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ENERGY Caribbean Yearbook (2013-14)

TT oil revival 1 Energy

TT oil revival 1 Energy issues After three decades of decline ... Trinidad and Tobago’s petroleum liquids production peaked at 229,589 barrels a day (b/d) in 1978, almost all of it crude oil. By 2012 it had fallen to 81,735 b/d, of which crude represented 69,062 b/d (the rest was condensate). The loss of 160,527 b/d over 34 years translates into billions of dollars of lost foreign exchange earnings and government revenue. A former minister of energy, Senator Conrad Enill, once suggested that 80,000 b/d of crude output should set alarm bells ringing. He could hardly have envisaged how quickly that scenario would come to pass and how much worse it might get. What has saved the day, to some extent, is the fact that oil prices have held up remarkably well in the last few years, at $90-100 a barrel: even with a staggering drop in production, oil sales still provide the Trinidad and Tobago treasury with 55% of its revenue from hydrocarbons. Gas yields 45%, despite the fact that it out-produces oil by a factor of seven in terms of barrels of oil equivalent. Finance minister Larry Howai pegged his oil tax inflows for the 2012-3 fiscal year at $75 a barrel and gas at $2.75 per mmbtu netted back to Trinidad and Tobago. One reason for the headlong decline in crude retrieval is the fact that older reservoirs (which means most of them) are delivering 8-10% less every year (Petrotrin’s land fields and the Repsol-Petrotrin-NGC Teak/Samaan/ Poui block off the east coast are prime examples). Other reasons are the fall of 12,726 b/d in production from Trinmar, Companie Petrotrin’s Gulf of Paria unit, between 2004 and 2010, and the failure of the Kairi and Canteen oil discoveries, operated by BHP Billiton T&T in block 2c off Trinidad’s north east coast, to live up to expectations. The latter was producing 50,542 b/d on average a few months after start-up in 2005, but had dwindled to 12,479 b/d by 2012. A further factor in this unsettling decline situation has been the inability of companies signing production sharing contracts with the energy ministry in the last 20 years to find new oil resources. Out of 36 such agreements, only two – yes, two – resulted in discoveries of crude, both Countries of them by BHP Billiton T&T and its partners, in block 2c (see above) and in block 3a, where no development has yet begun. The development of block 2c and the fact that Trinmar has held relatively steady in the last three years means that crude production still comes primarily from offshore – about 47,519 Galeota platform (courtesy Petrotrin) b/d in 2012, compared with 21,543 b/d from onshore. In his first public address after becoming energy minister in 2011, Senator Kevin Ramnarine declared that the “number one priority” of his stewardship (which ends in May 2015) was to “increase national oil production.” At the time of writing, he had not achieved much success in that regard. But he remains optimistic, predicting “a major increase in oil production around the period May/June 2013.” By February 2013, according to the latest data available, there had been only a very marginal improvement: the average 69,163 b/d of crude being lifted that month was 101 b/d above the 2012 average. It remains to be seen what will happen during the rest of 2013. The following story in this YEARBOOK recounts what is being done, and what can still be done, to achieve a muchdesired turnaround. 14

Energy tt oil revival 2 issues How to increase oil production What is the key to reviving crude oil production in Trinidad and Tobago, which, as already noted, has crashed from 229,589 b/d 34 years ago to 69,062 b/d today? But there have been precious few of those by companies working under the current system of production-sharing contracts (PSCs). Companies operating under the older exploration and production (E&P) licences have been a little more successful. Bayfield Energy (now absorbed by Trinity Exploration and Production) has identified what it said were about 32 million barrels of recoverable oil with its FG8 exploratory well in the Galeota block off southeast Trinidad, while Petrotrin found The obvious answer is new discoveries. Compani about 48 million barrels of “new hydrocarbon potential” in the course of a five-well exploration programme in the East Soldado area, subsequently named Jubilee in honour of the 50th anniversary of the country’s independence. Both finds were made in 2012. Some new oil was also discovered in the Cory Moruga block on land in 2010. Further discoveries may be made in the course of the extensive exploratory drilling due to take place in the course of 2013: among others, by Trinity in the Point Ligoure, Guapo Bay, Brighton Marine (PGB) block in the Gulf of Paria, and in the Galeota block; by Niko in the Mayaro/Guayaguayare block, which runs from the onshore to the offshore in south Trinidad; and by Parex Resources in the Central Range Shallow and Deep blocks on land. Under renewed E&P licences, Petrotrin has to drill four exploratory wells for Trinmar and two in the North Marine block. Following the interpretation of its 2012 3D seismic survey, it will also be doing exploratory drilling on land in late 2013 and beyond. Exploratory drilling is risky and results can not be guaranteed, but development drilling in an already producing location is of course much less so and can at least replace reserves. Trinity plans to sink 12 development wells onshore in 2013, and 12 in the Galeota block. Lease operators, farmout operators and incremental production service contractors will all be doing similar work. Energy minister Kevin Ramnarine has put great faith in Petrotrin as being “at the centre of the strategy for oil Countries production”, and Trinmar as “at the centre of that centre.” Concurrent with its exploratory activities in Trinmar, Petrotrin is reactivating its South West Soldado field, now producing The energy ministry says it will offer three land blocks for exploration this year about 6,000 b/d, in the belief that it can be boosted to 8,000 b/d by the end of 2013. Sixty wells which were capped ten years ago are being gradually returned to production: a few are already producing again, and the rest will come on line as they are worked over by a rig hired for that purpose. New block allocations are an important part of minister Ramnarine’s oil revival plan. In conjunction with Petrotrin, the ministry says it will offer three land blocks for exploration this year. More deep water and some shallow water blocks are also carded for allocation before the end of 2013. New blocks, and exploratory and development drilling in existing blocks, are all essential, but many analysts point out that for decades companies have ignored oil that is known to exist and which could have contributed long ago to arresting the production decline – both heavy oil and “leftbehind” medium-gravity crude in reservoirs that have ceased to produce, or are producing very little. Geologist Dr Krishna Persad has estimated that there is probably well over two billion barrels of crude left behind in reservoirs where natural pressure or even pumping no longer works. As for heavy oil, minister Ramnarine suggests there are “seven billion barrels in places like Trinmar and the southern basin on land.” Even if the correct figure is only half that or less, it represents a vast unexploited resource that could help achieve the country’s oil restoration goals. The government has offered incentives over the years to encourage companies to invest in mature marine and land fields, via a 20% tax credit, and to use enhanced oil recovery measures for lifting heavy oil. In the current national budget, it introduced a special supplemental petroleum tax rate of 25% for the development of small discovered oil pools lying inactive. Deep horizon drilling both on and offshore was encouraged with the offer of a 40% uplift on exploration costs. The deep horizon, like the deep water, could be an entirely new source of crude which the ministry has been urging companies to target. energycaribbean YEARBOOK 2013/14 15

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