False
premise, false conclusion: Low reserves-to-production
ratio part of ‘T&T magic’ says PM
The
Trinidad Guardian
Port
Spain
Petroleumworld.com
09 17 06
Prime
Minister Patrick Manning, in an address to BG’s
inaugural energy luncheon last week, made some controversial
comments on the issue of energy security and T&T’s
place in the global energy picture. Following is
an excerpt of the speech:
In
preparing for this luncheon I realised how much
there is to be said and how few opportunities exist
for saying it. While we have tried by way of the
Breakfast with the Prime Minister Series that has
gone in a slightly different direction and has only
been able to scratch the surface of what is involved.
May
I also say that it is not possible to exhaust the
topic that I have been asked to speak on in the
time that is allotted to us and therefore what I
say today is by no means the final word in this
story and I do not wish particularly the media to
criticise me at the end of the day for saying what
I did not say, I did not say this and I did not
say that let me tell you from now I am not going
to say everything.
The
object of the development programme of T&T is
the development of the people of T&T, giving
them the highest standard of living and the best
quality of life of which T&T is capable that
is the object of this and all other developments.
When
the Government embarks on the construction of two
26-storey buildings on the port and a hotel and
a conference centre that would be world scale and
world class it is not that we like large projects
or we like to spend money.
We
are providing better office accommodation for the
public sector so that our public service employees
will work in some of the best conditions that the
country can offer and contribute in no small measure
to higher levels of productivity in the public sector
which will result, of course, to better service
to the public and to a better quality of life by
those people who are served those services. It is
all about people and their standard of living and
when we decide to develop our energy resources.
It
is not just a question of developing energy resources
or developing energy resources for the purposes
of energy. It is not an end in itself. It is a means
to an end.
We
are developing our energy resources in a manner
that will give us the largest possible return to
the country for so doing so that these returns can
be pressed into service in national development
are contributing as they will to a better quality
of life of our citizens and a higher standard of
living.
People
are at the centre of development as the Government
sees it.
Where
does T&T lie in world terms?
In
terms of reserves, we do not rank.
And,
therefore, the achievement of T&T operating
on such a low reserves base and particularly on
a low reserves-to-production ratio for both oil
and gas is what has been described as the T&T
magic. And many countries and many experts around
the world ask T&T from time to time: how were
you able to do it on the basis of the reserves that
you have?
What
have they been?
T&T
today is ranked as the No 1 exporter of primary
gas based petrochemicals that is to say of methanol
and ammonia. The No 1 exporter in the world of both
methanol and ammonia.
T&T
is the world’s No 1 producer of methanol at
this time. T&T is ranked as the No 1 exporter
of LNG in the western hemisphere and T&T is
the sixth largest producer of directly reduced iron
in the world.
In
world terms, T&T ranks in methanol production
and exports, ammonia exports, LNG exports in the
western hemisphere and DRI production in the world.
In
terms of ammonia and methanol, we have achieved
it from ten world-scale plants for ammonia, ten
world-scale plants at Pt Lisas, and seven world-scale
plants for methanol at Pt Lisas, the latest of which
is the largest such plant of its kind in the world.
In methanol, ammonia, LNG and directly reduced iron,
T&T is world class.
From
the domestic standpoint, the standpoint of the domestic
commentators, they spend a lot of time on what appears
to them to be the low reserves-to-production ratio
for gas.
They
argue that, at this time, we have a reserves-to-production
ratio of more than 16 years which means to say—as
they interpret it and quite improperly and incorrectly—that
in 16 years’ time the gas will run out.
Having
arrived at a false conclusion based on a false premise,
they take it one step further and ask why does the
Government—knowing that the oil and gas the
gas will run out in 16 years’ time—proceed
helter skelter on a development programme whose
revenues are based on the availability of revenues
from the oil and gas sector.
Wrong
premise, wrong conclusion.
It
has always been so. The low reserves-to-production
ratio and that when one interprets that what it
really tells you is the level of exploration activity
that needs to take place in the country to ensure
that we maintain a proper reserves to production
ratio.
It
does not tell you the gas will run out.
Tax
reviews
The Government looks so closely at our tax structure
and reviews our tax structure so often because we
have always to ensure that there is a fiscal environment
existing in the country that stimulates exploration
activity in the oil and gas sector because that
is where the future lies.
That
is what maintains the production, that is what ensures
that with a low reserves-to-production ratio we
can still embark on ambitious projects utilising
natural gas and oil but never run the risk of the
oil running out.
May
I now take this opportunity of saying that it is
my view that the oil and gas will not run out in
my time certainly it will not run out in the time
of Professor Ken Julien.
The
fact, my friends, is that T&T has really developed
over time an expertise in the oil and gas sector.
And
let us not minimise the value of that expertise.
In fact, that expertise is so great particularly
the management skills of the managers in the oil
and gas sector that the Government has taken the
decision that we are going to press that expertise
into service in other areas of national development.not
have T&T so miniscule were we.
But
the Caribbean for us is a significant market we
sell about 60,000 barrels a day in the market of
all kinds of products.
And
much of the production much of the products that
we sell is derived from Venezuelan crude we buy
crudes from Venezuela for that purpose. We produce
now just about 150,000 barrels a day we refinery
at Pointe-a-Pierre about 60,000 barrels a day of
domestic crude just above that and we buy about
90,000 a day.
We
did not think that T&T could afford a loss of
that market and what Venezuela proposed is that
these countries will have access to products from
Venezuela transported in ships controlled by Venezuela
in storage in their own countries owned and controlled
in joint venture between Venezuela and a state entity.
The
immediate effect of that is as follows:
1.
That the minute you establish your own storage,
the storage now controlled by the multinationals
will be of no value to them, they are likely to
leave because they will also to have lost their
market they are likely to leave. If the multinationals
leave then we are left with a situation where Venezuela
becomes the dominant player. That is the first thing.
2.
The position of market dominance imposes an obligation
on the dominant entity and that obligation is energy
security that T&T provide that for the region
now and if a situation develops where our position
is displaced then surely, the responsibility for
providing energy security to the Caribbean can no
longer rest on the shoulders of T&T and Caricom
countries will have to consider whether that is
a happy position in which to find oneself or whether
it is not they will have to decide what they wish
to do.
But,
for our part, much of this was not unanticipated
you know as a result of which we have voluntarily
decided to give up the common external tariff we
do not need protection for the Pointe-a-Pierre refinery.
The
Pointe-a-Pierre refinery has been operating long
enough and if it cannot stand on its own two feet
at this stage the time has come for it to go.
It
can and it will be made to stand on its own two
feet and, as we withdraw the CET and reduce the
cost of imports into the region, what we are in
fact saying is that we acknowledge that we have
lost the Caribbean market and that our refinery
upgrade that is now taking place at a cost of a
lot of money just about US$650 million, I am calling
a dated figure. Is it dated?
US$650
million. Mr Jones is here he can attest otherwise
to the accuracy of the figure.We are producing a
quality, we are upgrading to produce a quality of
gasoline that can find a ready market in the east
coast of the United States.
May
I make the other point that Petrotrin sells products
not so much on the spot market but on the basis
of long-term contractual arrangements and if we,
if Petrotrin, enters into long-term arrangements
for selling its products in the US and if an emergency
develops in the Caribbean then we do not have the
flexibility to switch from our new markets to markets
that traditionally had been supplied by us but by
which we have been now displaced by the Venezuelans.
Is
Venezuela prepared to accept that responsibility?
I am in no position to say.
Are
the Caricom countries prepared to put themselves
in that position, I am in no position to say.
What
I can say it that T&T has had a stable government.
We are stable politically and in so many other respects
we are committed to Caribbean development and we
have up until now been very successful to giving
the Caribbean the level of security to which the
Caribbean aspires.
T&T
also finds itself in a similar position vis- a-vis
the United States that for the first four months
of this year we supplied 71 per cent of all US imports
of methanol, 73 per cent of all US imports of LNG
and about 55 per cent of all US imports of ammonia.
Secure
stable democracy in the western hemisphere. We are
proud of it. But T&T also has developmental
needs and we seek to leverage our energy resources
in the cause of national development.
It
would have been nice if I could have said today
that this is recognised in the United States of
America. We don’t know that it is recognised
in Washington at all. In fact, we believe that Washington
has been studiously ignoring the Caribbean and ignoring
the requirements of T&T.
Unfortunately,
that’s what we think and we believe that the
third-border initiative that has been so eloquently
articulated in Washington has not gotten off the
mark in any significant way. It has not gotten off
the market.
Big
concerns in the Caribbean now, with the expiration
of CBI in the year 2007 or 2008 or whatever it is.
What is going to replace it. We still do not have
a proper trade arrangement with the United States,
we don’t have it.
For
our part we need access to the US market, T&T,
providing the energy security that we have year
after year, stable, reliable supplier, something
happens elsewhere, we fill the gap and so on.
Country
Gas reserves as Oil reserves as per cent of global
reserves per cent of global reserves
Venezuela
2.5 per cent 6.17 per cent,
Qatar
14.9 per cent, 1.18 per cent
Malaysia
1.2 per cent 0.23 per cent
Russia
27.5 per cent 4.64 per cent
T&T
less than 0.5 per cent less that 0.1 per cent
(Continued
in next week’s BG)
The
Trinidad Guardian
Thursday 14th September 2006
Copyright
©2006 The Trinidad Guardian. All Rights Reserved.
