Prime Minister Dr Keith Rowley raised the alarm bells on Monday, indicating that without gas production from new fields, the country was likely facing a crisis that could severely impact citizens standard of living.
Rowley said the government has been working hard and continues to do so in an effort to increase natural gas production which he said had fallen to an average of 2.9 billion standard cubic feet per day (bcf/d), down from a high of 4.2 bcf/d.
It must be noted that figures from the Ministry of Energy place the natural gas production figures at 2.5 bcf/d and not the 2.9 claimed by the Prime Minister.
Dr Rowley said it was because of this dilemma he felt it necessary to head to Europe and meet with the leadership teams of Shell, BP and Proman to try and push the interest of T&T.
The Business Guardian reached out to two energy experts on what actions can government take to achieve its goal of improved natural gas production.
Former Energy Minister Kevin Ramnarine, under whose leadership saw the last successful bid round, now eight years ago, told the Business Guardian (BG) that the most fundamental economic issue in the country is natural gas production.
Ramnarine said natural gas production is literally the foundation of our economy and noted that in period 2014 to 2021, natural gas production declined by 1.49 billion cubic feet per day.
“Most of that decline ( two thirds) happened in the years 2020 and 2021. The effects of this decline are a 20% reduction in real GDP from 2014 to 2021 and a 29% reduction in energy sector real GDP for the same period. In 2022 and 2023 we will see some marginal improvements in natural gas production but T&T will still struggle to get above 3.0 billion cubic feet per day. This level of natural gas production is still insufficient to meet the demands of the plants in the country. Post 2023, the decline will set in again,” Ramnarine noted.
He posited that the Prime Minister seems to be alerted to the precipice that is facing this country come 2026 to 2028.
Ramnarine said, “If deepwater gas production is not realised in 2028 or thereabouts we are in trouble. A bad situation will become a lot worse. I also don’t think we should hang our economic coat on Venezuelan gas. The sanctions are still there despite the optimism of some. If all the sanctions were lifted tomorrow, it will take years before natural gas from Venezuela flows to T&T.”
Ramnarine said to increase natural gas production T&T needs to focus on four things. Firstly, we need to overhaul the fiscal regime. He noted this was promised in the last budget but nothing has happened.
“I expect some fluffy statement about it on budget day. The fiscal regime and in particular Mr Imbert’s royalty regime of 2017 have failed the country and have been a major factor in the fall in natural gas production. We went after a larger slice of a shrinking pie. The result of the 2018/2019 shallow water bid round should have been a wake up call to the Government that their approach to the fiscal regime does not work,” Ramnarine told the BG.
His view that there is a need to reform the fiscal regime is in keeping with a call from the Energy Chamber. In a statement the Energy Chamber insisted government should act now to reform the fiscal regime.
In its statement the Energy Chamber said it “strongly encourages the Government to avoid any further delay in reforming the upstream fiscal terms in Trinidad & Tobago. The time to act is now.”
It added that with the continued push for net-zero by 2050, the window for investment in gas and especially in crude oil production is narrowing every day. Across the world, the Energy Chamber argued, oil and gas companies have remained very disciplined in how they are allocating capital to upstream investments even with the current high global oil prices.
When oil and gas companies are assessing investments, the Chamber said, they do not base their decisions on today’s oil and gas prices, but rather on the future long-term projected prices. Companies want to make sure the investment makes sense at prices under US$50 per barrel as well as at prices over US$100 per barrel.
The Chamber’s statement read, “Unfortunately, in Trinidad & Tobago the structure of the upstream fiscal regime, especially for oil, means that it is extremely difficult to be profitable after-tax once prices are in the US$ 50 range. This is primarily because of the way in which royalties (on oil and gas) and supplemental petroleum tax (on oil) are calculated. While this does not impact investment in the acreage under production sharing contracts, it does impact potential investments in acreage under the Exploration & Production (E&P) licensing regime.”
Ramnarine said the second thing government needs to do is to commercialise deepwater gas.
He said, “The Government needs to sit with Woodside (formerly BHP) and work with them to make the Calypso project a commercial and engineering reality. They also need to get Woodside to bring that gas to market earlier by two years.”
The former energy minister said the country needs more natural gas producers like the DeNovos and more Touchstones of this world, small companies that have the appetite for the small pools of natural gas.
The idea of developing small pools of gas is something that Energy expert Anthony Paul has long been preaching. Paul told the BG that we need to remember the “Creaming Curve” concept that says there is as much oil and gas in a basin in small fields as there is in large fields. He explained that large fields get developed first, because they can pay for the required development infrastructure and support system. Smaller fields get developed late because they can piggy-back on the installed base. In addition, new plants require a long-term, secure gas supply to get financing. Once they’ve passed their investment pay-back phase, they can survive on shorter term or lower volume gas supply contracts, which is all small fields can offer.
Paul also called for the seismic and well data be removed from under the indefinite confidentiality cover that Heritage and BP have without using it effectively.
He also called for the government to enforce relinquishment clauses for under-explored or un-developed acreage from BPTT.
“Add to that. a transparent process for fixing gas prices from producers and open access to infrastructure (pipelines and plants, including LNG), all the small fields that BPTT isn’t interested in (because they don’t qualify for funding within their rich global portfolio) will have a huge market to smaller, lower cost operators, like EOG. Keep in mind that BP and Shell have recently stated that T&T is not in their long term growth strategy. PM may believe that he has convinced them otherwise, but all he would have walked away with are promises, not commitments. We seem not to know the difference.You must know that under the current arrangements, only the shareholders in ALNG have the right to off-take liquids. So no other gas producer can benefit from the downstream LNG value-chain,” Paul told the BG.
For Ramnarine another factor is the ease of doing business. He said the ease of doing business is suffocating investment in the energy sector and delaying projects that should be producing natural gas.
The Government, Ramnarine argued needs to make it easier for companies to get approvals and not be held hostage by ministries, some public servants and statutory agencies.