Mango
delivers first gas
TG
Bptt’s Mango
Port Spain
Petroleumworldtt.com 12
09 07
Despite
Ibis Deep’s failure to produce gas
a year ago, it is still being dubbed a “commercial
success” by bpTT’s chairman and chief
executive Robert Riley.
Fast forward to 2007.
Today,
Riley is saying the new platform, Mango—apart
from its late start-up—is world-class.
Already it has reached 200 million standard cubic
feet of gas (scfd).
But
it’s two months behind the company’s
projected September 1, start-up date.
This also pushes back start-up of Cashima, which
was built alongside Mango at the La Brea Fabrication
Yard and scheduled to deliver first gas by October
1, to year-end.
Why the delay?
Riley
deflected this pointed question by stating that
it was bpTT’s internal target which
is different from its target to the external world.
“We set what we thought was best in class
date for delivery,” he told the Business
Guardian in an interview last week.
For the past year, the energy major has been on
the defensive.
The new chief executive, Tony Hayward, is set
on globally restructuring the company.
It has sold off its company-operated convenience
stores to franchises. Its refineries in Whiting
in Indiana and Texas City are running below capacity
and are not expected to reach full output until
next year.
Fifteen people were killed in an accident at its
Texas City refinery in 2005, and a fire in April
damaged the Whiting refinery.
An
oil find in the Shah Deniz field in the Caspian
Sea two weeks ago and Mango’s start-up in
T&T should mark a turnaround, even as the company
streamlines for efficiency.
Riley noted that Mango and Cashima have had challenges,
particularly weather-related ones which put pressure
on productivity.
But
it’s had no impact on business, Riley
said.
“We’ve not had any keep back on productivity
or targets, so we are well placed to meet all our
production targets for the year. That’s the
position on the delays.”
A confident Riley explained that rates of declines
have panned out better than expected.
“We’ve had one of the smoothest start-ups
that I can recall. Everything looks very good.
Minor issues in the start-up. This actually could
be one of bp’s world class start-ups.
“We
are confident that we can supply all of our existing
contracts and I look forward to
a great year in 2008 because for the first time
in maybe three years, we will have additional deliverability
over and above the immediate production needed.
That will give us some flexibility which we did
not have over the past three years.”
Riley expects to get about 250 million scfd from
Mango as it goes into its second well and begin
nursing it into production.
“This additional structure gives us greater
flexibility because it gives us some additional
gas deliverability. We have the capacity to produce
more than we actually need, so it creates flexibility
in case something doesn’t work. And I will
have that spare gas most of next year because what
Mango will do is start to replace other gas that
we are loosing because production declines. We
have a personal amount of gas and they decline
over time. Mango will come in and full up the decline.”
He
noted that Cannonball, which was commissioned
three years ago, has already started to decline.
It’s expected that Mango will fill the gap.
Cashima
is expected to impact on bpTT’s
production in 2008. The gas will go to filling
LNG contracts.
“At the moment, we are not really trying
to grow our gas production. We should distinguish
deliverability from production,” he was careful
to point out.
Mango
will increase its deliverability by 750 million
scfs a day when it’s fully on stream.
“Not all of that will be translated into
production. You’ve got to have some spare
to be able to deliver consistently at close to
500 million scfs (of oil equivalent) a day for
a very long time. Mango and Cashima play a very
important role in continuing that trend.”
How
does bpTT’s exploration agenda tie into
that?
“What
it will do is fill out the back end of these
contracts and give us more assurance on
any downtime risk on what we think we know now.
We think we understand the extent of the basin.
“We
liken it to a puzzle. What we have been doing
is filling out the boundaries of that puzzle
so we know the rough size. We will have a lot of
work to fill out those pieces. We think we understand
the size of the basin roughly. It is unlikely that
our exploration will grow a whole lot and bring
more certainty to how we should produce these barrels
of oil equivalent.
“I should say to you that 500 million barrels
of oil equivalent is a huge and very challenging
business to deliver over a long period of time.
Very few people in the world are able to do that.
We intend to do that here. That’s in keeping
with our strategic objectives.
“We are using about one tcf a year, so we
have to be able to replace that for as long as
we can,” he added.
He anticipates paying the Patrick Manning-led
government more than $1 billion in revenue a year.
Ryder Scott
When the Ryder Scott audit results were announced
in July, energy executives were barely alarmed.
Collectively, they expressed optimism about the
future of the energy-based industrialisation.
“We
know the business. The Ryder Scott report is
a snapshot which locates you; gives you a sense
on pace, what kind of challenges you have.
“It’s a very wrong thing to conclude
that if you have proved reserves for ten years,
that is all you have got. We all know that there
is some more gas to be found. I feel in 2009—not
just bp—but other people will find gas.
“The
question is, then, what pace should you develop
this gas and what are the challenges?
In bp terms, we think we are at a stage of our
productive life where we are much more focused
on sustaining that than in trying to prove it.
We have gone through the growth phase and we feel
more likely that what we will shore up as we fill
out this puzzle will go toward filling and staving
off a decline.
“Now that’s
a very good position to be in. Five years ago,
we would have been worried
if there was enough gas there. We now know that
there is enough gas there to fill out all our projects.
So, in a sense, we have de-risked the basin and
bought more certainty.
The
downside of certainty is that it starts to tell
you the extent and that gets people a little
nervous. Our business will be longer than 12 years.”
The
company’s LNG contracts run for 30 years
and are now halfway through, while its contracts
with the National Gas Company will last another
27 years.
Riley insists the energy major is ready for the
challenge.
“Gas
is going to be harder to find. Smaller pools.
It is going to be more costly and more challenging.
That is why we are developing a world-class fabrication
industry.”
These
days, it’s bpTT’s restructuring
that’s making news.
In
October, BP’s chief executive Tony Hayward
announced a global restructuring. The company was
poised to axe swathes of management in response
to a “dreadful” financial performance.
Locally, Riley expected minimal impact.
But the company has hemorrhaged some staff.
Riley
explains: “Two things are driving
changes. We are globally working on restructuring.
We have been concerned with head office costs.
Bp is not in competitive crisis. We have been falling
back in our prices, so we’ve looking at that
and we need to reduce the complexity. As a result,
we will have some impact on people in our head
office. That work is going on.”
He noted that locally, two departments have been
affected. The communications and external affairs
unit and finance and control will be combined with
commercial.
Restructuring is part of the business.
Riley reflected that in his tenure, the company
has restructured at least three times.
“We’ve
bought exploration and appraisal together. We
now have a performance unit. We need
to focus more on the cost management of the business
because inflation is eating our lunch.”
To emphasise the point, he said that over the
last five years, the cost of doing business in
the energy sector has almost doubled.
“The
big challenge of the oil and gas business is
cost management because as we increase our activity
to fill demand, we are creating more and more demand
on the same level of staff in the industry and
they are raising their prices. The consequences
are the cost of doing business has gone up. There
are some global effects and there are some local
effects. Time will tell.”
Pushed to be more specific, he said:
“I can’t be more specific. There is
no lit. There is no specific data. I have to say
things carefully because I don’t want to
create anxiety in my staff, but I also have to
be real with everyone and we are constantly looking
for ways to make sure or costs remain as they can.”
Energy
companies are experiencing about 20 per cent
inflation a year which puts pressure on companies’ bottom
line, said Riley.
Trinidad’s
energy industry
The
company’s operations are in a good place.
“We
are a well managed business, but there is room
for improvement. We are not required to
adjust as much as our North Sea and Andean business
and we are not in the same category.”
He
explained that a large proportion of the company’s
crude commands less than world price.
“Because of climate change and the onset
of winter has been slower and milder in recent
times, there has been a noticeable lag between
oil prices and gas price. US is the premium market
for gas and LNG yet gas prices are not in the teens.
That is why cost management is always important.
It’s not a high margin: high volume, low
margin business.”
He
echoed Prime Minister Patrick Manning’s
conservative approach to industrialisation.
“My
own view is that we ought to be conservative.
I think the Government is very right to curtail
how fast it is going with its projects and to be
very, very choosy about what it does. Trinidad
does not have to rush into projects. It is more
a question of how much revenue we are getting,
so while we need some growth, I think it is prudent
to exercise restraint and quality choice in the
kind of projects we do and we should not be doing
projects which chart the price of gas now. That
is inconsistent with what is likely to happen in
the upstream.
“In
the upstream where we produce the gas, we are
likely to see twice the average price, twice
the price of finding and developing that gas price.
Therefore, in the downstream, if you are not to
have a massive conflict you need to ensure that
the projects you are choosing downstream are the
best that you can get.
“The
other thing we have to take note of is the highest
profitability for the Trinidad government,
the highest tax wedge comes from LNG, not from
the domestic production, so you have to be careful
about that from now. It is important to have some
balance.”
Story from The Trinidad Guardian
The
Trinidad Guardian
Thursday 29th November, 2007
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