has the capacity to process 4.2 billion cubic feet per day (bcfd) into LNG, petrochemicals and power, but its gas production is about 2.7 bcfd.

The lack of gas has led to the shutting of one of its LNG processing units.

The parties have agreed in principle to a price that would land gas across the border at less than $3 per mcf, the sources said.

PDVSA has pushed for a signature bonus of some $65 million to be paid upfront. But Shell and NGC want to tie any payment to certain milestones, such as first gas, the sources added.

The parties are considering two separate lines to transport the gas: one partially built by PDVSA to Guiria, on Venezuela’s eastern coast. A second line would connect to Shell’s Hibiscus field in Trinidad.

If the parties agree that some of the gas will pass through Guiria, an additional short pipeline linking Guiria to Point Fortin, home of Trinidad’s LNG plants, might be needed.

That option would allow Venezuela to process the gas on its shore, keeping what it needs to supply the domestic market and potentially exporting gas liquids in the future. But adding a new line might extend the time for the project to begin output to five years, rather than three years as hoped, the people said.

(Reporting by Curtis William in Houston; additional reporting by Marianna ParragaEditing by Marguerita Choy)

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