BY ASHA JAVEED

ashajaveed@yahoo.com

After a year highlighted by an Ibis Deep failure, a Ryder Scott Hydrocarbon audit which put reserves to production ratio at 12 years and a general consensus among energy executives that the Government needs to review its tax and fiscal incentives, the energy industry is once again regaining momentum.

Maybe it has to do with natural gas discoveries offshore Tobago and the North Coast by Petro-Canada and Canada Superior respectively.

Or maybe it was Energy Minister Conrad Enill’s detailed agenda which he presented to energy executives at an energy luncheon hosted by BG T&T at the Hyatt Regency Trinidad hotel, Wrightson Road, Port-of-Spain, two weeks ago.

When energy executives gathered at the Hilton on Monday and Tuesday for the South Chamber’s Petroleum Conference to discuss “the Future of Energy,” the general mood was one of optimism.

Enill first outlined his agenda which included:

n A new bid round scheduled for shallow blocks in the North Coast Marine Area and South East Coast Area in late 2008 and for the Deep Atlantic in 2009.

n The establishment of an integrated oil company

n The establishment of a Natural Gas Governance Framework

n The continued focus by the National Energy Corporations to develop its industrial estates and port facilities funded by the State

n Review of its fiscal regime

n An oil audit

n An updated gas audit

It was comprehensive enough.

Enill, who has consistently maintained that the Ryder Scott audit was just a guide to manage the country’s energy future, was pleased with Petro-Canada’s and Canada Superior’s discovery.

T&T also got a pat on the back from Richard Hurburt, Minister of Energy of Nova Scotia, Canada, for its incentives for local content and its subsidised education to create a well-educated workforce.

“Of course, a well-educated local workforce is the key to a strong local market. That is a commitment T&T has clearly made, starting programmes like Petroleum Geoscience at the University of the West Indies and creating the University of T&T in 2004 to build talent in the energy sector,” he said.

But it was South Chamber president Rampersad Motilal who added a touch of sobriety.

Local stock market needs energy listings

“The development of LNG (liquefied natural gas) spurred on by the extremely successful gas exploration and development programmes of the past two decades has resulted in a world-class LNG industry here in T&T.

“Given our limited proven natural gas resource pool and over 54 per cent of gas produced being utilised by this sector, we must now examine whether LNG in our current portfolio has also reached or exceeded its proportional limit,” he said.

Delving further into the job creation potential of metal industries, Motilal noted that T&T’s success has raised questions about sustainability given limited gas reserve.

“In addition, with industrialisation comes other concerns such as environmental and social issues. The challenge for all stakeholders will be to find the appropriate balance,” he said.

He noted that in 2008 demand for natural gas is expected to rise marginally at 4.1 billion cubic feet a day (bcfd).

By the end of 2010 the demand will rise to 4.7 bcfd as the four new projects which are currently under construction come on stream: MTHL’s AUM Complex, Essar Steel, Alutrint and Petrotrin’s Gas to Liquids plant.

“The existing stock of petrochemical plants is relatively new or well-maintained and one can only assume that the owners will look forward to stable operations over the next 20 years. When LNG is included, we will require approximately 34 trillion cubic feet (tcf) of gas for stable operations over the next 20 years. If a lesser horizon of 15 years is considered we will still require approximately 25 tcf of gas to satisfy industry,” he said.

Viewed from this perspective, one can well understand the urgency to stimulate exploration activities, he said.

And while the Government is re-examining the fiscal regime this “cannot come too soon given our limited proven reserves and the changing characteristics of the sector which now includes maturing assets, smaller gas fields and deep water interests.”

He called on the Government to consider the plight of farmed-out wells which today face rising costs, royalties and payment to bonuses to the Ministry of Energy such that they are under threat of becoming uneconomic.

Motilal pointed out that there was a noticeable absence of energy companies on the local stock exchange.

“We wish to encourage the Government to establish the appropriate framework of local energy industries to be placed on the local stock exchange so that citizens can participate directly in sharing the risk and the rewards of the energy sector.

“This can be a useful mechanism for the divesting of mature assets which may no longer meet the returns criteria of larger players but could still be profitable to a smaller, publicly-traded company,” he said.

Then there was Central Bank Governor Ewart Williams admitting that the country’s inflation rate, now at ten per cent, was a symptom of the “Dutch Disease.”

Williams said, “While the factors behind the increase in inflation are many, at least two of them could be traced back to the buoyancy of the energy sector. These are:

“One, the expansion in domestic demand in the context of capacity constraints (reflected in the public utilities, the transportation sector, etc) and

“Two, sluggish agricultural production, as farm incomes stagnate relative to other non-farm incomes.”

He said that, as a result, fiscal policy provides special challenges for natural resource-based economies.

“Higher oil revenues provide these governments with the opportunity to increase public spending on priority economic and social goals. However, the fortunate governments are faced with the trade-off between pressing developmental needs and the limits of the country’s institutional and absorptive capacity,” he said.

—Asha Javeed

T&T: A successful history in oil production

By Raphael John Lall

Vice president, business development at the National Energy Corporation (NEC), Andrew Jupiter, has said that Trinidad has had an illustrious history in the energy sector over the last 100 years.

Jupiter was making a presentation at the South Trinidad Chamber of Industry and Commerce’s (STCIC) Petroleum Conference at the Hilton Trinidad and Conference Centre, St Ann’s on Tuesday.

Jupiter walked the audience through the 100 years of oil production in T&T.

He said that Merrimac Company drilled the first oil well in La Brea in 1857.

However, it was not until 1908-1910 that commercial oil production began.

Shell’s first commercial well was drilled in Point Fortin in 1912.

“In 1911 we had the first shipment of oil from Brighton. In this context the operation at Brighton can be considered as the first commercial well in the western hemisphere.”

Jupiter said in 1913 Shell entered into a very unstable environment.

“When Shell entered, they met a very unwilling and untrained workforce and met with malaria and yellow fever. That was the challenge and they conquered all.”

He said that by 1916 there were two refineries, one in Point Fortin and a smaller one in Tabaquite.

In the same year the world’s first recycling system was used in the oilfield in Tabaquite.

He said this put T&T in a very strong position in the world oil market during the early 20th century.

“T&T was the world’s eleventh largest oil producer... ahead of Venezuela.”

He said by the pre-World War Two period T&T had entered a period of industrial unrest which shook up the oil industry.

Tuber Uriah Butler led protests for better working conditions in the oilfields which led to his imprisonment by the then colonial authorities.

Jupiter said things improved after the war and in 1954 the Soldado field was discovered in the Gulf of Paria.

He said 1960 was a pivotal year which saw the birth of the Organisation of Petroleum Exporting Countries.

In 1961, the first exploratory well was drilled off the east coast.

The post-Independence period saw the nationalisation of a large part of the energy sector.

“1974 saw the acquisition of Shell, the birth of Trintoc...1972 saw the formation of the National Petroleum Marketing Company, 1975 saw the birth of the National Gas Company.”

He said the 1985 to 1998 period saw the return of involvement of the private sector in the energy sector in a large way.

Jupiter said the history of energy in T&T has been a successful one and it is up to the Government, academia and industry to work together for the future good of the energy sector.