Opinion
- Editorial- Commentary
STCIC
:The issue of reserve to production.
Does
T&T need a target RP ratio ?
The
reserve to production ratio (RP) has generated
much discussion since the findings of the 2007
Ryder Scott report were made public in August 2007.
At next week’s T&T Petroleum Conference
(TTPC 2008), the reserve to production ratio will
be the focus of attention of a high level panel
of experts who will address the question: does
T&T need a target reserve to production ratio
and, if so, what should it be? The panel includes
Trevor Boopsingh, Herman Acuna and Bill Cline;
moderated by Rodney Jagai of the University of
T&T (UTT).
Trevor
Boopsingh is well known to the T&T
energy sector. He is a former permanent secretary
in the Ministry of Energy and a former chairman
of Petrotrin. He was also the chairman of the Vision
2020 Sub-Committee on Energy.
Herman Acuna is the senior international VP at
Ryder Scott Company. Acuna has been the coordinating
manager for the gas reserves and resources certifications
conducted by Ryder Scott Company on behalf of the
Ministry of Energy since 2000.
Given
that Ryder Scott is the company that conducts
the audits of T&T’s natural gas reserves,
Acuna’s presence on this panel is of significance.
Bill
Cline is the group CEO of Gaffney, Cline & Associates,
the company that drafted a gas master plan for
the Government. These three gentlemen will bring
their considerable experience in the energy business
to bear on this topic.
What is the RP ratio and why is it important or
why is it not important? The RP ratio is calculated
by simply dividing proven reserves of natural gas
by the current rate of production.
The
RP has been described as a “snapshot” and
a planning tool that policy makers, governments
and oil companies use to plan future exploration
and bid rounds. The opinions and interpretations
of the RP ratio vary across the oil and gas industry.
One school of thought holds that the RP ratio is
a “nuisance statistic” while another
holds that it is an important metric that gives
a snap shot of the relationship between existing
proven gas reserves and the market.
A high RP ratio may not necessarily be a good
thing as this represents a high inventory of natural
gas while a low RP on the other hand might negatively
impact on investor confidence.
Understanding
the RP is critical to T&T since
we now produce six times more natural gas than
oil on an equivalency basis. T&T is, therefore,
more a gas province than an oil province. Our natural
gas reserves provide us with cheap electricity
which is directly related to the competitiveness
of our manufacturing and services sectors.
Using
the information in the 2007 Ryder Scott report,
T&T would have had a RP of approximately
12 years as of January 1, 2007. Given that no discoveries
of natural gas were made in 2007, the RP, as of
January 1, would have fallen to roughly 10.4 years.
When Ryder Scott does its 2008 audit it will consider
the gas that was recently discovered by Canadian
Superior and Petro-Canada in early 2008. These
finds were described by the Minister of Energy
as constituting roughly two trillion cubic feet
of natural gas. There seems to be a high degree
of confidence that both Canadian companies may
find more gas as their respective drilling campaigns
continue in 2008.
T&T’s low RP (approaching single digits)
has generated some concern in the energy sector.
Some have, however, argued that there are countries
that have RP’s lower than T&T’s
and that these countries have been able to maintain
the supply of natural gas for a long period of
time.
According
to the BP Statistical Review of World Energy,
2007, the UK, Canada, Mexico and the US
all had RP’s less than that of T&T at
the end of 2006. In the table, the T&T RP ratio
was derived from the 2007 Ryder Scott report and
not from the BP Statistical Review of World Energy.
In
considering the RP ratio one may wish to consider
that T&T is an island and cannot fall back
on pipeline imports of natural gas (as does the
US). Some countries have adopted a target RP ratio
while others like Canada have altogether done away
with the target RP ratio and have opted to allow
the market to determine natural gas supply. It
should be noted that Canada with its vast hinterland
has an abundance of natural resources such as oil,
coal and oil sands, any of which can be easily
substituted for natural gas. T&T does not have
that luxury.
It
should also be considered that 99.5 per cent
of T&T’s power generation comes from
natural gas. No other country in the world derives
99.5 per cent of its power generation needs from
one energy source.
Natural
gas is, therefore, not only important to the
industrial base of T&T but also to our
standard of living and our way of life. Given our
almost total reliance on natural gas for our electricity
needs it may be prudent to consider diversifying
our power generation mix to include renewable sources
such as wind and solar energy. Any move to diversify
our power generation mix by including oil would
be a step backwards given oil’s higher carbon
footprint.
The
management of our natural resources and in particular
natural gas is critical when one considers
that the future of energy and the future T&T
are tied together.
As
we approach next week’s T&T Petroleum
Conference we look forward to the discussion on
the RP ratio and other issues that relate to our
long-term sustainability. The discussion on the
future of the energy sector is an important one
and one that should be ongoing given that the international
climate and technology can change industries in
the short term.
For
more information on the T&T Petroleum
Conference go to www.stcic.org.
99.5
per cent of T&T’s power generation
comes from natural gas.
No other country in the world derives 99.5 per
cent of its power generation needs from one energy source. Natural gas is, therefore,
not only important to the industrial base
of T&T but also to our standard of living
and our way of life.
Information on the workshop is available at www.stcic.org
STCIC is the South Chamber of Industry and
Commerce (STCIC).
Petroleumworld does not necessarily share these
views.
This
commentary was originally published by Trinidad Express,Wednesday,
February 21 st, 2008
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Petroleumworld
News 02/24/08
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