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Sunday, May 4, 2025

Good news on the natural gas front

by

2410 days ago
20180928

When Min­is­ter of Fi­nance Colm Im­bert de­liv­ers his fourth bud­get on Mon­day, he will be in a po­si­tion to an­nounce that the en­er­gy sec­tor has turned the cor­ner and its growth is dri­ving eco­nom­ic ex­pan­sion, ac­cord­ing to the Cen­tral Bank’s lat­est eco­nom­ic bul­letin.

Last year, Im­bert pred­i­cat­ed his bud­get on an oil price of US$52 and a gas price of $2.75 per mmb­tu.

At the time he told Par­lia­ment: “It should be not­ed that our as­sumed oil price is be­low the In­ter­na­tion­al Mon­e­tary Fund fore­cast of $56.20 per bar­rel for 2018 and low­er than the cur­rent oil price fore­casts made by the World Bank, Unit­ed States En­er­gy In­for­ma­tion Ad­min­is­tra­tion (USEIA) and In­ter­na­tion­al En­er­gy Agency (IEA).”

Im­bert will re­port that for fis­cal year 2018, crude pro­duc­tion was down by close to 3000 bar­rels com­pared to 2017 but prices were sig­nif­i­cant­ly high­er than in 2017.

West Texas In­ter­me­di­ate (WTI) av­er­aged US 50.88 a bar­rel in 2017 but for 2018 it is av­er­ag­ing US $66.25 a bar­rel. Brent Crude’s av­er­age in 2017 was US $54.25 but in 2018 it has av­er­aged $68.26.

T&T’s mix of crude, in­clud­ing those pro­duced by Petrotrin and its op­er­a­tors on­land and Trin­mar off the west coast, usu­al­ly fetch in the vicin­i­ty of US$5 less than the price WTI is be­ing trad­ed at. Those on the east coast, in­clud­ing bpTT’s pro­duc­tion and Peren­co’s TSP pro­duc­tion, usu­al­ly av­er­age close to US $1.50 above Brent.

As a re­sult, T&T’s bas­ket of crude would have av­er­aged in the range of US $70.06 for east coast crude and Petrotrin’s pro­duc­tion would have fetched clos­er to US$61 a bar­rel.

This means that while the fu­el sub­sidy will be high­er for the gov­ern­ment it should have earned more than $1 bil­lion more from oil rev­enues than was orig­i­nal­ly con­tem­plat­ed. Im­bert will con­tin­ue to be con­cerned about falling crude pro­duc­tion and in par­tic­u­lar the low­er pro­duc­tion from Petrotrin. The ex­pec­ta­tion is that the bud­get will in­clude in­for­ma­tion on how the new ex­plo­ration and pro­duc­tion com­pa­ny will stop the de­cline in pro­duc­tion, then turn around its for­tunes.

On the nat­ur­al gas side, the news is far more en­cour­ag­ing.

For a long time T&T has been seen as a gas-based econ­o­my with for­ward and back­ward link­ages. In this re­spect, the con­tin­ued cur­tail­ment is hurt­ing the down­stream sec­tor which has not been able to op­er­ate at any­where close to name plate ca­pac­i­ty.

How­ev­er, there has been sta­bil­i­sa­tion of the gas sup­ply sit­u­a­tion and an in­crease in pro­duc­tion. bpTT’s Ju­niper plat­form made a ma­jor dif­fer­ence and Shell’s ad­di­tion of 300 mil­lion stan­dard cu­bic feet of gas will al­so help. Im­bert will al­so be pleased that a new play­er has en­tered the mar­ket in De­N­o­vo and while it will pro­duce a mod­est 70 mm­scf/d, that is enough to pow­er an am­mo­nia plant.

Ac­cord­ing to fig­ures from the Min­istry of En­er­gy and En­er­gy In­dus­tries, nat­ur­al gas pro­duc­tion has av­er­aged 3.683 bil­lion stan­dard cu­bic feet a day this year. Com­pare this to 2017 when the fig­ure was 3.3 bil­lion scf/d.

The in­crease in nat­ur­al gas pro­duc­tion means an in­crease in rev­enue to the ex­che­quer in sev­er­al ways. It means ad­di­tion­al tax­es at the well head. High­er gas pro­duc­tion will be trans­lat­ed in­to high­er petro­chem­i­cal pro­duc­tion and this com­bined with im­proved prices for petro­chem­i­cals means more mon­ey for Min­is­ter Im­bert.

The ad­di­tion­al gas pro­duc­tion and LNG prices that av­er­aged over US$ 3 per mmb­tu means Im­bert col­lect­ed more mon­ey from LNG, based on price and pro­duc­tion.

There is more good news that the Min­is­ter of Fi­nance will be able to share on the en­er­gy sec­tor, as BHP Bil­li­ton has had a rel­a­tive­ly suc­cess­ful sec­ond phase in its deep wa­ter cam­paign with the fi­nal well, Con­cep­tion, to be drilled in the first quar­ter of fis­cal 2019.

bpTT is ex­pect­ed to go out and ex­plore again. Armed with sig­nif­i­cant­ly im­proved seis­mic, the com­pa­ny has found gas in the first two wells it drilled in 2017 and will be try­ing to repli­cate its suc­cess.

BHP is ex­pect­ed to drill out its Ru­by and Delaware fields with a view to adding 10,000 bar­rels of oil a day by 2020. In ad­di­tion, EOG Re­sources is al­so ex­pect­ed to ex­plore.

In fis­cal 2019 new bid rounds are ex­pect to go out and there ap­pears to be sig­nif­i­cant in­ter­est in shal­low and deep wa­ters.

So, the news from the en­er­gy sec­tor is en­cour­ag­ing. The ques­tion is: will the rest of the econ­o­my grow with it?


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