Thursday 21st April 2005

 

T&T holds solution to cross-border gas

 
 
 
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Energy Minister Eric Williams told journalists last week that the negotiations between T&T and Venezuela on cross-border gas were going “very well” and presumably this means that some finality will be brought to the matter soon.

Two pairs of blocks are involved here: BGTT/ChevronTexaco’s 6d acreage and ChevronTexaco /Conoco Phillips’ block 2 over the border in Venezuelan waters and bpTT’s Kapox field and block 1 in Venezuela.

I suspect that 6d and 2 will be the first on which agreement is reached, if only because the private sector partners are so keen for it to happen.

The three exploratory wells ChevronTexaco, the operator on the Venezuelan side, drilled in the Loran structure indicated about five to seven trillion cubic feet (tcf) of potentially recoverable gas reserves. The Manatee well on the Trinidad side, also drilled by the US major though BGTT is technically the operator, was expected to identify around 1.5 tcf. Being cautious and taking, say, around six tcf as a more realistic figure of potential gas reserves, this is a huge discovery in any language.

The US$64,000 question, however, is: what to do with it?

How do you best commercialise such a large tranche of gas sitting out there in the Atlantic ocean, hundreds of miles from landfall in Venezuela, with no pipeline infrastructure yet in place to carry it to any sort of market on the mainland?

The immediate answer is to bring it to Trinidad where the Columbus Basin pipeline network, which now gets as far as the Kapok field, can easily be extended into 6d and hook up with a platform, preferably on the Trinidad side, which can be utilised to tap into the gas reservoirs in Venezuelan territory.

What seems the obvious solution, however, does not find favour with the Venezuelans, presumably for reasons of national pride rather than economics.

We have seen evidence of this before, when BG, ChevronTexaco’s original choice of partner in block 2, tried to wring a commitment out of Pdvsa that cross-border gas would be monetised in Trinidad, at least in the early years, but was turned down flat. BG eventually withdrew, leaving an opening for ConocoPhillips.

Ali Moshiri, president of ChevronTexaco Latin America Upstream, which includes Trinidad was, no doubt, echoing the Venezuelan government’s line when he said in Port-of-Spain a few months ago that “the current plan is for gas on the Venezuelan side to be monetised in Venezuela and for the Trinidad gas to come to Trinidad.”

The hard fact, however, is that reserves of the size of Loran/Manatee can really only be economically exploited via a large, high-priced market opportunity—namely an LNG plant which uses around 500 mmcfd of gas. It would be pointless developing six tcf of gas reserves to service, say, a methanol plant, which requires only 60 mmcfd; even three methanol plants in the same location would not cut it.

Why not an LNG plant in Venezuela itself, so the gas can find a home there? Why not, indeed, but the reality is that Venezuela has, so far, not succeeded in moving such a project forward.

You will recall that I said in my column last week that LNG for Venezuela had first been mooted by Exxon in 1970—35 years ago!

Our large South American neighbour is still no nearer the realisation of that goal today than it was then. The Mariscal Sucre LNG plant, of which my readers will be aware, has yet to be finally signed off.

In any event, the current thinking is to feed that proposed 4.7 million tonne a year plant with gas from the four fields north of the Paria peninsula where the plant is expected to be located. These fields, which are all on the Venezuelan side of the border, are said to contain around 14 tcf of gas based on previous exploratory drilling in the area by Pdvsa.

That’s twice as much as Loran/Manatee gas reserves and, what’s more, they are sited much closer to the Guiria industrial complex earmarked as the site of any LNG project.

My friend, Francisco Bello, formerly Pdvsa’s unitisation manager for Plataforma Deltana where the cross-border blocks are located, who was mistakenly sacked by Chavez and is now Latin American and Caribbean regional manager for IHS Energy in Houston, told me that Petrobras has now been brought into the Venezuelan LNG mix and handed a mandate by Chavez/Pdvsa to develop a gas supply from the Paria Norte fields.

The Brazilian petroleum giant has been given 10 months to come up with a plan, the options for which seem severely restricted, being confined, in effect, to LNG.

Even ConocoPhillips’s gas discovery in the Corocoro field in the Gulf of Paria West (GOPW) block, said to be about two to three tcf would be more sensibly commercialised through Venezuelan LNG than the far-away Loran/Manatee reserves.

Petrobras’s insertion into the LNG mix could have the effect of further disrupting the already erratic path of the 35-year-long effort to add LNG to the Venezuelan energy exporting matrix.

As soon as Royal Dutch Shell, which holds 30 per cent in the Mariscal Sucre project and has been its main international sponsor, heard about Petrobras’s involvement, it sought assurances from Pdvsa that it still had an integral role to play.

Bello says Shell was assured that it did though clearly some damage must have been done to its confidence.

The other shareholders in the LNG plant, as distinct from the development of the gas supply, are Pdvsa, with a majority 60 per cent share and Japan’s Mitsubishi (eight per cent), with the remaining two per cent reserved for interested Venezuelan investors.

Bello’s view, and he is very knowledgeable about the way Chavez and Pdvsa think in these matters, is that Pdvsa will end up with 51 per cent of the plant (if, and when, it goes ahead), yielding nine per cent to Petrobras, a share that Venezuela once tried to interest Qatar in taking.

All of the above is manifestly not good news for Plataforma Deltana gas, which can not be exploited by either side unless both agree on a development plan.

With Plataforma Deltana reserves a distant third in the ranking for supplying Venezuelan LNG, therefore, I strongly suggest to Mr Moshiri (who, I believe reads this column on the Internet) that he persuade Caracas to reconsider its desire for Loran gas to be monetised in Venezuela and accept the unemotional reality that the only near-term course of action is really to allow it to come to Trinidad where pipelines and, more importantly, a thriving LNG complex already exist and are poised for further expansion.

 

 

 

 

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