TT:
Proceeding with caution with oil and gas tenders
By
Roxanne Stapleton
Trinidad Express
Port
Spain
Petroleumworldtt.com
10 01 06
THERE'S
a perception among some top oil and gas executives
in Trinidad and Tobago, that the processes, at the
Government Ministry level and particularly related
to bid rounds, could be moved with a bit more pace
than what currently obtains here.
But Energy Minister, Dr Lenny Saith
defended the current modus operand last week, telling
Business Express that his Government "is as
anxious as anybody else to get the bid rounds off",
adding that they were seeking independent advice,
to ensure that the country gets maximum value and
leverage its resources for optimum results, preferring
to be safe than sorry.
In fact, time and time again many
have referred to past energy contracts in which
Trinidad and Tobago lost out to multinationals,
purporting that Government must make its best effort
to avoid repeating those grave errors of the past.
"What else can I say,"
Saith insisted.
With this feeling being shared by
the energy executives, Business Express took its
line of questioning to industry specialist, Anthony
Paul who has more than 27 years in the industry
within the field of exploration and production opportunity
access and growth and in geophysical services.
Asked as to whether he felt Government
was in fact being aggressive, in moving the paper
along, Paul said: "You asked about whether
the Government was being aggressive - that bid round
went out in 2003 and was only awarded in 2005.
"These bid rounds now before
the Ministry were supposed to close since March
and April 2006, but have gone on.
"There's something in the system
that is not as effective as it could be.
"Currently, this bid round
was supposed to close in September, now October
and the Ministry as of today (last Friday) hasn't
given out the Production Sharing Contracts (PSCs),
which is the basis on which you bid, which is the
analysis.
"Within the system there is
a bottleneck."
Business Express: And do you know whether these
companies have intimated such to the Ministry?
Anthony Paul: "Yes they have.
"The Ministry itself is strapped
for resources in terms of the people it needs to
oversee this process.
"In fact, one of the challenges
we don't speak about in the country is human resources,
now we talk about it, but we don't understand the
value that you give up by doing things badly and
on the flip-side, I worry that in some of those
activities that we're not bringing the best value
we can to Trinidad and Tobago because we're trying
to go too quickly also.
"That said, we're in a high
oil price period, so we ought to capture that opportunity
- how do you then do it fast, but do it well.
"A question that I ask all
the time is whether things are being done with the
full value chain in mind - both upstream and downstream.
"In theory, there's a connect
by the flow through at the Ministry of Energy -
but in practice when you look at the Ministry's
bid round requirement, there's no connection at
all in that downstream. Nothing in that speaks to
how the gas is used in Trinidad and Tobago.
"So when you awarded the gas,
you go back to negotiate with the guys to get the
gas and that's created a challenge.
"But I believe that is being
looked at now by the Government... insisting now
that every contract include value added downstream.
"The Government is saying that
LNG is giving us a great price - now the Government
doesn't capture the upside of that price because
technicalities in the contracts and that's where
a lot of the money is being lost. "The Government
takes months and months to implement change, look
at the royalty for bpTT for instance, you're looking
at 2008.
"For every cent we lose at
4 bcf per day, every cent per thousand that's four
million cents per day and we're losing dollars not
cents - so there's a lot of value not being captured
from the current projects.
BE: And now with the disappointments that both BHP
Billiton and bpTT with its Ibis Deep have faced,
what's the energy landscape and exploration now
looking like?
AP: "In BHP's case they found lots of sand
in an exotic place with oil coming through it but
in very chopped-up reservoirs.
"In bpTT's case, they went
deep at something they hadn't tested before - on
the seismic its was a structure that said this will
trap oil, it had the right characteristics - connected
to the source of oil.
"BPTT has several options.
They have always had lots of small prospects and
small by their standards is pretty big by any other
standards.
"They also have some huge prospects
as well and they spent the last five to eight years
looking at those.
"They now have a lot of infrastructure
in place, storage capacity, treatment facilities
and this means that the smaller prospects can now
become economic because you don't need that big
infrastructure cost to develop it. So that's one
part of the pulp that bpTT can now go after in a
cohesive way.
"Had Ibis Deep panned out,
it would have meant success and they could have
quickly moved on to a new prospect, but now the
move is to regroup.
"In the meantime, the Ministry
awarded some contracts last year and they're now
at the stage where people have shot seismic, are
now interpreting it and will start drilling."
BE: And what are you hearing on the ground of these
contracts?
AP: "They are very promising.
Petro-Canada has actually put out an EMA, consultancy
and have identified several areas of interest and
potential drill sites.
"But again promising before
you drill is different from after you drill. Then
there's Kerr McGee and EOG Resources."
Turning to Petrocaribe, Paul was
insightful.
"Petrocaribe, from the general
description assures the Caribbean cheaper fuels
in times of high fuel price, and more security around
fuel availability.
"Traditionally, natural gas
for power has been cheaper than fuel oil, if you
have well designed power plants for instance and
the biggest use of fuel in the Caribbean is for
power.
"In the Caribbean, fuel prices
have been higher, some of the highest in the world,
(in spite of the fact that there are some big refineries
close by) and they are the highest in the world
because all the terminals within which oil is imported
also control the retail, so they're at a fixed price.
"So to break that you need
alternate terminals.
"Some people argue that if
you destroy the existing market as a new player,
you introduce a monopoly, what you have to be careful
to do is to create an environment for competition.
"Now, how does Petrocaribe
and Venezuela support the natural gas initiative
- what may be possible is that Trinidad and Tobago
is lobbying Venezuela to bring natural gas into
Trinidad to monetise - Now Trinidad may choose to
shop some of those molecules that goes to LNG, for
gas that goes up the islands - I'm not sure that
Trinidad and Tobago wants to do that, but may give
Venezuela the credit for that, collaborating to
make it possible. So there are solutions.
"Some of the gas fields, cross
border between Trinidad and Venezuela, with some
actually straddling the borders and in these fields
are several reservoirs which cross borders.
"You put a hole in the ground
gas will come from both sides of the border and
it's common industry practice to share that - both
the cost of putting in the well and the gas to production
and that is called unitisation, agreeing also how
much reserves belong to each and allocate the cost
and production proportionately.
"In addition, there are reservoirs
that don't cross the border, but are nearby and
probably better produced from a single facility
in one place, so unitisation has to not only include
the reservoirs that cross but the fields themselves."
BE: So with everything that's happening, Petrocaribe
and all, is the Eastern Caribbean Gas Pipeline a
viable prospect at this time?
AP: "Absolutely - remember
the initial markets for this are Martinique and
Guadeloupe (others are also waiting in the wings),
Barbados has installed natural gas infrastructure
without any gas at this time."
BE: So there's still much oil and gas to be found
here then?
AP: "To put everything into
perspective let me first show you a map of Trinidad
and Tobago.
"With the disappointment of
this exploration well (bpTT's Ibis Deep) and with
the trouble that BHP has had, what is the country's
resource story currently - have we got enough oil
and gas to sustain the ambitions we have, speaking
to all the projects we have lined up.
"Let's step back and take an
overview. Now Trinidad as you know has been an oil
producing country for more than 100 years. Geographically,
it is a very small land area, so some imagine that
with the small land coverage, all the oil and gas
there is to find should have been found by now over
that more than 100 year span.
"Trinidad oil fields, some
of them are some of the best oilfields in the world.
This area that sits between Pt Fortin, Palo Seco,
going to Fyzabad actually has produced more than
one billion barrels of oil and by any standard that
is huge.
"In the 70s, a major oil field
on the world scale was anything that produced more
than 100 million barrels - so putting it into context
you understand what that means.
"Now having said that, how
did that oil get there. Eastern Venezuela, of which
Trinidad is a part geologically has some of the
most oil generated from rocks anywhere in the world,
even the Middle East.
"Most of that oil sits in the
eastern part of Venezuela in an area called the
Faja del Orinoco (Orinoco Oil Belt), which is very
heavy oil.
"When we speak of oil reserves,
we actually speak about oil that can be produced
and most of that isn't economic so it doesn't get
counted as reserves - it gets counted as resources.
"As prices change, technologies
improve, as the cost of production decreases - resources
can be converted to reserves.
"Actually, I must say that
Trinidad sits in one of the richest oil provinces
in the world.
"Trinidad also sits on three
plate margins and sits on the junction of the South
American plate, the Atlantic plate and the Caribbean
plate.
"And with all these plates
interacting rocks are being deformed and in Trinidad's
case being deformed very intensely over a long period
of time.
"This means that things are
getting chopped up - there are faults or folds.
Since oil is formed in rocks it migrates through
some of these faults, or gets trapped in some of
these folds.
"Some of those folds themselves
get broken and faulted and the oil could move on
again.
"In fact, the Pitch Lake in
Trinidad is a hundred plus acres of oil seep - oil
that came up, didn't find a trap and came to the
surface.
"Because of the complex geology
its been difficult to find the oil in Trinidad.
Now, I told you that we produced a billion barrels
here.
"Those barrels were found by
looking at micro-fossils in rocks, drilling wells,
taking electric measurements in wells and correlating
them to drill cross sections - its well structured
and collecting tonnes of data and creating 3D-imaging.
"But with the complexity you
understand how much the error of margin is.
"We've been drilling and producing
oil based on a picture that we have from limited
data and additionally where traditionally the depths
are fairly shallow.
"Now with complex geology,
to drill deep is much more expensive than shallow
- so the risk and cost is much higher.
"What we need to do now is
to get technology that allows for a better understanding
of what is below there and the Government is now
trying to get 3D-seismic to give a much better picture
and generate higher confidence for going forward
in building more expensive wells.
"Also, because of the complex
structure, we've not been able to drain reservoirs
optimally.
"An oil well typically produces
20 per cent of the oil there. You can go back in
and do things like pump water, steam and get more
oil, but that
pumping and the flow out is premised on you understanding
the geology and you're putting the steam and the
water in the right place.
"So the long and short of it
is that you can do it quite wrong. Now the 3D-seismic
will give you a much better image and allow you
to recover more oil in the existing fields.
"Not only that in Texas and
Louisiana (Southern United States), where most of
the oil in the US is found since in the 1880s, new
oil found there was actually found from mature existing
fields using 3D-seismic.
"So 3D-seismic does three things
- it allows you to produce the existing oil you
have much better, you're able to find new oil in
the fields where you already know there's oil and
you're able to find new oil where you don't know
for sure there's oil.
"So Trinidad's oil story on
land has a lot of promise - very expensive and it
will take time, it will also take commitment. But
there's real potential there.
"Trinidad's oil story is a
rich one given our source rock - in terms volume
and carbon content its one of the richest source
rock in the world.
"And because of the Orinoco
Delta dumping sediments there, its created a reservoir.
"What's happening in Trinidad
is that the oil is moving up, but the gas is moving
faster - we suspect that the oil is so deep that
it will require more expensive drilling.
"We believe there's more oil
but we need technology breakthroughs - seismic imaging
and deeper drilling."
"And those technologies are
coming. It was revealed a couple weeks ago that
Chevron-Texaco is involved in probably one of the
biggest oil fields in the world at five miles deep
in the Gulf of Mexico, we haven't started to type
that deep drilling yet.
"In the area called the deep
water (now up for bid round in Trinidad) has real
promise - in the last 20 years or so, all the major
discoveries in the world have been in deep water,
Gulf of Mexico, off West Africa.
"Nobody has yet drilled the
Orinoco and it is some of the best source rock the
world over, so one of the vast potential areas is
offshore Trinidad deep-water which hasn't been tested
yet."
BE: And what are the prospects for offshore Trinidad?
AP: "The structures I saw that
I mapped, actually showed structures that could
have a billion barrels each."
"In terms of prospects - Trinidad's
oil production could actually reach as much as a
million barrels a day if these possibilities pan
out.
"I will not say its like shooting
fish in a barrel - it is difficult, risky and challenging,
but Trinidad and Tobago continues to attract oil
and gas companies.
"Now
in the deep water, the possibility for gas is also
there, though producing gas in deep water is expensive
but it will become possible in the near future as
prices and technology change."
Trinidad
Express
Wednesday, September 27th 2006
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©2006 Trinidad Express . All Rights Reserved.
