By Curtis Williams

HOUSTON, July 14 (Reuters) - Shell SHEL.L has begun tendering for drilling services for its Dragon offshore gas project in eastern Venezuela, part of a plan to drill four wells there beginning in the second quarter of 2027, according to two people familiar with the process.

The contract is expected to be awarded by the end of September, the people say. However, it will not take effect unless a positive final investment decision is made for the 4.2 trillion-cubic-foot development. But the requirement is a sign that the company is taking concrete steps to advance the long-delayed development after years of sanctions-related uncertainty.

Progress at Dragon has repeatedly been interrupted by shifts in U.S.policy toward Venezuela. The Trump administration earlier revoked licenses granted under former President Joe Biden that had allowed Shell and NGC to move forward with Dragon and other cross-border gas developments.

Washington later issued new authorizations allowing the project and others in the oil industry to proceed following the removal from power in early 2026 of former Venezuelan President Nicolas Maduro.

Shell and Venezuela's Oil Ministry did not immediately respond to a request for comment. The company is separately negotiating oil and gas areas with the Venezuelan government that could widely expand its presence in the country.

The Dragon project, located in Venezuelan waters near the maritime border with Trinidad and Tobago, is set to be the OPEC country's second offshore gas development, and is viewed as one of the most important initiatives to address Trinidad's worsening gas shortage, which has reduced output at the country's liquefied natural gas and petrochemical facilities.

Shell plans to transport gas from Dragon to Trinidad, with about 70% of production earmarked for the Caribbean nation's flagship Atlantic LNG export facility and the remaining 30% intended for the country's petrochemical sector, the Trinidad government has previously said.

Trinidad's domestic gas production has declined, forcing LNG and petrochemical producers to operate below capacity and contributing to the shutdown or idling of several ammonia and methanol plants as well as Atlantic LNG's 4 mtpa Train 1.

Shell has previously said that Dragon could help replenish supplies to Atlantic LNG, of which the British company and BP BP.L each own 45%, while Trinidad's National Gas Company holds the remaining stake.

Shell completed a marine survey for Dragon last year that has helped it determine drilling locations and pipeline routing. The company and NGC were granted a 30-year license in 2024 by Venezuela for the project and have said that initial output could come in three years.