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ENERGY Caribbean newsletter (April 2014 • Issue no. 72)

The final edition of the ENERGY Caribbean newsletter

20/20

20/20 ENERGY VISION How the US is shaking up world oil trade China’s hunger for crude is also setting new trading patterns While the US is boosting its domestic crude oil production and reducing its need for imported oil, China is being forced to increase its imports, which are expected to hit 9.2 million b/d by 2020. The US cut its need for imported crude to about 10.8 b/d in 2013 by raising its own production to around 8 million b/d, the highest since 1989. Consultants Wood Mackenzie predict that its need for oil imports will drop below China’s by 2017 as domestic output rises. The US could become the world’s biggest crude oil producer as early as 2016, according to the International Energy Agency, overtaking Saudi Arabia and Russia, which both produce around 10 million b/d. Weakening demand for oil is also a factor. Analysts predict that demand will stay at its present level, around 18.8 million b/d, for some time, and may even fall as vehicle fuel efficiency improves. The Energy Information Administration (EIA) predicts a 25% reduction in demand for fuel by cars and light trucks over the next 28 years, and President Obama plans to raise fuel efficiency standards to 55 miles per gallon for new vehicles by 2025. Mixing corn-based ethanol with the gasoline pool is also reducing demand. In China, on the other hand, car ownership is currently 70 cars per 1,000 people, and is likely to increase to 400 per 1,000 by 2034. China produces only 3.3 million b/d of crude compared with total oil demand of 12.5 million b/d, and its need for imports is forecast to rise from 2.5 million b/d (2005) to 9.2 million b/d by 2020. The trend is clear. OPEC countries are already switching exports to China and other Far East countries. According to the EIA, crude oil shipments from OPEC to the US fell to as little as 3.9 million b/d in 2013, from the peak of 6.7 million b/d in 1977. Its need for crude is the main reason why China has been assiduously wooing resource-rich African countries. If the US decides to export some of its crude – currently not allowed except to Canada – the picture could change again. Much new US production is of light, “sweet” crude, while the domestic refinery sector is geared for heavier crudes. The US could thus become not only a smaller importer but also an exporter of crude as well as refined petroleum products such as diesel and gasoline. LATIN AMERICA ENERGY Venezuela may restart Aruba refinery Decision not to buy delayed coker clears the way for PdVSA Since Trinidad and Tobago decided not to buy the delayed coker unit from the mothballed Valero refinery in Aruba, Venezuela’s PdVSA has been eyeing the unit for itself. Petrotrin is engaged in a bottom-ofthe barrel upgrade of its 160,000 b/d refinery at Pointe-à-Pierre in Trinidad, and considered buying the coker outright when the Aruba refinery closed in 2012. But relocation costs alone were about 85% of a new coker, so an inhouse upgrade became the preferred route. Venezuela needs as much refinery capacity as it can find, despite today’s challenging refinery economics. It already leases and operates the 335,000 b/d Isla refinery in Curaçao. In addition to wanting the Aruba delayed coker restarted, PdVSA is negotiating with Valero to bring other refinery facilities back on line, such as two crude distillation units, a hydrotreater and a hydrocracker. PdVSA suffered a disastrous explosion at its Amuay refinery in 2012, a storage tank fire at the Puerto La Cruz refinery in August 2013, and a shutdown at the El Palito refinery due to a power cut. The Aruban government desperately needs activity of some sort resumed at the refinery. Prime minister Mike Eman wants to see a deal reached between Valero and PdVSA, which would put the Venezuelan company in charge of the restarted units. One of the benefits for PdVSA of restarting the Aruba refinery would be to access naphtha, which it can use as a blend with the increasing amount of extra heavy oil likely to be extracted over the coming years as joint ventures with international oil companies take shape in the Orinoco oil belt (“the Faja”). Because of cash flow problems, PdVSA uses crude oil to reduce debt. Almost a third of the 640,000 b/d of crude exported to China goes towards servicing Chinese loans, and PdVSA pays for storage space at the Valero complex with crude shipped directly to the US. 16

Trinidad and Tobago energy statistics Oil and condensate production (barrels per day) 2009 2010 2011 2012 November 2013 average average average average average BPTT 20,720 19,487 13,957 7,745 8,900 Repsol 15,335 13,829 11,771 11,961 11,112 Trinmar 23,410 22,389 22,765 21,127 22,392 Petrotrin 15,198 13,942 13,669 13,691 13,457 BHP Billiton TT 15,407 9,451 12,929 12,479 9,406 Primera Oil and Gas 496 460 417 408 382 EOG Resources 5,280 7,486 5,233 2,276 1,499 TED/SWP* 14 13 10 6 7 Moraven 229 273 214 229 348 Trinity Exploration** 680 655 599 546 578 Neal and Massy Energy 196 165 155 134 128 BGTT (Central Block) 1,312 1,260 1,230 1,014 1,031 BGTT (ECMA) 2,208 1,758 1,623 1,201 951 Lease operators 4,892 4,758 4,854 5,685 5,893 Farmout operators 1,172 1,099 888 1,059 903 IPSC*** na 223 330 365 857 New Horizon Exploration na 76 80 87 86 Bayfield Energy 541 921 1,195 1,722 1,383 Total 107,169 98,246 91,919 81,735 79,220 *Trinidad Exploration and Development/South West Peninsula Joint Venture **Brighton Marine and Point Ligoure *** Incremental Production Service Contractors (Petrotrin) Depth drilled (feet) 2011 2012 2013 December December November BPTT 5,900 9,734 1,152 Niko 1,929 ... ... Petrotrin ... ... 140 Trinmar 5,079 1,173 4,013 EOG Resources 200 8,656 ... BHP Billiton 4,462 ... ... Farmout operators 42 2,341 ... Lease operators 6,086 14,897 ... Bayfield 1,602 … ... Parex 2,920 … ... Primera ... … ... Centrica ... ... ... Trinity (Galeota) ... ... 4,368 BGTT (ECMA) ... ... 9,539 Total 28,220 37,401 19,212 Petrotrin refinery output (bbl) 2009 2011 2012 2013 total total total November LPG 1,259,913 467,728 134,981 107,048 Motor gasolene 11,491,748 8,589,559 4,833,960 822,265 Aviation gasolene (3,099) (265) (1,868) 8 Kerosene/jet fuel 6,264,257 5,430,534 3,378,689 421,802 Gas oil/diesel 12,815,467 10,297,034 6,870,568 823,847 Fuel oil 17,064,805 16,375,621 15,302,402 1,690,486 Sulphur 60,700 37,229 5,611 2,170 Bitumen 183,325 244,428 190,696 9,889 Other 4,868,269 6,765,601 6,576,739 115,435 Refinery (gain)/loss 1,410,635 1,870,118 1,768,657 286,448 Total 55,416,020 50,097, 587 39,060,435 4,279,308 Crude oil exports (bbl) 2011 2012 2013 2013 total June June November Galeota Mix 10,199,415 759,161 760,005 771,393 Calypso Crude 4,262,064 378,467 461,052 360,560 Total 14,461,479 1,137,628 1,221,057 1,131,953 Energy Caribbean April 2014 17

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