Future
of energy
PORT SPAIN
Petroleumworldtt.com
03 02 08
The
South Trinidad Chamber of Industry and Commerce
hosted the annual T&T Petroleum Conference
2008 on Monday and Tuesday this week at the Hilton
Trinidad and Conference Centre, St Ann’s.
Highlights of the welcome address by STCIC president
Dr Rampersad Motilal.
The relatively high prices of energy combined
with an increased focus on the environment have
reopened the international debate on the future
of energy.
This
conference is taking place in the year that we
are celebrating 100 years of commercial oil
production here in T&T. This is a significant
milestone in our long history and demonstrates
that we have a long history in this sector and
reinforces our conviction that we possess a huge
amount of knowledge and expertise to draw on as
we chart our path forward.
Policy
As a small country we have been quite successful
in developing our energy-based industries. This
can be attributed to several favourable factors
including our oil and gas resources, supportive
government policies, respect for contracts and
property rights, an emphasis on training and development
of our workforce within the sector, and established
expertise in energy services.
There
is also very broad support for the policy of
moving further downstream and for trying to
facilitate and encourage the production of higher
value-added goods within T&T. Much emphasis
has been placed in the past on the monetisation
of gas and the maximisation of direct government
revenues.
Lately
we can detect a shift to deepening economic activity
within T&T particularly through projects
with linkages to other sectors of the economy.
If we are to fully benefit from our energy sector
it is important that we move further downstream
and secure further value from each molecule of
natural gas.
Primary petrochemicals
T&T
has benefited immensely from the primary petrochemical
sector. The sector has created thousands
of well-paying permanent jobs and a wide range
of opportunities for entrepreneurs in all of the
support services required by the industries. This
includes world-class services associated with plant
construction, on-going maintenance and plant operational
activities.
We
recognise, however, that in the context of a
balanced portfolio we may wish to target for
our relatively small energy sector in T&T,
the share of primary petrochemicals may already
be approaching its proportional limit.
The local petrochemical industries have contributed
significantly to government revenues especially
since the year 2000 as they have enjoyed high prices
over that period. With their commodity-linked gas
pricing structure, these products have yielded
revenues per unit of gas consumed which are comparable
to those from the export gas industries.
LNG
The
rapid development of LNG exports from T&T
has brought many benefits to the economy, not least
the high levels of government revenue that it has
generated. The development of LNG spurred on the
extremely successful gas exploration and development
programmes of the past two decades and has resulted
in a world-class LNG industry here in T&T.
Given our limited proven natural gas resource pool,
and over 54 per cent of gas produced being utilised
by this sector, we must now examine whether LNG
in our current portfolio has also reached or exceeded
its proportional limit.
Downstream
As we move further downstream the investment dollars
per unit of gas utilised increases. The number
of jobs created by each unit of gas used also increases.
This underscores the value of going further downstream.
Our success in developing our gas-based industries
has, however, raised important questions about
sustainability, given our limited gas reserves.
In addition, with industrialisation comes other
concerns such as environmental and social issues.
The challenge for all stakeholders will be to find
the appropriate balance.
In
2007, the gas-based industries consumed an average
of 3.9 billion cubic feet (bcf) of gas
a day, of which 1.6 bcfd were utilised by the domestic
market with 2.3 bcfd going to LNG. This year, demand
is expected to rise marginally to 4.1 bcfd. By
the end of 2010 the demand will rise to 4.7 bcfd
as the four new projects which are currently under
construction come on stream (MHTL’s AUM Complex,
Essar Steel, Alutrint and Petrotrin’s GTL
plant). The existing stock of petrochemical plants
is relatively new or well-maintained and one can
only assume that the owners will look forward to
stable operations over the next 20 years. When
LNG is included, we will require approximately
34 trillion cubic feet (tcf) of gas for stable
operations over the next 20 years. If a lesser
horizon of 15 years is considered we will still
require approximately 25 tcf of gas to satisfy
industry.
Viewed from this perspective, one can well understand
the urgency to stimulate exploration activities
with a view to shoring-up our current gas reserves.
In this regard we are pleased to note that the
Government is currently re-examining the fiscal
regime governing the energy sector so as to ensure
that the taxation legislation remains relevant
to the needs of the sector and promote the necessary
exploration activities. This cannot come too soon
given our limited proven reserves and the changing
characteristics of the sector which now includes
maturing assets, smaller gas fields and deep water
interests.
Reserves to production ratio
Recently, the reserves to production ratio has
been the subject of considerable attention and
discussion from the wider public. Such discussion
is a positive sign that issues affecting this most
critical sector are today capturing the interest
of the average citizen.
With all the discussion of the R/P ratio for gas,
we must not forget about our oil production. This
has been declining fairly rapidly over the past
couple of years and urgent action is needed to
reverse this trend.
Farm-out wells
Some 31 per cent of local land-based oil production
comes from the various lease and farm-out operators,
joint ventures and independent oil companies. These
companies are mainly locally owned and are collectively
referred to as the independent sector. This sector
has produced an impressive 21 million barrels of
oil from mature oilfields mainly in the South since
its inception some 16 years ago.
It is roughly ten times more labour intensive
than the overall national oil and gas exploration
and production sector but today faces rising costs,
royalties and payment of bonuses to the Ministry
of Energy such that it is under threat of becoming
uneconomic.
This would be very unfortunate and we would like
to encourage the Government to take this small
but nevertheless important sector into account
as they consider their revised fiscal regime for
oil and gas production.
Story
from The Trinidad Guardian
The
Trinidad Guardian
Thursday 28th February, 2008
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