A
case for oil …again
Port Spain
Petroleumworldtt.com
12 16 07
Surging oil prices have placed resource-rich countries
like Venezuela, Russia and Iran in positions of
power.
Oil peaked at US$97 in November and some analysts
believe that it will cross US$100 by year-end.
In the Caribbean, tourism-dominated and energy-dependent
islands have become reliant on PetroCaribe, a facility
offered by Venezuelan leader Hugo Chavez. Under
PetroCaribe, Venezuela supplies oil to the region
at preferred prices for which part of the payment
is deferred.
T&T and Barbados did not sign on to the initiative
which has been criticised by Ron Hewitt, general
manager of the Barbados National Oil Company, as
an attempt by Chavez to “mash up” Caricom.
“PetroCaribe is a perfect example of the
Caribbean gone wrong. We cannot allow a non-Caricom
member to mash up things,” said Hewitt at
the seventh Energy Caribbean conference held at
the Hilton on Monday and Tuesday.
Chavez has also used his Bolivarian Alternative
for the Americas (ALBA) for integration in the
Caribbean with Antigua and Barbuda, Dominica, St
Vincent and the Grenadines.
“As
we scan this playing field of global and regional
petropolitics and energy security
the obvious question is, can it last?
“The current reality is that Russia’s
flexing, Iran’s command of the world’s
attention, China’s fascinating outreach and
President Chavez’s frequent flyer mileage
are still about the energy security that only a
barrel of oil can provide,” stated Professor
Anthony Bryan, senior associate of the Americas
Program Center for Strategic and International
Studies.
Had oil prices remained at US$20 a barrel not
much flexing would have taken place, he said.
“From the perspective of contemporary international
relations and international business, the point
is that a tight market and high prices for petroleum
and other fuel commodities provide both a shield
and the necessary leverage to indulge in petropolitics,” he
added.
Chavez’ use of oil as a “political
weapon,” as Bryan put it, has recast the
role of oil in T&T.
T&T has lost it’s
Caribbean petroleum market and has had to look
to Europe as a market
for its crude, principally obtained from state
energy company Petrotrin.
The gas factor
T&T
distinguishes itself as a gas-based economy,
says newly appointed Minister of Energy Conrad
Enill.
Yet,
the results of the Ryder Scott hydrocarbon audit—which was made public in August—point
to a reserve-to-production ratio of 12 years. Inevitably,
this has led to a prioritisation of gas-based projects
as exploration needs to play catch-up to consumption.
T&T
consumes about four billion cubic feet of natural
gas a day.
Oil has now become the by-product of future exploration.
Robert Riley, bpTT chairman and chief executive,
believes that the Government should re-consider
its incentivisation programme where oil is concerned.
At
a time of high oil prices, he expressed scepticism
that the Government was “not moving with
greater alacrity on this.”
Oil,
he noted, is a high-value product and T&T
must take the lead in enhanced capital recovery
incentives.
He also noted that his company would continue
to produce 500,000 barrels of oil equivalent a
day but does not expect to discover any huge gas
finds.
A US$80 million Ibis Deep failure deflated the
prospects of look-alike geological profiles.
“My company is fast approaching plateau
production at the Columbus basin,” he said.
“Big
tcf (trillion cubic feet) is a thing of the past
and our message needs to be a sophisticated
and balanced one.”
Geologist Anthony Paul, who was part of the team
which drafted the Vision 2020 document on energy,
expressed a similar view.
He believes that there is no sense of urgency
to take advantage of high oil prices.
“Time is going. Urgency of action isn’t
going,” he told participants at the conference.
Paul explained that the Government still needs
to formulate a strategy to make companies go after
oil and gas.
Current oil reserves amount to 621 million barrels
(proven), 404 million barrels (probable) and 1,688
million barrels (possible).
Petrotrin’s
reserves are estimated at 424.3 million barrels:
254.5 million barrels in Trinmar,
162.3 million barrels from land fields and 7.6
million barrels from joint ventures.
Leroy
Mayers, permanent secretary of the Ministry of
Energy, told the local media that the Government
will undertake an independent oil audit and expects
to have tenders out by “the first quarter
of 2008.”
But
Enill appeared unimpressed by talk that T&T
should once more prioritise oil. He said there
is an opportunity to increase production but T&T
remains primarily a gas-based economy.
Bryan
noted that T&T has done well in the
global energy geopolitical game.
He
suggested that to ensure continued success, T&T
should embark on a structured regional, hemispheric
and global energy diplomacy that reflects
constantly changing geopolitical realities.
“The three immediate concerns for the country’s
energy diplomacy are: the PetroCaribe agreement
and T&T’s relationship with its Caricom
neighbours; cross border co-operation with Venezuela
and the changing energy landscape in the US,” he
said.
Peak oil/gas?
In
his contribution to the conference, Wayne Bertrand,
president of operations at the State-owned Petroleum
Company of T&T (Petrotrin), wondered whether
T&T had reached its peak in the discovery and
production of oil and gas.
Referring
to a speech by Riley at a South Chamber luncheon
two weeks ago, Bertrand noted that Riley’s
remarks had dampened expectation for mega gas discoveries
and “spoke of the one trillion cubic feet
(tcf) a year burden in new discoveries needed to
service the life of their existing contracts.
Petropolitics
Creating
strategic alliance between Venezuela, T&T
Bertrand
said, “Could this then be a signal
that T&T has reached its peak? If this is the
case, there are serious implications for future
revenue streams and also the pace of development
of new gas based industries.”
On
the flipside, he said if the scenario was not
accurate T&T will have to spend more as it
gets closer to the crest of its profile.
“In this scenario, what then are the incentives
for further exploration? Do we as a country need
to re-examine our fiscal regime and recognise that
the way the pie is divided needs to be rethought
or do we take our neighbour’s attitude that
if this is valuable enough then people will do
what it takes to get it?” he asked.
Enill
says the Ministry of Energy’s first
order of business is to review fiscal incentives
for ultra deep water exploration.
Enill confirmed that it is one of the priority
items on the workplan for the Energy Standing Committee.
Ultra deep blocks will be put up for bidding in
2009.
But industry insiders believe that the Government
may miss the opportunity to cash in on higher oil
prices as it could take years to prove up reserves.
Riley said that it could take at least ten years,
if exploration begins immediately.
Venezuela
and T&T
Venezuela’s
petropolitics is intended to move the country
toward greater control over and
to extract more wealth from its energy sector.
While commendable, Bryan said it is a recipe for
regional power play.
He
said that increasingly, Venezuela is being viewed
as a “trusted regional partner” by
most of the energy-dependent Caricom countries
and PetroCaribe looks like a real attempt to find
a regional solution to the energy supply problems
they face.
However, energy commentators have questioned whether
a spill-over will occur in the Caribbean.
“Chavez isn’t giving away oil, you
know. Chavez is creating strategic alliances by
offering oil at preferential financing terms,” noted
Paul.
Bryan
said it will be to Venezuela’s advantage
to capitalise on T&T’s established LNG
infrastructure and monetise gas from its Plataforma
Deltana area. This could also be crucial to the
establishment of a fifth LNG train.
A framework unitisation agreement was signed in
March when Prime Minister Patrick Manning visited
Venezuela but moving to the monetisation phase
has been delayed.
Enill noted that a team has already been put together
and a framework for dialogue established.
“We just need to re-convene the team to
continue this discussion. We have a framework already
to figure out how we should do negotiations,” he
said.
In November, Petroleum Economist magazine suggested
that the two governments may have conflicting aims.
T&T has proposed to Venezuela that Manatee/Loran
gas form the basis of Train X to Trinidad. The
Venezuelan State oil company, Pdvsa, has made it
clear that it favours commercialisation in Venezuela
for use in Venezuela’s proposed Mariscal
Sucre LNG project.
“There is a very long distance between a
government-to-government framework agreement and
actual contractual terms to supply gas across a
border to an LNG project. As the Venezuelan LNG
experience indicates, government to government
negotiations can become protracted and agreements
can be years in the making. One detects in the
case of Pdvsa that high oil prices have trumped
natural gas for the time being,” said Bryan.
Moving forward with oil
Ken Allum, general manager of marketing and trading
of Petrotrin, noted that petroleum products remain
the main source of energy.
Bryan believes that the age of oil has entered
a new chapter as strong demand and a shortage of
productive capacity have generated a significantly
higher trading range for crude oil than the world
has experienced during the last 20 years.
The demand for crude oil has been the most immediate
factor exerting pressure on prices.
He noted that the recent structural shift in the
international oil market is shrinking surplus productive
capacity along the supply chain as global oil supply
has increased in recent years but not as much as
demand.
“The reality is that the upstream oil sector-the
exploration and production of crude oil-is far
from an open and competitive environment. A high
proportion of the remaining areas suitable for
comparatively low-cost renewal of reserves, mostly
in the Middle East and former Soviet Union are
off-limits to the international oil industry,” he
said.
Government to government negotiations can become
protracted and agreements can be years in the making.
New report sees gloomy gas outlook
A
report by Wood Mackenzie Ltd on T&T’s
gas reserves has painted a dim outlook for this
country’s energy future.
The report was based on figures from the Ryder
Scott hydrocarbon audit.
It
noted that T&T does not have enough proven
and possible gas reserves to supply existing gas
projects to 2015, let alone beyond that date.
It
looked at the country’s exploration failures
in 2005 and 2006.
n Ibis Deep: US$80 million and was the first key
test of the deep play (deeper geology). Although
it was a failure, it has been retained as an exploration
prospect by the Ministry of Energy.
-
Repsol’s appraisal well found only 600
billion cubic feet of reserves.
- BHP Billiton has drilled 11 wells with little
success.
- Talisman has drilled four dry wells.
Results
are expected on BHP Billiton’s Bruce-1,
Canadian Superior’s Victory-1 well and Petro-Canada’s
Zandolie West-1 and Anole-1 wells.
“Wood Mackenzie’s base case forecast
of gas demand in T&T estimates that over the
next 15 years (2008-2022) 11.4 trillion cubic feet
(tcf) of gas is required simply to supply ‘firm
demand’ (ie existing projects). Over the
next 20 years (2008-2027) the supply requirement
jumps to 15.7 tcf,” it noted.
“Whilst the concern over gas reserves in
T&T is a real one, the Government should be
commended for not only making public the potentially
worrying news but also for the fact that it is
now trying to act swiftly to try and improve the
situation.
“The exploration potential of the country
is probably still significant but what is now being
realised is the fact that this gas is becoming
more difficult and more expensive to find. To this
end, pragmatism over issues such as government
take and the price paid by domestic gas-based industries
is required to stimulate much-needed exploration
activity,” it said.
Story
by Asha Javeed from
The Trinidad Guardian
The
Trinidad Guardian
Thursday 13th December, 2007
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