Shell plc (SHEL Quick QuoteSHEL - Free Report) , a London-based integrated oil and gas company, is advancing its plans to commence natural gas production at Venezuela’s Dragon gas field in 2026, a year ahead of the previously projected 2027 launch. This ambitious timeline highlights SHEL’s commitment to securing gas supplies to boost liquefied natural gas (“LNG”) production in Trinidad and Tobago. According to sources familiar with the project, survey work is set to begin next month, with drilling operations slated to include three wells.

U.S. Sanctions and Special Licensing for Dragon Gas Exports

Venezuela’s oil and gas sector, largely controlled by state-run PDVSA, remains subject to strict U.S. sanctions. However, Washington granted a special license in early 2023, allowing Trinidad’s National Gas Company (“NGC”) and SHEL to pursue gas development at the Dragon field. This license, which has been extended through October 2025, enables the companies to export gas from Venezuela’s territory to Trinidad and Tobago, ensuring compliance with international regulations.

Given the recent tightening of U.S. sanctions on Venezuela, industry leaders are closely watching whether the license will be renewed beyond 2025. Trinidad’s government has been actively lobbying U.S. officials, emphasizing the strategic importance of these energy projects for regional energy security.

SHEL’s Fast-Tracked Timeline to Address LNG Shortages

Shell’s acceleration of Dragon’s development is driven by a pressing need to increase natural gas output for LNG production at Trinidad’s Atlantic LNG facility. The project, a key supplier of LNG to global markets, has faced significant supply constraints, operating at only 8.5 million metric tons last year, well below its full capacity of 12.5 million metric tons.

The supply shortfall was further exacerbated by BP plc’s (BP Quick QuoteBP - Free Report) recent decision to decommission Train 1, a liquefaction unit that had been idled since 2020 due to insufficient gas availability. With Dragon’s estimated 4 trillion cubic feet of natural gas reserves, SHEL is poised to help bridge the gap and enhance regional energy stability.

Engineering and Environmental Assessments Underway

As part of the development process, SHEL will commence an environmental baseline survey in April. This study will assess ocean currents, wave patterns, marine biodiversity and seabed stability, crucial for constructing a 10-mile (16-kilometer) subsea pipeline linking Dragon to existing infrastructure in Trinidad.

The final investment decision is anticipated later this year, contingent on Washington’s stance on extending the U.S. license. In 2023, Venezuela granted SHEL and NGC a 30-year license to explore and develop the Dragon field, highlighting their long-term commitment to the project.

Geopolitical Considerations and U.S. Policy Uncertainty

Despite the U.S. government's recent revocation of Chevron’s (CVX Quick QuoteCVX - Free Report) operating license in Venezuela, no specific actions have been taken against projects involving Trinidad and Tobago. However, signals from the current administration suggest a potential hardening of policies toward Venezuela, raising questions about the future of licensing exceptions for energy projects.

Trinidad’s leadership has reiterated its stance on the necessity of maintaining exemptions for projects like Dragon, which play a crucial role in energy security and economic stability across the Caribbean region. Industry experts remain optimistic that diplomatic engagements will secure continued access to Venezuela’s gas reserves.

Strategic Energy Move With Global Implications

Shell’s accelerated push to develop Dragon represents more than just a regional energy initiative. It is a strategic maneuver in the evolving global LNG market. By securing additional gas supplies, SHEL aims to reinforce Trinidad’s position as a leading LNG exporter while reducing dependence on other volatile supply chains.

With the first gas production now targeted for 2026, SHEL and its partners are positioning themselves at the forefront of an energy transition that balances supply security, regulatory compliance and geopolitical challenges. The success of this project will be a key moment for Venezuela-Trinidad energy relations and the broader LNG sector.

Zacks Rank & a Key Pick

Currently, SHEL, BP and CVX, each has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at a better-ranked stock like Archrock (AROC Quick QuoteAROC - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present. You can seethe complete list of today’s Zacks #1 Rank stocks here.