petroleumworld

The Government has reviewed its production sharing contracts (PSCs) to ensure there is a greater return to the State for its energy resources, said Energy Minister Dr Lenny Saith.

“The new production sharing contract, which we have now finally formalised and finished, is an exercise in which the technocrats here looked at what we had and recommended changes,” Saith said.

“We then had it reviewed by an independent expert on contracts. Having come back, the standing committee looked at the new proposal, went to Cabinet about two weeks ago, has been approved and we are now in a position to make that new PSC available to potential bidders.”

Saith said the Government has “walked the line between maximising potential revenue to the Government but also understanding that you have to give the people who are turning in proposals some incentive to be able to make the investment.”

Saith was giving an update on the energy sector at the National Library earlier this month.

Stating there’s nothing certain about exploration, Saith said the Government wants to invite new players into the country so there’s a wider range of competition and companies operating.

“We want to preserve our existing revenue streams and we want to get new revenue streams by developing a fiscal package that enhances the government’s take.”

Production sharing contracts

The new PSCs include:

n consolidating the regime, that is, consolidating the regimes for different areas: one for the land and shallow regime areas and a separate one for deep water.

“If you try to use the contract for land and areas where there’s less risk, to try and do that for deep water, you probably will get nobody interested.”

n a reopener clause which both sides can access. The reopener clause can be invoked five years before the termination of the first term of the contract when the contract is to be extended the first time, and when it is to be extended the second time.

“One of the triggers for reopener would be a contract profit ratio. We’re saying where the contractor is getting less profit oil, then he has the option to ask for the terms to be looked at.

“If it’s more than 3.5—in other words, we feel he’s making super profits on it—then the Government could ask that it be renewed.

“You keep calculating that ratio. If it’s less than one, then the contractor has the right to ask that the contract be opened up. If it crosses 3.5, the Government has the right to say we need to look at the terms again.”

Under the new PSCs, the contractor pays taxes on profit oil.

Saith said the Government was also proposing to put in a clause dealing with the assignment of energy assets by one company to another, but will collect revenue for such transfers.

“There are a lot of operators who find the need to look for partners and they want to assign their contracts and we will have a charge for that.”

T&T LNG Company

This newly-formed company will be responsible for:

managing the government’s assets and investments in the LNG sector

promoting the development of new business opportunities in the industry locally and abroad

evaluating new business opportunities and identifying investments for T&T

“If somebody comes and says we want to invest in a gas plant, they will evaluate it and see whether it makes sense and then make recommendations.

“It would also be the means by which we optimise local content, but more importantly, develop the expertise in the country now in LNG to be able to understand and be better equipped to deal with your partners.”

“The Ministry (of Energy) and the Ministry of Finance will determine the rate and then an independent consultant will determine the value of this assignment and they will pay that rate.”

To treat with the abandonment of oil platforms, Saith said the Ministry of Energy has told operators they have to establish an escrow account from the first day of production.

“The contractor will have to put US$0.25 cents per barrel into that escrow account.”

He said there’s now a new production price table which sets US$40 for oil, US$4 for natural gas.

That table determines what share of the production sharing contract is the Government’s and what share is the operator’s.

Also sitting in at the energy update was Leroy Mayers, permanent secretary in the Ministry of Energy, who said the Government applies a special windfall profits tax if the production price table is above US$40.

Saith said the Petroleum Taxes Act will be amended to reflect proposed changes.

Utilisation treaty between

T&T and Venezuela

Minister Lenny Saith said a T&T/Venezuela steering committee had agreed on a framework for the unitisation treaty and agreed to prepare a draft treaty prior to its last meeting on July 6.

“At the last meeting, they looked at the last draft framework and they also agreed that a provision for local content should also be included in the treaty.

“As part of the work that is going on, the steering committee appointed two technical working groups, one for the Loran/Manatee field and one for the Kapok/Dorado field, two fields in which there is cross-border (reserves), and both of them are gas fields, I understand.”

Saith said these two technical teams are to work on quantifying whatever hydrocarbon reserves exist and to apportion the of share T&T and Venezuela.

“It is unlikely that two different countries will drill in the same area and extract the gas. So one will do it, but in doing it, if they agree on the formula, then so much of that will be available to one country and so much to the other.”

He said the Loran/Manatee Group presented its final report in July of this year and the technical working group has determined the volume of gas in place and the allocations for both sides, which will be the subject of an agreement between T&T and Venezuela.

The future development of LNG

Industrial sites

Saith said the Government extracts revenue from LNG beginning at the wellhead and also has some equity in two liquefaction plants.

To maximise revenue from LNG, Saith questioned whether the Government should invest in shipping, in a regasification plant and in marketing the commodity.

“Part of the decision will be a feasibility study of where added value should come. The marketing side depends on where you could market it.”

Mexico’s demand for energy

Saith, who spoke of Mexico’s “voracious appetite for natural gas,” said that country wants gas to increase its generating capacity, and has been buying gas from the US at “very expensive prices.”

He said the Mexican government had taken a decision to obtain LNG, and is building a plant which has the capacity for expansion. The plant, due to start production soon, will be operated by Shell.

“They have an aggressive programme of building gas terminals. They are looking at another one in the Gulf of Mexico. Two on the Pacific side. And they will need LNG. Shell is building this one and will be bringing gas, I think, from Nigeria,” the Energy Minister said.

“So, there is great potential and there is great interest by Mexico sourcing LNG from Trinidad. It goes beyond gas. It’s talks about the whole energy sector.”

Crude oil production

T&T exports 53 per cent of the 52,727,944 barrels of oil it produces annually;

The daily crude oil production is 144,460 barrels;

Of the country’s total crude oil production:

— BHP Billiton produces 28 per cent;

— bpTT 23 per cent;

— Petrotrin Marine 23 per cent;

— Petrotrin 17 per cent;

— EOG five per cent,

— Repsol 2 per cent, and

— other, 2 per cent

Gas allocation