Trinidad & Tobago

Trinidad & Tobago

This special report has been produced by Elite Special Sections for distribution with Oil & Gas Journal

New investment and technology revitalize an oil pioneer

Trinidad and Tobago still has vast petroleum potential, despite more than a century as an oil producer. Oil and gas explorers are taking a fresh look thanks in part to government efforts to take the nations upstream and

downstream industries to new heights

Government determined to create a globally competitive fiscal regime for oil and gas

After a century as an oil producer, Trinidad and Tobago could be forgiven for choosing a quiet retirement from the petroleum business. But the small Caribbean nation of only 1.3 mil-lion people is determined to carve out an even bigger future in the upstream and downstream sectors.

The country already punches above its weight in the worlds petroleum busi-ness. It ranks among the worlds top 20 gas producers, with an output of 40.7 billion cubic metres in 2011.

BP produces more than half of this gas and is the largest petroleum producer in the country, where it has operated since the 1960s.

Most of the countrys gas produc-tion is processed into 15 million tonnes of LNG every year by Atlantic LNG at the Port Fortin facility. Large volumes are also taken by US-based Methanex, which operates the worlds biggest methanol and ammonia plants at Points Lisas Estate.

Oil production is a smaller part of the countrys petroleum economy, total-ing 136,000 barrels of oil per day across hundreds of wells onshore and offshore. Production has declined by about 30% since 2007, but this reflects chronic under-investment rather than any dry-ing up of the countrys oil opportunities.

Trinidad and Tobago is part of the Eastern Venezuelan Basin, which is

widely regarded as one of the oiliest places in the world. The country has already produced 3.5 billion barrels of oil, but this represents only 20% of the discovered reserves of 16 billon bar-rels. The leading geological expert on the region, Dr Krishna Persad, believes another 16 billion barrels of oil are still waiting to be discovered, along with an-other 50 TcF of gas.

Trinidad and Tobagos coalition government of Prime Minister Kamla

Persad-Bissessar, which came to power in 2010, is determined to attract new investment to realise some of this po-tential. It has a long-term vision for the countrys petroleum industry, but there are also pressing issues that require swift and effective action.

The most urgent priority is a turna-round of the decline in oil production. The petroleum sector provides about 60% of public revenues, and the recent decline in oil production is eroding this critical revenue base. The countrys fi-nances remain in a very strong position, thanks to conservative management of many years of petroleum wealth. Trini-dad and Tobago had more than $US10 billion in foreign exchange reserves at

Tax changes and new programs revitalize petroleum sector

Human resources, a rich natural endowment of oil and gas and low production costs, make Trinidad and Tobago one of the most attractive places in the world to explore

Mr. Larry Howai Minister of Finance and the Economy

Sector revitalization

Petrotrin

Offshore

Onshore

NGC

Downstream

First Citizens

Servicing

Infrastructure

Summary

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CONTENTS

All production and editing was done by

www.elitespecialsections.com

Project Director: Nathalie Martin-Bea

Writing: David Upton

Design & Layout: Antonio Caparrs

Photos courtesy of: Petrotrin, NGC, NEC, PLIPDECO, TOFCO, BP, Methanex and Oscar Segura

Published April 2013 in Oil&Gas Journal

Special Thanks to:

Minister of Finance Senator Larry Howai, Minister of Energy and Energy Affairs Senator Kevin Ramnarine, Minister of Transport Mr. Chandresh Sharma, The Energy Chamber of Trinidad and Tobago and its CEO, Dr. Thackwray Dax Driver and the Communication Departments of Petrotrin, NGC, NEC and PLIPDECO

The staff of OGJ and Daniel Bernard for their help and support

the end of 2012, and a sovereign wealth fund (the Heritage and Stabilization Fund) with a further $US4.5 billion.

But government receipts from oil production have tracked downwards for almost a decade and the government is acutely aware it needs to act to avoid a permanent shift to a lower revenue base.

Another key priority is finding more gas to feed the huge appetite of Atlantic LNG and the 90 downstream companies at Port Lisas Estate. The governments 2012 audit of gas reserves, conduct-ed by consultants Ryder Scott, shows proved gas reserves of 13.3 Tcf at the end of 2011. While this is a decrease of only 0.2 TcF or less than 2% from the previous year, it is part of an unbroken downward trend from a peak of 20.8 Tcf in 2002.

BPs latest Statistical Review puts a figure of 14.2 TcF on the countrys prov-en gas reserves, slightly higher than the Ryder Scott figure. However, BPs review

also points out that proven reserves will last for only 9.9 years at current rates of production.

The outlook for oil reserves is less worrying, but is helped by the fact that falling production is placing less stress on the existing resources. BPs Statistical

Review estimates total proved oil re-serves of 800 million barrels at the end of 2011, which will support another 16 years of production at current rates .

The task of reversing the oil produc-tion decline and rebuilding gas reserves is led by Minister of Energy and Energy Affairs, Kevin Ramnarine, who was just 39 years of age when appointed to the role in 2011. He is possibly the young-est energy minister in the world, but his background as a petroleum engineer and experience as an economist with BG in Trinidad and Tobago also make him perhaps the best qualified.

Ramnarine is under no illusions about the changing competitive envi-ronment for petroleum investment.

The world 20 years ago was very different to today. Trinidad and Tobago was a very sought-after destina-

tion for E & P in-vestment, but now we have to compete with new players, such as Ghana, Mo-zambique, Tanza-nia, Colombia and of course Brazil. Therefore we have

to constantly reassess our fiscal system to ensure we are competitive.

Ramnarine says a number of im-provements have already been made over the past three years. The most significant changes were in last years national budget, and included the in-

we have to constantly reassess our fiscal system to ensure we are competitive

Mr. KEvin raMnarinE Minister of Energy and Energy affairs

Gulf of Paria in La Brea

troduction of special supplemental petroleum (SPT) tax rate for new field developments to encourage the devel-opment of smaller pools of oil and gas with marginal economics.

Ramnarine says the country still has work to do. Cabinet has just appointed a committee to consult with all stake-holders in the energy sector and has terms of reference that include heavy oil development and reform of produc-tion sharing contracts. The committee will report in six months, and I am hoping to take up some of the recom-mendations in this years budget.

President of the Energy Chamber, Roger Packer, says Trinidad and Tobago has some challenges and even more needs to be done to encourage exploration and investment in gas. We need to incentivise the E & P companies because when you are drilling offshore you need deep pockets. There are many smaller gas reserves out there that are not economic, but with the right tax incentives it will be possible to develop these fields and turnaround the decline in reserves.

The governments determination to revitalize the petroleum sector has other

dimensions than protecting public finances. Oil and gas has dominated the countrys affairs for several generations, and the industry is a way of life for the people of Trinidad and Tobago. The countrys schools and universities, which are free for all citizens right up to the level of PhD study, are geared for training people to work in oil and gas.

Minister of Finance and the Econo-my, Larry Howai, says the countrys hu-man resources, combined with a rich natural endowment of oil and gas and low production costs, make Trinidad and Tobago one of the most attractive places in the world to explore.

In terms of human resources, we have one of the highest literacy rates in the region, and we have a very high level of tertiary level graduates. We have a high level of intellectual capital floating around in Trinidad and Tobago, as well as a low cost of operations and an attractive fiscal regime. All these things contribute to attracting large investors, and explain why such a small country is globally significant in terms of exports of LNG and ammonia.

Ramnarine says improvements to the countrys fiscal regime is already leading

Tax ChaNGeS SO Far AcutintheSPTrateforpre-1988offshoreareasfrom42%to33%,

bringingitintolinewithrateforpost-1988areas,andtheintroductionofallowances for operators of small and/or mature fields

TheintroductionofspecialSPTrateof25%fornewfielddevelopments

Acutinthepetroleumprofitstaxfrom50%to35%foroffshorefieldsinwaterdepthsofatleast400metres

Anincreaseinthecostrecoveryto80%foroperatorsofdeepwaterfields

The introduction of a 140% capital uplift for exploration in deephorizons,definedas8000feetormoreonlandand12,000feetormorein marines areas

Energy Map of Trinidad and Tobago May 2012. Source: Ministry of Energy and Energy Affairs

www.petrotrin.com

Petroleum Company of Trinidad and Tobago Limited (Petrotrin),