Opinion
- Editorial- Commentary
STCIC:
Energy
sector in 2007
Despite
the continuation of the high price environment for
oil, metals and petrochemicals, an active exploration
and developmental drilling programme and the construction
of major downstream projects, the past year was most
notable for a significant downturn in public confidence
about the future of the energy sector in T&T, especially
in the latter half of the year. This downturn in public
confidence was triggered primarily by the media and
various commentators’ responses to the release
of audited national gas reserve figures in August 2007
and then exacerbated late in the year by news of staff
cuts at three of the major multinationals operating
in T&T.
Higher oil prices but stable gas prices
Overall
WTI crude oil averaged US$ 77.66 for the year and
peaked at US$ 99.16 on November 20, 2007; the average
price over the year was some 17 per cent higher than
the 2006 average of US$ 66.19. While high international
oil prices continued to receive significant press coverage,
especially as they neared the US$100 mark, the prices
for natural gas (T&T’s major export) and
petrochemicals received little press coverage.
Overall natural gas prices showed much less volatility
and showed much more modest increases than oil over
the year: gas prices averaged US$ 7.11 at the benchmark
Henry Hub in Louisiana in 2007, just a couple of percentage
point higher than the 2006 average of US$ 6.99.
The dramatically increasing costs within the industry
also received limited press coverage, with the exception
of some coverage of a presentation by Robert Riley,
CEO and chairman of bpTT, at an STCIC Energy Luncheon
in November.
Ryder Scott audit
The
major T&T energy issue in 2007 was the findings
of the Ryder Scott audit report which was released
by the Ministry of Energy in August 2007. The findings
of the audit confirmed what many who work in the industry
had known for some time. That is that proven reserves
of natural gas had declined. The report indicated that
proven reserves had fallen by 9.2 per cent over the
period 2005 to 2007 while the 3P reserve declined by
11 per cent over the same period. The findings of the
report engaged the attention of the wider T&T public
on talk shows, the budget debate and the Government’s
Energy Conference that was held in September 2007.
One
of the conclusions coming out of the Energy Conference
was the need to increase the rate at which T&T
explores for hydrocarbons. In recognition of this the
Prime Minister noted, in his budget presentation, that
a new fiscal regime was necessary to stimulate further
drilling in the deep marine areas of the east coast,
marginal fields, heavy oil and farm in and farm out
arrangements. This new regime would be introduced in
2008, according to the budget presentation.
Cross-border gas and Train X
The
declining reserves to production ratio in T&T
has added impetus to attempts to monetise cross-border
reserves of natural gas that straddle the T&T and
Venezuela maritime boundary. In March 2007, the Prime
Minister Manning and the President Chavez of Venezuela
signed the first unitisation arrangement in the Western
Hemisphere. This agreement appeared to be a significant
step towards the monetisation of natural gas reserves
in the Loran/Manatee field, estimated to hold some
ten trillion cubic feet of natural gas, and the execution
of the agreement was closely flowed by the announcement
that BG T&T and the Government would undertake
a feasibility study for a fifth LNG Train (Train X).
However,
since the unitisation framework agreement was signed
in March 2007 there has been no public indication
that headway has been made on the finalisation of specific
plans for the Loran/Manatee field nor any indication
that the Venezuelans will agree to have Venezuelan
gas processed through T&T.
Future of state-owned companies
Another
announcement made by Prime Minister Manning in March
2007 was the proposed establishment of “an
integrated oil company that goes international.” This
decision has generated considerable debate in relation
to the future of the state-owned companies in the energy
sector.
Oil and natural gas production
The official figures that are available, thus far,
for oil and natural gas production in 2007 are up to
the end of September 2007. Natural Gas production for
January to September 2007 averaged at 4.04 billion
cubic feet of gas a day. That equates to approximately
1.48 trillion cubic feet of natural gas production
in 2007.
In
terms of the companies producing the natural gas,
bpTT accounted for 61.1 per cent of natural gas production
in T&T while BG T&T and EOG Resources accounted
for 21.9 per cent and 10.5 per cent of natural gas
production respectively. Oil production in the first
nine months of 2007 was a disappointing 121, 738 barrels
of oil per day which is a 14.3 per cent decline over
the average oil production in 2006 of 142, 753 barrels
of oil a day.
In November 2007, bpTT began natural gas production
from its Mango field. Production from this field is
expected to add 750 million standard cubic feet of
gas per day deliverability plus some associated condensate.
In December 2007, bpTT had started natural gas production
from the Cashima field. Cashima has a total gas production
capacity of 750 million standard cubic feet a day.
The jackets and topsides for both platforms were fabricated
in by Trinidad Offshore Fabricators Company (Tofco)
at La Brea.
In
May 2007, BG T&T and Chevron signed a US$ 2
billion contract with the NGC for the supply of 220
million cubic feet of natural gas per day by 2009.
This gas would be supplied from the Dolphin field.
Exploration activity
The highlight of exploration drilling activity in
2007 was the start of drilling campaigns by Canadian
Superior, Petro-Canada and Kerr McGee. Canadian Superior
began its campaign in block 5c, which it named the
Intrepid Block, in June 2007 and their first well was
reported to have reached a total depth (TD) of 16,
150 feet by December 2007.
The most recent press release from Canadian Superior
dated December 17, 2007 indicated that the company
had completed wireline logging of the well and were
casing the final section and conducting flow test.
BG
T&T has brought into the Intrepid block since
the start of the exploration campaign.
In
September 2007, Petro-Canada’s kicked off
its ambitious drilling campaign that includes drilling
in the Block 1a and 1b in the Gulf of Paria and in
Block 22, which is North East of Tobago.
Kerr
McGee also spudded a well, the Kugler-1 in July 2007
in Block 3(b). Kerr McGee’s partners are
local company Primera Oil and Gas Ltd (25 per cent)
and BHP Billiton (30 per cent).
It is important to note that these areas, especially
blocks 5c and 22 are new areas for exploration and
from all reports have potential for commercial hydrocarbon
deposits
EOG Resources also completed its development of the
Oilbird field in mid 2007.
In August of 2007 EOG, chief executive officer Mark
Papa announced that the company had finalised its block
4(a) gas contract with the Government. It was also
reported that the Ministry of Energy was very advanced
in its negotiations with Tullow Oil, Centrica and OMEL
for blocks that were offered as part of the 2006 onshore
/nearshore/shallow marine bid round.
Downstream developments
In the downstream sector construction work continued
on the MHTL AUM complex which had started construction
in February 2006. This projected is expected to be
completed in Q4 2009. Work is also expected to begin
in Q1 2008 on the Alutrint aluminum smelter, the Essar
Steel complex and the Carisal Calcium Chloride plant.
The Essar project signed its gas supply contract for
140 million cubic feet of gas a day from the NGC in
May 2007.
Guyana/Suriname border dispute resolved
Regionally the Guyana/Suriname border dispute was
resolved. The settlement of this six year dispute has
the potential to open up new opportunities in both
countries where the US Geological Survey estimates
a potential of 15.2 billion barrels of oil and 42 tcf
gas in the basin.
In October-November, 2007 the STCIC organised a trade
mission for its members in the energy services sector
to Guyana and Suriname. In Barbados, the Government
announced that it will accept bids for the frontier
deep-water blocks it wants to open up for exploration
on April 4.
The
upcoming years promises to be another active one
for the T&T energy sector as a number of downstream
projects that have long been in the planning stage
move into the construction phase. The next year will
also see the continuation of the search for oil and
gas with some seven offshore exploration wells expected
to be drilled.
The
publication of the Ryder Scott audit in 2007 has
stimulated thinking about scenarios for T&T beyond
oil and natural gas. The STCIC has advocated a vision
for T&T as an energy services and petrochemicals/
metals processing hub.
The
roadmap to attaining this vision will form part of
the discussion at the STCIC’s T&T Petroleum
Conference that will be held from February 25 to 26,
2008 at the Hilton Trinidad and Conference Centre.
Further
details on TTPC are available at www.stcic.org
STIC is South Trinidad Chamber of Industry and Commerce. Petroleumworld
not necessarily share these views.
Editor's
Note: This article was first publish
in Trinidad Guardian, January 3rd 2008.
Petroleumworld reprint this article in the interest
of our readers.
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Petroleumworld
01/ 06 /07
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