Boost
non-oil sector while the going is good
PORT SPAIN
Petroleumworldtt.com
03 09 08
WHILE the US Geological Survey in 2000 pointed
to massive potential for oil and gas discoveries
in the region, energy experts do not believe that
government should use that as a license to indulge
in expanding into more heavy industries. Estimates
of this country's current proved and probable gas
reserves range from 20 trillion cubic feet (tcf),
according to BP's statistical review in 2007, to
33 tcf (NGC's CEO, Frank Look Kin in 2006), to
35 tcf (John Andrews, formerly chairman of ALNG).
In
fact, Andrews, who was also Permanent Secretary
in the Energy Ministry before his retirement, said
in 2004 that there was an exploration potential
of 65 tcf. And recently, newly-appointed Minister
of Energy Conrad Enill, announced that Government
was undertaking yet another "gas audit",
due to commence soon.
In 2004, before ALNG's Train 4 came on stream,
gas usage was allocated as follows: ALNG 56 per
cent overall. Of the remaining amount, the petrochemical
industry accounted for 68 per cent of NGC sales;
power generation, 20 per cent; iron and steel,
6.9 per cent; gas processing, 2.1 per cent; and
other, including refinery, 3 per cent. Among petrochemicals,
the main users were: the ammonia, methanol and
urea industries, with 59 per cent, 40 per cent,
and one per cent of the total petrochemical sales,
respectively. ALNG's trains are projected to use
the following volumes of gas over a 20-year span:
Train 1 (from 1999)- 3.5 tcf; Trains 2 and 3 (2003)-
7.7 tcf; and Train 4 (2006)- 6 tcf.
What the above numbers suggest is that the four
ALNG trains will consume some 17 tcf of gas over
a 20 year period, or 2.5 bcf per day, or around
900bcf per year. Train 1 is closing in on 10 years
of operation. With additional heavy industrial,
gas-fired plants coming on stream since 2004 (Nu-Iron
steel, several methanol plants including the giant
M5000, additional capacity at Powergen), one can
assume total daily consumption of gas now stands
at close to 4 bcf/day. This amounts to almost 1.5
tcf per year, or 30 tcf over a 20-year period.
The
challenges we face, say energy experts, is not
how much gas there is beneath the Columbus
Channel and the Tobago Trough, as projected by
the USGS. "The cost of exploration has increased
immensely," said one former key player in
the sector. "From drilling pipes to associated
equipment, prices are not what they used to be
10 years ago. The other challenge is the depths
at which reserves can be found. Again, the deeper
one drills, the costlier it becomes. This latter
may not be of great concern, except for the duration
between start-up and striking gas. Clearly, high
exploration costs will mean higher gas prices."
It's
how we utilise the gas-proved, probable and possible-that
will determine where the country
goes from here. "Merely to maintain current
levels of consumption for another 30 to 40 years
will mean having to discover at least 1 tcf of
gas a year," he continued. "If we are
talking several mega-plants like a new steel mill,
aluminium plants and the much-touted 'Train X'
to be added to ALNG's facilities, then we shall
need much more than 1.5tcf by way of new finds,
annually." He said he did not see the need
for a new steel mill, given that we are already
saddled with the "nastiest still mill anywhere
in the world"-Mittal Steel. "The corrosive
dust spewed by that plant, which is damaging to
the health of everyone on the Point Lisas Estate,
will not be tolerated in any other country, Russia
and China included."
Exploration,
besides being costly, also has a set time-line
between start-up and getting gas
flowing into the national pipeline-grid. Rafael
Sandrea, a Caracas-based petroleum engineer with
30 years experience, who holds a PhD from Penn
State University, wrote: "Gas exporting countries
are in a headlong rush to install LNG facilities
and, to a lesser extent, build emerging GTL plants
to produce synthetic fuel products. These projects
require major capital investments and enormous
reserves. The efficiencies of these technologies
range about 60-65 per cent, which implies that
losses of wellhead gas, hence reserves, are high,
roughly one-third."
Although
Minister Enill has restored "Train
X" to the future-gas-development agenda, this
is what Professor Ken Julien had to say of the "LNG
egg" back in 2003: "If you look at our
gas reserves, what we call proven, bankable reserves
which we know are there, no speculation - we could
simply say, let us proceed immediately with Train
IV, a big project, worth at least US $1.5 billion.
But when you look at the reserves picture, and
the country has to look at sustainable benefits
both tangible and non-tangible, you will find out
that you are committing 80 per cent of gas reserves
to one industry, ALNG. That's a frightening thought."
Our
energy expert said while the Patrick Manning
Government keeps insisting on diversification
within
the oil and gas sector, it has failed to look at
other successful models of diversification. "Take
the UAE as an example," he said. "They
have much more reserves than we can dream of. It's
true that Qatar, because of its huge gas reserves-some
900tcf-is going with LNG, aluminium and other heavy
industries. Qatar has the land space to site such
plants where they pose little or no danger to their
people. But most of the other GCC states are increasingly
turning to tourism, to becoming the financial and
commercial centres of that part of the world, and
to light manufacturing. We simply cannot continue
to sustain a uni-economy society it's untenable."
Prime
Minister Patrick Manning has asked a very pertinent
question to those who suggest we "go
easy" on our natural gas consumption: if not
industrialisation, then what? Assuming we do strike
gas at a rate higher than 1 tcf per annum, given
the intense exploration activities offshore, what
do we do with all this gas? Energy Minister Enill
alluded to the construction of a new refinery at
Petrotrin's Pointe-a-Pierre site, costing around
US$4 billion. That makes sense, say the experts. "There's
a global shortage of refining capacity. In fact,
few new refineries have been built over the past
decade, and the ones that have been around for
some time, like ours, are woefully run-down. It's
why Petrotrin has had to continuously upgrade its
plant and equipment, bringing daily refining capacity
back up to 160,000 bpd. People forget that refinery
processed up to 355,000 bpd in the early 1970s."
There are huge markets out there, ready to gobble
up refined products. Recently, a source said, one
shipment of LNG was sold to Korea at US$19 per
thousand cubic feet (mcf), almost three times the
Henry Hub price. And countries as varied as Russia,
China, India, Australia and the USA are rushing
to build new refineries, or to upgrade existing
ones. So building a new refinery here seems to
make sense. More than that, though, energy experts
point to boosting our strong manufacturing sector
through use of gas, piped directly to plants at
costs that will make them globally competitive.
China
is the world's manufacturing giant, without doubt.
But China will always need to import gas
and oil since it does not fall in a zone that holds
high potential for oil and gas discoveries. "Understand,
though, that a huge cost in delivering oil and
LNG is transport," said one expert. "Indonesia,
currently the world's biggest LNG producer and
exporter, is far closer to China than Trinidad
is. Qatar, too, is strategically located close
to India, the other big consumer, as well as Far
East countries that are gobbling up oil and gas."
Delivering
oil and gas products to external markets is also
costly, depending on the product and the
location of exporter and importer. Trinidad, though
not the biggest LNG producer in the world, currently
supplies more than 80 per cent of US needs. Indonesia,
the biggest, markets its LNG to Japan. On this
challenge, the International Energy Administration
said: "The high cost of gas transportation
sets it apart from oil as an energy commodity,
making the commercial value of gas discoveries
very dependent on how far they are from markets.
Over the past decade the world has added three
and a half times as much gas to its proved reserves
as it has consumed."
Even
if the US economy plunges into a recession, a
very real prospect at this time, it will continue
to rely on Trinidad for LNG. The market, therefore,
will not be a problem. Whether we should venture
into "Train X", or husband new discoveries
carefully, spreading their life-spans, is where
government and energy experts disagree. Mr Manning
insists that high usage through heavy industries,
including some downstream activity, is the way
to go. The experts, who believe oil and gas prices
will remain buoyant for many years to come, disagree.
"Of course we must continue with the heavy
industries already established," said one
expert. "What we should not do is add more
such mega-plants to an already crowded small-island
state. We should use revenues from these sources
to transform the economy, to boost the non-oil
(and gas) contribution to our GDP. Food production
is one sector behind which we should plough more
money. Food processing is also an imperative. Our
once dominant manufacturing sector needs to be
revived, made more competitive. Most of all, we
should be saving much more than we currently do
in the energy stabilisation fund."
Story
by Raffique Shah from Business Express
The
Trinidad Express
Wednesday, March 5th 2008
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