Ken Ali

In a can­did and re­veal­ing in­ter­view, En­er­gy Min­is­ter Car­olyn Seep­er­sad-Bachan has spo­ken, for the first time, of a re­duc­tion in Pe­tro­le­um Prof­its Tax. Seep­er­sad-Bachan al­so told of plans for an over­haul of oth­er in­dus­try tax­es. She dis­cussed the ben­e­fits of the land­mark joint ex­plo­ration pact she signed in Cara­cas ear­ly last week. These and oth­er rel­e­vant mat­ters were cov­ered in the in­struc­tive in­ter­view.

Q: Why is this agree­ment with Venezuela for joint ex­plo­ration of the Lo­ran-Man­a­tee off­shore nat­ur­al gas field so im­por­tant?

A: This agree­ment be­tween the gov­ern­ments of Trinidad and To­ba­go and Venezuela is ex­treme­ly im­por­tant on sev­er­al lev­els. First­ly, it seeks to strength­en our cross-bor­der re­la­tion­ships and of­fers the po­ten­tial to deep­en these bonds fur­ther in en­er­gy, as well as oth­er ar­eas of co-op­er­a­tion. Sec­ond­ly, it af­fords each coun­try an op­por­tu­ni­ty to widen its en­er­gy sec­tor growth and de­vel­op­ment. Con­comi­tant with this will be the av­enues for rev­enue gen­er­a­tion that can deep­en eco­nom­ic di­ver­si­fi­ca­tion. Ken, you will re­call that at the end of the 1995-2001 Gov­ern­ment's term, the 3P re­serve po­si­tion stood at 34.3 tcf.?A key ob­jec­tive of the then gov­ern­ment was to ar­rest the de­cline and en­cour­age greater ex­plo­ration ac­tiv­i­ty.

Nat­ur­al gas con­sump­tion in Trinidad and To­ba­go to­day stands at about 4 bil­lion cu­bic feet per day (bcf), of which 1.4 bcf rep­re­sent do­mes­tic sales.?The most re­cent Ry­der Scott Au­dit puts our 3P re­serve po­si­tion for nat­ur­al gas at 28.2 tril­lion cu­bic feet. What this means is that greater ef­forts are need­ed to prove up ad­di­tion­al re­serves to main­tain our re­serve po­si­tion. This is be­ing ad­dressed through our planned 2010 com­pet­i­tive bid rounds. The re­serves of the Lo­ran Man­a­tee Field have been booked as proven re­serves for sev­er­al years.?The cross-bor­der agree­ment now moves us for­ward to­ward de­vel­op­ing and mon­etis­ing this nat­ur­al gas that was pre­vi­ous­ly out of our reach.?With an al­lo­ca­tion of 27 per cent of the 10 tcf, the de­vel­op­ment of the Lo­ran/Man­a­tee Field will strength­en se­cu­ri­ty of sup­plies for ex­ist­ing nat­ur­al gas con­sum­ing in­dus­tries and pro­vide ad­e­quate source for fu­ture projects.

How much is T&T like­ly to ben­e­fit from the mon­eti­sa­tion of this field?

We stand to ben­e­fit a great deal, Ken. My mis­sion in Venezuela was to bring to a con­clu­sion more than 14 years of ne­go­ti­a­tions, which be­gan in 1996.? In fact, it was in my ca­pac­i­ty as Chair­man of the Na­tion­al Pe­tro­le­um Mar­ket­ing Com­pa­ny that I was part of the first gov­ern­ment del­e­ga­tion that pi­o­neered the agree­ment.?As re­gards quan­ti­ties, the quan­tum of gas amounts to 2.63 TCF, that is orig­i­nal gas in place. While in Venezuela, I held closed-door dis­cus­sions with His Ex­cel­len­cy Rafael Ramirez, the Min­is­ter of Pe­tro­le­um and En­er­gy, and out of these dis­cus­sions came a com­mit­ment for ex­pand­ed and deep­ened col­lab­o­ra­tion be­tween our en­er­gy sec­tors. What be­gan as a mis­sion to fi­nalise the Lo­ran Man­a­tee agree­ment, de­vel­oped in­to a com­mit­ment to work to­geth­er fur­ther along the de­lim­i­ta­tion line be­tween both our coun­tries and al­so to cre­ate new, valu­able syn­er­gies with our en­er­gy sec­tors.

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Is it that there has nev­er be­fore been a mar­itime agree­ment across the de­lim­i­ta­tion line?

This agree­ment is the first of its kind in the west­ern hemi­sphere. It clear­ly iden­ti­fies a frame­work agree­ment in terms of the thor­ough con­sid­er­a­tions for how we be­gin the process of ex­trac­tion, how we co­op­er­ate be­tween our sec­tors so that the ben­e­fits are shared and max­imised for both par­ties and al­so how we will con­tin­ue to work to­geth­er to joint­ly mon­e­tise oth­er cross-bor­der gas re­serves.

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Would there be op­por­tu­ni­ties for lo­cal ser­vice com­pa­nies?

In the past years, com­pa­nies in the en­er­gy ser­vice sec­tor have com­plained bit­ter­ly about a lack of work in the sec­tor due to the in­er­tia cre­at­ed main­ly by the glob­al fi­nan­cial crises and fis­cal stim­uli. With the com­ing on-stream of this de­vel­op­ment, there will be op­por­tu­ni­ties for in­creas­ing ac­tiv­i­ties for ser­vice com­pa­nies in­volved in seis­mic sur­vey­ing, tug­boat op­er­a­tions, lo­gis­tics ser­vices, petro-chem­i­cal dis­tri­b­u­tion and so on and in build­ing our lo­cal con­tent, this is where we could de­vel­op a new use for the Labid­co com­plex in La Brea.

What was par­tic­u­lar­ly en­cour­ag­ing was that dur­ing my dis­cus­sions with His Ex­cel­len­cy Ramirez, it emerged that they will be look­ing at the pos­si­bil­i­ties of util­is­ing the ser­vices from Trinidad and To­ba­go, giv­en our prox­im­i­ty to the field.

We will, there­fore, be look­ing at build­ing co­op­er­a­tion in terms of skills de­vel­op­ment, knowl­edge and ca­pac­i­ty shar­ing as well as tech­nol­o­gy shar­ing. What al­so emerged from my dis­cus­sions with His Ex­cel­len­cy is that Venezuela is now open to fur­ther dis­cus­sions and co­op­er­a­tion in oth­er cross-bor­der fields which strad­dle the mar­itime bound­ary.?This is how the ben­e­fits will build. Lo­ran Man­a­tee is on­ly the be­gin­ning.

I un­der­stand there is an­oth­er un­ex­plored gas field not far away from Lo­ran-Man­a­tee. Are there plans for joint ex­plo­ration?

These fields, as I men­tioned be­fore, were dis­cussed. And yes, there is a com­mit­ment for us to now move to a uni­ti­sa­tion agree­ment on mon­etis­ing the Man­akin Co­quina field.

Does all of this mark a new day in en­er­gy re­la­tions with Venezuela and, if so, what else are you look­ing at?

Ab­solute­ly! Both our coun­tries, in our own rights, are ma­jor en­er­gy play­ers in the west­ern hemi­sphere. This agree­ment which would see our two coun­tries col­lab­o­rate and joint­ly mon­e­tise gas fields while at the same time fos­ter­ing ca­pac­i­ty build­ing, knowl­edge and tech­nol­o­gy trans­fer means a new era in en­er­gy re­la­tions.

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Are there op­por­tu­ni­ties for ties be­tween Petrotrin and Venezuela's State oil gi­ant?

Well, Ken, fol­low­ing this agree­ment, the next step will be the ap­point­ment of a unit op­er­a­tor for the project. Some dis­cus­sions cen­tred on the in­volve­ment of State en­ti­ties in the op­er­a­tor­ship of the acreage, but the de­tails are still to be worked out. ?

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Do you now feel a greater mea­sure of com­fort with re­spect to gas re­serves?

Ken, I won't feel com­fort­able un­til my mis­sion of 100 per cent re­serve re­place­ment is achieved.?With the ag­gres­sive ap­proach to ex­plo­ration we are un­der­tak­ing and with the more com­pet­i­tive fis­cal regime we have in­tro­duced, I am con­fi­dent that the gas that is out there in un­ex­plored ter­ri­to­ry will be found, ex­tract­ed and mon­e­tised.?And in ad­di­tion to just re­serve re­place­ment, what is al­so im­por­tant is the amount of out­put, the val­ue we ac­tu­al­ly re­alise from our gas sec­tor. The fis­cal side in terms of tax­a­tion and rev­enue is clear, but there is al­so the de­vel­op­ment side.?

How do the rev­enue streams con­tribute to sus­tain­able de­vel­op­ment of Trinidad and To­ba­go?

While im­prov­ing our re­serve po­si­tion of our nat­ur­al gas is im­por­tant, equal­ly im­por­tant is the util­i­sa­tion and the max­imi­sa­tion of ben­e­fits from its us­age. You will re­call my re­cent an­nounce­ment of a new eval­u­a­tion mech­a­nism for projects util­is­ing nat­ur­al gas. Con­sid­er­a­tion will be tak­en for such com­po­nents as val­ue-added, en­vi­ron­men­tal im­pact mea­sures, trans­par­ent and com­pet­i­tive gas pric­ing, lo­cal con­tent, en­er­gy ef­fi­cien­cy and cor­po­rate so­cial re­spon­si­bil­i­ty among oth­ers in eval­u­at­ing gas-based projects.

What specif­i­cal­ly is the Gov­ern­ment do­ing in go­ing down­stream in the en­er­gy sec­tor?

Ken, at the mo­ment, the down­stream sec­tor is dom­i­nat­ed by LNG, methanol, am­mo­nia and urea.?We have ben­e­fit­ed a great deal, yes, but there is so much more in the down­stream sec­tor that we can ben­e­fit from.?We can look to­ward the plas­tics in­dus­try, deep­er in­vest­ment in skills de­vel­op­ment for do­mes­tic and ex­port pur­pos­es, phar­ma­ceu­ti­cals and so on.?We must look be­yond the pri­ma­ry stage if we are to ex­tract max­i­mum val­ue for every cu­bic foot of gas we mon­e­tise and al­so en­sure lo­cal­ly, busi­ness­es, the fi­nan­cial ser­vices sec­tor and peo­ple are able to par­tic­i­pate more in the en­er­gy sec­tor.

Will the Gov­ern­ment an­nounce tax in­cen­tives soon for de­vel­op­ing oil re­serves?

Ken, our crude oil pro­duc­tion has fall­en to about 100,000 bar­rels a day from a high of 238,000 in 1978.?Re­cent­ly, aris­ing from the con­sul­ta­tion with the en­er­gy in­dus­try, two ma­jor is­sues sur­faced. These were the form of pro­duc­tion shar­ing con­tract and the ef­fec­tive tax rate for the av­er­age and deep wa­ter blocks. I should tell you that our own tech­ni­cal analy­sis sug­gests that there are fields in the deep wa­ter re­gion with po­ten­tial re­sources in the or­der of 1.8 bil­lion bar­rels of oil. But, blocks in the av­er­age and deep wa­ter en­vi­ron­ment, as rep­re­sent­ed by wa­ter depths in ex­cess of 400 me­tres, in­cur high­er ex­plo­ration and pro­duc­tion costs, as much as three to five times the cost of ex­plo­ration in shal­low wa­ter.

In the Gulf of Mex­i­co, deep wa­ter is clas­si­fied as wa­ter depths in ex­cess of 400 me­tres and drilling costs are in the or­der of US$90 mil­lion per well and lift­ing costs av­er­age US$9-10 per bar­rel. Gov­ern­ment has, there­fore, agreed to re­duce the Pe­tro­le­um Prof­its Tax to 35 per cent for blocks in wa­ter depths in ex­cess of 400 me­tres. This com­pares with the tax­a­tion ap­plied in oth­er com­pet­ing ju­ris­dic­tions, such as Ghana and the Gulf of Mex­i­co, and will bring the Gov­ern­ment take in line with oth­er deep wa­ter ju­ris­dic­tions. The Gov­ern­ment will al­so be ad­dress­ing ma­ture oil fields and mar­gin­al oil fields and, in so do­ing, we will re­duce the sup­ple­men­tal pe­tro­le­um tax for these two cat­e­gories of fields so that com­pa­nies will be able to in­vest, will re­ceive a fair rate of re­turn and the Gov­ern­ment's rev­enues in the long run will in­crease.?

We will al­so seek to ac­cel­er­ate lease op­er­a­tor­ships and farm-outs and it is in these ar­eas that the op­er­at­ing costs are low­er.?And at present, this group pro­duces 25 per cent of land pro­duc­tion.