We’re
doing something right - Riley
The
Trinidad Guardian
Port
Spain
Petroleumworld.com
07 02 06
Last
Friday, Prime Minister Patrick Manning and Energy
Minister Dr Lenny Saith were given a tour of the
bpTT-operated rig, the Ibis Deep, in the South-East
Coast Consortium by the energy company’s chairman
and CEO Robert Riley.
Following
the tour, the three gentlemen were interviewed by
Guardian business editor, Anthony Wilson, Newsday
senior political reporter, Ria Taitt and Express
business reporter, Kim Boodram.
Following
is the verbatim recording of the interview:Saith’s
opening comments
It’s
been a very interesting experience. I have been
sitting in my office and calculating the amount
of gas and money we need to get out of this, but
to actually come and see an operation and see the
quality of work that has been done is very interesting.
I
wish the rest of the country really could get a
better understanding and appreciation of how world-class
we are in deep sea exploration.
Manning’s
opening statement
I
am very pleased to be on this rig this morning.
I have not been on a rig like this for 20 years
or so since I left the Ministry of Energy.
I
thought it would be a good idea if members of the
media were exposed to the revenue side of the country’s
operations as opposed to the expenditure side.
The
expenditure side is what you see when you go around
Port-of-Spain and see tall buildings being constructed
and you see modernisation taking place at every
turn, then you see expenditure.
This
morning, what we sought to do is expose you to the
revenue side of it and the tremendous effort that
goes into the revenue generation upon which the
country is embarked.
The
scale of operation, as you know, is world-scale
and this well (20,546 feet) is the deepest well
ever to be drilled in T&T. It is expected to
cost US$70 million.
The
well is targetting a very large structure that first
was identified by EOG Resources and bpTT separately.
It is an EOG acreage and the two companies collaborated
to drill the well.
BpTT
is drilling the well because they have more expertise
than anybody else in drilling in the offshore part
of Trinidad.
NGC
and Petrotrin have an interest in the well and by
drilling the well, bpTT itself will get an interest
in the well so that it is a collaborative effort
between the four energy companies—two which
are state-owned.
We
anticipate that because of the size of the structure,
if the well is successful, that the reserves would
be significant. The estimate, in terms of gas, is
between 2.5 to 3 trillion cubic feet of gas, if
it is successful.
Of
course, it is a rank wildcat well and the likelihood
of success is about 35 per cent. That’s the
nature of the business, but that is high for a rank
wildcat.
At
this time, there are three such prospects that we
have: one is in the west coast, off Soldado, where
our retention of Exxon has led to the development
of a deep prospect in Soldado, which is an existing
oilfield, in a cretaceous test, which will be drilled
not too long from now.
Second
is BHP Billiton, in their acreage to the north,
they too have a cretaceous prospect and which they
will be drilling a deep well, a rank wildcat well,
for new horizons and hopefully new sources of oil
and gas and therefore new sources of revenue.
Because
of the expertise that bpTT has developed over the
years, their success ratio is much higher than would
normally be the case and therefore we are very optimistic
about the success of this well, even though we know
there are risks associated with it and we don’t
want to be over-optimistic. But we are cautiously
optimistic, just as we were with the Soca Warriors,
and things worked out quite well.
So
we wait and see what will happen. I am very confident
that we will... well, let’s see how it goes.
Let me not overstate the case.
Our
gas production at this time is just about 3.9 billion
cubic feet per day of which 1.9 billion is liquefied
natural gas (LNG), approximately.
So
about 2 billion cubic feet of the gas is available
for oil and gas production itself and also for manufacturing—methanol,
ammonia, iron and steel, electricity generation
and all the host of other things we make by the
small manufacturing sector in Trinidad.
We
are expanding that. As you know, we are moving into
new directions. We are now moving—complete,
eh—to the base of the modern industrial state:
We
are now moving into aluminium; we are moving into
gas to polypropylene; gas to ethylene and polyethylene...
When
those things are done and put in place by 2011,
then all that is required for a modern industrial
T&T will be in place.
It
is a plan that was designed by (the late Prime Minister)
Eric Williams when he turned the sod for Iron and
Steel (Iscott) in 1976.
It
is a vision, the realisation of which we are now
beginning to see. As we come to the end of the implementation
and realisation of that vision, there are other
things that emerge from it which we will address
in the budget for the 2007 fiscal year.
We
are indeed moving into a very exciting stage in
the country’s oil and gas development and
in the country’s social development, which
is what it’s all about—a very interesting
phase. And in due course, as we address the Parliament
in the budget, we will have much to say on these
matters.
Meanwhile,
I thought it was very important that the media have
an idea of what goes on out here and that when the
Government embarks on expenditure, the Government
is not being wild, the Government is incurring expenditure
on the basis of our understanding of the productive
capacity of the country and on the basis of the
revenues—current and anticipated revenues—a
proper balance between revenue and expenditure.
Proper management of the economy.
ANTHONY
WILSON: Is it important for the continued industrialisation
thrust that one of the three prospects—Soldado,
BHP and bpTT—finds a significant amount of
natural gas?
MANNING:
The magic of T&T is our development on the basis
of low reserve-to-production ratio—which some
people misunderstand.
If
we say that the reserve-to-production ratio is 15
years, some people say the oil and gas will run
out in 15 years. That is not so. What it means is
that we have to conduct an exploration programme
to find oil and/or gas to replace what has been
produced. And traditionally we have always been
able to do it.
We
are in an oil province and from all that we know
about this province, we are not about to run out
of it.
If
I answer the question in the way you’ve asked
it, I will convey an impression that is not correct,
so I thought I must clarify.
WILSON:
How important is it that the fiscal package encourages
companies like bpTT to continue exploring yet gives
the Government enough of the pie to ensure that
you are able to make the expenditure...
MANNING:
Dr Saith is just back from a conference in Russia,
which has the largest gas reserves in the world,
and they are about to have two major LNG developments...
What
in fact is happening, with specific reference to
the BP system, is that T&T has to compete for
investment dollars with the other areas of investment
that they have all over the world.
Our
regime of incentives, therefore, must be competitive
with the regimes of other countries and that is
why we spend a lot of time developing these regimes
and we utilise the expertise of people worldwide.
It’s a global economy.
Just
last week, a team from the Ministry of Finance came
back from London where they were consulting with
Professor Van Miers, who is the world-renowned expert
on oil taxation.
A
judicious balance has to be struck between incentives
for exploration and production and the revenues
that the country will gain from the exploitation
of its natural resource. That really is the trick.
We have not done too badly with it so far.
RIA
TAITT: What is the gestation period of this project.
How soon will we know if it is a success or a failure?
ROBERT
RILEY: As we explained to the Prime Minister earlier,
we expect to complete the drilling, in my opinion,
sometime in September. It will take us a couple
months thereafter to assess the results. So sometime
towards the end of the year, we will have a good
opinion about what this has taught us and what the
results are.
I
have to let you know that this is one of three to
six prospects that we have lined up in our programme.
Our exploration programme intends to do one like
this a year—certainly for the next three years
and maybe beyond—depending on what we learn
as we go.
And
just to add to what the Prime Minister said about
taxation, as you know, we spent a good bit of time,
and it was wise time, looking at the current taxation
system.
It
has served us well in the past and I believe that
the programme that we have, particularly as it pertains
to the shelf activity, is right because here we
are drilling and taking a 35 per cent chance and
spending US$70 million. I believe we are achieving
the right balance because BP today is satisfied
that we can continue to explore and produce in T&T
and look forward to doing it.
WILSON:
Dr Saith, there was a report in the Business Guardian
(last week Thursday) that the Government was delaying
the latest round of production sharing contracts
in order to increase the level of taxes retained
by the State. There may be a feeling that that may
be going too much in the direction of the State
collecting an overdue amount (providing) a disincentive
to investment. How do you feel?
SAITH:
The Prime Minister made the point that you have
to find a judicious mix between investment incentives
and tax revenues. We have developed a new production
sharing contract and the team the Prime Minister
spoke about went up to London (a fortnight ago)
with the contract to get expert independent advice
on whether that’s the best structure or should
it be modified.
They
have come back and we will be in a position, in
a couple weeks to finalise those contracts—bearing
in mind the comments—in time for the awards,
especially the deep water bids that are going out.
MANNING:
And remember it is the return to the country from
the development and exploitation of our natural
resource. And therefore, a great deal of time, effort
and resources are brought to bear on the consideration
of that.
WILSON:
Mr Manning, has the Government had to turn away
gas-using contracts because of the reserves-to-usage
ratio?
MANNING:
Let me ask you this question. We have six projects
this year—three ammonia/methanol projects,
two aluminium projects and one iron and steel. It
requires 19,000 people to construct these projects
at peak. Next year, we already have four projects
lined up. Do you think we have the capacity in this
country to take any more at this time? That should
answer your question.
WILSON:
But is there a limitation on the extent of gas?
The human resource limitation is one thing but is
there a concern...
MANNING:
We have maximised taking all of the parameters into
account. One is the availability of gas. The limit
is not that, as some people believe, the limit is
the capability of the country to develop. While
those six projects are being started this year,
I have not spoken about the upgrade of the Petrotrin
refinery where there are seven sets of plants to
be constructed.
It
is a tremendous amount of work, the full extent
of which many people do not appreciate.
SAITH:
Anthony, this is a good place to invest in the energy
sector. And we’ll always have more people
wanting to come than we can accommodate.
I
have been to Russia. They have reserves way in excess
of what we can even dream of, but there are not
people lining up to invest there.
So
that because we are a good investment destination,
because our decision-making is fast and because
we can sit with the companies and negotiate a win-win
deal, people are flocking to bring funds.
WILSON:
So are you saying that it is better to be turning
away people than not having people come knocking
on your door in the first place?
SAITH:
It’s better to have the ability to choose
who you want.
MANNING:
And not only that. The mere fact that we have so
many takers now causes us to determine our policy
taking that into account.
So
we say, if you want to build a methanol plant in
T&T, we are not interested in that. But if you
want to use methanol for the manufacture of melamine
or you want to use ammonia for the manufacture of
ammonia or UAN, that’s a different story.
We
are now, as part of the primary investment, going
into downstream activity at the same time—a
modification of policy.
RILEY:
I also believe there is something very right that
we are doing. Three or four weeks ago, we entertained
Gazprom in Trinidad. They are the Russian state-owned
gas company that’s charged with developing
gas resources.
The
reason they came to Trinidad was to understand the
Trinidad model. It’s something we don’t
always recognise—that Trinidad is recognised,
by countries that want to get after this product,
as the leading model.
They
were spending a lot of time trying to find what’s
the magic; how could this small country achieve
this in this short space of time.
There
are good things that we are doing. And I think it’s
always good to question and review, but it’s
also good to reflect on the successes. That is what
Gazprom did to us four weeks ago.
‘Govt
should do more to educate’
MANNING:
May I say one more thing. A technocrat from the
energy sector attended an energy conference in Venezuela
not too long ago. And he heard a Venezuelan official
get up in the conference and say that Venezuela
has looked all around the world for models and the
most successful model they have not examined is
the T&T model right next door.
WILSON:
Why is it that some people still don’t get
the relationship between the country’s financial
success and industrialisation?
MANNING:
Part of the reason is that the oil industrialisation
is offshore and out of sight. They don’t see
it and therefore to them it does not exist. But
that is not so and that is one of the reasons we
wanted you all to come here today. As people who
write in the newspapers that you can do so from
a proper perspective.
Look
at the scale of the operations. Look around. Were
you aware that there were so many platforms offshore?
Look at them. Wherever you turn, it’s only
platforms. You were not aware of that.
And
therefore you worry about shortage of gas.
And
you worry about whether we could do it.
And
you worry about whether we have the reserves.
And
you worry about whether we have the revenues to
sustain the ambitious development programme.
Don’t
worry. What do you worry about? It’s in capable
hands. We know what we are doing?
WILSON:
But do you think that the Government should be doing
more to show people the link between what’s
going on offshore, literally, and what happens onshore.
MANNING:
We plead guilty.
SAITH:
You people have more credibility...
TAITT:
Do we? Not with you!
SAITH:
Not with me. But you should be doing some of it
as well. You are trying to do some of it in the
Business Guardian, but I want to see more of it
in the mainstream.
(There
is a short discussion of Exxon/Mobil’s Soldado
exploration)
KIM
BOODRAM: Why are people so fond of saying that you
are giving away our national resources?
MANNING:
Because it is popular to say. Those who are opposed
to us will say that. We have been very successful
in these ventures, you know. You don’t really
expect the opposition to say that and pat us on
our backs. So they they will try to find some way
of decrying it. But as they do that, it gives us
an opportunity to demonstrate that we are not doing
so. So you have the interplay of ideas that are
an essential part of any democratic existence. We
have no quarrel with that.
WILSON:
Any developments with regard to the aluminium smelters.
MANNING:
The developments of the projects are proceeding
in both cases. Incidentally, some journalists went
to the Alcoa smelter in Brazil. Were you one of
them?
WILSON:
I was.
MANNING:
I would like to see the opinion of the journalist
as to what they saw in terms of the compatibility
of the smelter with the environment.
SAITH:
Anthony wrote and they accused him of being bought
over.
MANNING:
You understand? I’m aware you wrote, I read
it.
The Trinidad Guardian
Thursday 29th June, 2006
Copyright
©2006 The Trinidad Guardian. All Rights Reserved.
