Opinion
- Editorial- Commentary
William
Lucie-Smith :
Plan
for when the energy runs out
The recent report on Trinidad and Tobago's gas
reserves by petroleum engineers Ryder Scott has
fuelled a debate on when our depleting energy reserves
may in fact run out. The report concluded that
our proven, probable and possible reserves had
all fallen by about 11 per cent since the last
audit. At the current rate of production these
existing reserves should last until about 2019.
The decline in reserves however is a clear indication
that we have been using existing reserves at a
rate greater than we have been finding new reserves.
Prime Minister Patrick Manning has been quick
to point out that it is wrong to conclude that
we will run out of oil or gas anytime soon. He
believes this report merely highlights the need
to step up exploration in order to find new reserves
and continue to develop existing finds. Now I haven't
read the Ryder Scott report (which has not been
published) nor am I a petroleum engineer, but it
is not possible to read the newspaper reports without
understanding that this is a major setback for
Trinidad and Tobago.
Prime Minister Manning has been at extreme pains,
however, to point out that the production-to-reserves
ratio is NOT an indicator of when gas will run
out because it takes no account of exploration
and new finds. It is only a guideline to indicate
when we need to step up exploration in order to
prove up more reserves. The report really tells
us nothing about the likelihood of success or failure
of future exploration.
Despite
Mr Manning's cautions it seems some commentators
are unnerved by, or misinterpret, the report. A
large firm of accountants (not my old firm) in
their budget letter incorrectly refers to Ryder
Scott's "prediction" as to when reserves
will be depleted. They also say that the budget
speech "reminded us of a 1970s Ryder Scott
report that gave the country a production to reserves
ratio of eight years-an eventuality that has obviously
not come to pass .We must therefore collectively
hope Ryder Scott continues to be wrong."
This
is exactly the misinterpretation the Prime Minister
complains of because, with stepped up
exploration and development, we can replace current
production with new reserves, a result in no
way in conflict with Ryder Scott's findings.
I repeat that the Ryder Scott report tells us
nothing about the results of exploration or the
likely costs associated with exploration and
development of new reserves.
What we do see from the report is that current
reserves are inadequate for some of the development
plans that we have heard about e.g. Train X for
LNG, aluminium smelters and a Caribbean gas pipeline.
The decline in reserves is because production
has exceeded new finds. The failure of the ultra
deep round earlier this year and BPTT's 2006 Ibis
deep well (which cost US$80 million and was a dry
hole) were both disappointments that contributed
to this. So while I am not qualified to talk about
our future prospects there must be concerns and
risks associated with our ability to find new reserves
at the pace at which we are depleting existing
reserves.
I fully accept Prime Minister Manning's position
that we must monetise our energy reserves .At current
prices we should indeed maximise production. However
the existing plants in 2006 were more than capable
of utilising all production and there is anecdotal
evidence that there were some gas shortages and
Train IV of ALNG did not run at full capacity.
It is essential that we do not continue building
new projects so that demand outstrips supply. It
would be prudent also to be confident about the
available reserves as existing fields start to
decline, and new plants are built with a life span
of 20 years or more. That in itself is a tricky
exercise and suggests the boom in downstream plants
is already over.
Not only do existing production fields have a
natural decline that must be replaced, but the
cost of exploration and production is increasing.
We may certainly find new reserves but at what
cost and what return to the energy producers and
to Trinidad and Tobago?
Already
at the recent energy conference there were calls
for more incentives to stimulate exploration
especially in deep waters. We have obviously
over the last 100 years found and produced the
most accessible and cheapest reserves and it
would be foolish to assume future production
will not be at much higher costs.
No matter what the outcome, this debate has at
least stimulated thought and starkly highlighted
the fact that energy is a wasting and non-renewable
resource. So much of our downstream development
is still dependent on energy that we must realise
that the transformation of the economy into one
that can achieve self-sustaining growth without
being dependent on energy is still a long way off.
We must use the current energy windfall to ensure
we can continue to grow when the energy runs out.
That requires diversification and more savings
and investment than is currently evident.
William
Lucie-Smith is Trinidad and Tobago citizen, Mr.
Lucie-Smith is the recently retired Senior Partner
of PricewaterhouseCoopers.
Since his retirement, Mr. Lucie-Smith has been
an independent
Consultant. Petroleumworld
not necessarily share these views.
Editor's
Note: This article was first publish in Trinidad
Express, Monday, September 3rd 2007. Petroleumworld
reprint this article in the interest
of our readers.
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Petroleumworld
09/04/07
Copyright ©2006
William
Lucie-Smith. All Rights Reserved.
