Deep — no
sweet spot
By Linda Hutchinson-Jafar
Special Correspondent
Newsday
Port Spain
Petroleumworldtt.com
08 26 07
Multinational
energy companies in the country have identified
government’s punishing fiscal
regime as the major deterrent to high-cost, high-risk
deep water and ultra-deep water exploration, which
may hold the key to new hydrocarbon reserves.
This
was their common message to the government during
last week’s two-day conference which
reviewed energy developments and examined prospects
for the country’s oil and gas industry which
in 2006, contributed just over 45 percent to the
Gross Domestic Product and accounted for 62 percent
of total revenues.
Illustrating
the impact of government’s
high tax regime, Vincent Pereira, President of
BHP Billiton Trinidad and Tobago, said his company
did not participate in the last ultra deep-water
bid round — an area in which they have a
keen interest — because of the government’s
new regime.
“The terms of the new fiscal regime, however,
prohibited our participation in the round since
the success case economics unrisked were insufficient
to justify a bid. We could not make it work,” he
told the government-sponsored conference.
“The
new terms resulted in economic outcomes significantly
below our minimum corporate hurdles
for a petroleum project anywhere in the world and
this is even without consideration of the associated
geological risk.”
Describing the ultra-deep prospects as high risk
and high exposure but with potential significant
rewards, Pereira said the commercial arrangements
must recognise this and provide the necessary framework
that allows commercial viability.
He added that the significant up-front investment
required for a deep water development cannot sustain
the very slow payback over time that occurs with
the current high tax regime and suggested a more
progressive tax rate that is lower for deep water
projects and incentives for the full capital investment
and not limited to the exploration component.
BHP Billiton Trinidad and Tobago produces 30,000
barrels of oil per day and 220 million standard
cubic feet of gas per day (mmscfd) which is re-injected
for pressure maintenance to aid oil production.
The company is currently working on its Phase 11
gas project which involves the development and
sale of gas from their Greater Angostura field.
First gas production is expected in 2010.
Last December, the state-owned National Gas Company
concluded negotiations with BHP Billiton, EOG Resources,
and BG Trinidad and Tobago for the supply of 560
million standard cubic feet of gas per day, beginning
in 2009, which will be used for new domestic gas-based
projects.
BPTT’s Chief Executive Officer, Robert Riley
advised the government to take a hard look at reducing
technical risk such as 3D seismic, and creating
the right incentives to open up deep water exploration. “Incentives
will be needed to capture smaller pools of gas
and marginal oil and gas on shelf and on land.
Lower priced market opportunities must be looked
at hard since the industry no longer has low cost
stranded reserves,” he said.
BPTT plans to invest US$5B over the next five
years to maintain its 500,000 barrels of oil equivalent
a (bcf/d) day or 3 billion cubic feet a day of
gas for the next 20-25 years. He noted that the
Columbus basin shelf, which has delivered high
quantity and high volume prospect, may now be maturing
and the transition will be towards smaller and
more complex prospects.
“Pools are going to be smaller, a lot more
deeper,” he said, noting that previous discoveries
have been over one tcf in size. Energy companies
are also ramping up huge costs in carrying out
exploration and BPTT’s costs over the last
five years have doubled.
Rig
costs, for example have increased from US$40,000
a day in 2000 to US$200,000 a day in 2007. Riley
also expressed confidence that the country has
many more decades of gas resources and described
the recent Ryder Scott audit which showed a decline
of 3 trillion cubic feet of gas over the last two
years, as “snap shots.”
“It moves up, it moves down. There is gas,
gas will be found, this is hydrocarbon land and
it will be hydrocarbon land for a long time,” he
said at the conference, chaired by prime minister
Patrick Manning.
Martin
Houston, BG’s Executive Vice-President
and Managing Director for North America and the
Caribbean, noting the decline in bids being made
on the government’s licensing round suggested
that stimulus is needed to help drive exploration.
“ The reserves are undoubtedly there but
there’s need for incentives to encourage
exploration,” he said adding,”We do
share the view that there’s a lot of gas
out there to be found.”
However, Houston echoed concerns of other up-streamers
that exploration costs were increasing.
Petro-Canada’s
Senior Vice-President, Operations and Technology,
Gordon Carrick called for clearer
criteria and standard guidelines for Certificate
of Environmental Clearance (CEC) from the state-agency,
Environmental Management Authority which would
help in their planning.
“Often rig commitment must be made in advance
of CEC so the Operator needs confidence in the
CEC award process,” said Carrick. Petro-Canada
plans to begin an 8-well exploration programme
in three energy blocks in the latter part of this
year.
At least 29 wells are carded to be drilled by
energy companies over the next few years. Thirteen
wells are planned for drilling during 2007-2008,
while 16 more exploration wells at a cost of US$565
will begin from 2008 by companies that were selected
for energy blocks in the 2006 competitive bid round.
Trinidad & Tobag Newsday
Thursday, August 23 2007
Copyright
© Daily News Limited. All Rights
Reserved.
