The con­tin­ued mas­sive fall in bpTT’s nat­ur­al gas pro­duc­tion is the main rea­son for the gas short­age the coun­try con­tin­ues to grap­ple with.

A Cab­i­net Note, which the Busi­ness Guardian has ob­tained a copy of from the Of­fice of the Prime Min­is­ter, has re­vealed that bpTT’s pro­duc­tion in May av­er­aged just over 1 bil­lion stan­dard cu­bic feet per day (bscf/d) which is just over a half of the size of its av­er­age pro­duc­tion last year and shows the al­most free-fall in its out­put since the end of 2020.

The Cab­i­net note read, “There was an es­ti­mat­ed 2% de­crease in nat­ur­al gas pro­duc­tion from 2,559 MM­scf/d in April 2021 to an es­ti­mat­ed 2,497 MM­scf/d in May 2021. EOG and BHP had pro­duc­tion in­creas­es of 83 and 40 MM­scf/d re­spec­tive­ly.

How­ev­er these were coun­ter­act­ed by a 185 MM­scf/d de­crease in pro­duc­tion from BpTT. The ma­jor dri­ver of the de­crease was the BPTT Ju­niper plat­form be­ing of­fline for 15 days.”

bpTT’s low nat­ur­al gas pro­duc­tion was one of the ma­jor rea­sons that At­lantic LNG’s trains 2,3 and 4 saw plum­met­ing out­put in May.

The Cab­i­net Note re­port­ed that in May gas sales to At­lantic LNG de­creased by 219 MM­scf/d.

The Note re­vealed that there was a 19% de­crease in LNG pro­duc­tion from an av­er­age of 30,775,486 MMB­TU in April 2021 to 24,891,291 in May 2021.

“The At­lantic de­crease was dri­ven by lack of sup­ply due to re­duced BpTT pro­duc­tion with the Ju­niper plat­form be­ing of­fline for planned works and Shell on­shore Beach­field fa­cil­i­ty be­ing of­fline from May 22. Trains II and IV were on­line at re­duced rates for the en­tire month. Train III came on­line from the 7th May 2021 at re­duced rates. Train I re­mained down.” The Cab­i­net was told.

The prob­lems with bpTT and to some ex­tent low­er out­put from Shell has meant sig­nif­i­cant lost rev­enue op­por­tu­ni­ty for the coun­try even as LNG prices are strong and petro­chem­i­cal prices have re­bound­ed.

It is al­so the rea­son that Train 1 will be moth­balled in the com­ing weeks and why the de­ci­sion of the Mark Lo­quan man­age­ment and NGC Board to in­vest a quar­ter bil­lion dol­lars in­to an ill fat­ed at­tempt to save Train 1, that now seems all but lost, has raised so much con­cern.

Petro­chem­i­cal pro­duc­tion ramps up

But the news is not all bad as both petro­chem­i­cal and crude pro­duc­tion ramped up on both high­er glob­al prices and the com­ing on­stream of new vol­umes.

Am­mo­nia pro­duc­tion in­creased by 8% or 34,121 Met­ric Tonnes (MT) while Methanol pro­duc­tion in­creased by 63% or 202,458 MT. Urea pro­duc­tion in­creased by 985 MT and UAN in­creased by 8,754MT.

The in­crease in petro­chem­i­cal pro­duc­tion meant that more gas was sold to the NGC ac­cord­ing to the Cab­i­net note.

“Sales to NGC in­creased by 213 MM­scf/d while the NGC in­crease was due to the high­er sup­ply to the methanol sec­tor af­ter sign­ing of new gas sales con­tracts, as well as, a slight in­crease in de­mand from the am­mo­nia sec­tor.” the Cab­i­net Note read.

Crude Oil pro­duc­tion shows promise

With BHP brin­ing on its Ru­by de­vel­op­ment it has had the im­me­di­ate pos­i­tive im­pact on the coun­try’s crude oil pro­duc­tion which in May av­er­aged over 60,000 bar­rels of oil per day (bpd).

In May 2021, crude oil and con­den­sate pro­duc­tion av­er­aged 61,055 bar­rels per day (bpd).This was a 2,537 bpd in­crease on the pre­vi­ous month’s re­vised pro­duc­tion of 58,518 bpd and was due to in­creased out­put main­ly from BHP and Peren­co.

In May 2021, pro­duc­tion from Peren­co in­creased from 7,932 bpd to 8,311 or 5%. This in­crease can be at­trib­uted to Peren­co hav­ing more op­er­a­tional is­sues in April as op­posed to May.

BHP’s pro­duc­tion in­creased from 4,011 bpd in April 2021 to 6,934 bpd in May 2021. On May 4th, BHP com­menced pro­duc­tion from the Ru­by field with the P2 well be­ing brought on­line. This well pro­duced an av­er­age of 4,000 bpd ini­tial­ly. As such, there was a marked in­creased in the month­ly pro­duc­tion of crude oil by BHP. How­ev­er, there were some flow chal­lenges as­so­ci­at­ed with the pro­duc­tion from Ru­by since the flow­line was de­signed for a much high­er flow rate than it was be­ing used for, with on­ly one well on­line. This re­sult­ed in P2 be­ing tak­en of­fline and sub­se­quent­ly restart­ed with a re­strict­ed rate of ap­prox­i­mate­ly 3,000 bpd.

As such, a small­er than ex­pect­ed in­crease in pro­duc­tion was re­alised over the month. It is ex­pect­ed that as ad­di­tion­al pro­duc­tion wells come on­line from the Ru­by de­vel­op­ment and the flow­line be­comes packed, the pro­duc­tion rate per well would in­crease.

State-owned- Her­itage’s pro­duc­tion saw a neg­li­gi­ble in­crease in pro­duc­tion from 34,744 bpd to 34,753 bpd.

Oil prices strength­en

The price of all the ma­jor crude mark­ers in­creased with West Texas In­ter­me­di­ate (WTI) strength­en­ing by 6% to US$65.09/bbl and Brent al­so in­creased 5% to US$68.37/bbl in May.

For the month of May 2021, Her­itage Pe­tro­le­um Com­pa­ny Ltd ex­port­ed a com­bined 1,530,098 bar­rels (bbls) of Mo­lo crude oil to the USA at a weight­ed av­er­age price of US$66.76/bbl.

The Cab­i­net was told, “Af­ter de­clin­ing in April, crude oil prices in May moved to­ward post-pan­dem­ic dai­ly highs at near­ly US$70.00/bbl. Con­tin­u­ing draws on glob­al oil in­ven­to­ries con­tributed to up­ward crude

oil price pres­sures. De­spite ris­ing COVID-19 case counts in some coun­tries, par­tic­u­lar­ly In­dia, glob­al oil de­mand re­mained high­er than sup­ply in May, con­tribut­ing to con­tin­ued glob­al with­drawals from in­ven­to­ries of crude oil and pe­tro­le­um prod­ucts.

“It is ex­pect­ed that up­ward pres­sure on the Brent price will ease and the Brent price to de­crease to av­er­age US$65.00/bbl in the sec­ond quar­ter. This de­crease comes as OPEC+ crude oil pro­duc­tion ris­es to meet the grad­u­al­ly in­creas­ing crude oil de­mand. Eco­nom­ic ac­tiv­i­ty has in­creased sig­nif­i­cant­ly af­ter reach­ing mul­ti­year lows in the sec­ond quar­ter of 2020.

The in­crease in eco­nom­ic ac­tiv­i­ty and eas­ing of COVID-19-re­lat­ed re­stric­tions have con­tributed to ris­ing en­er­gy use.”

The Cab­i­net Note end­ed by warn­ing of soft­en­ing crude prices say­ing that the US EIA ex­pects that con­tin­u­ing growth in pro­duc­tion from OPEC+ and ac­cel­er­at­ing growth in US tight oil pro­duc­tion, along with oth­er sup­ply growth, will out­pace de­cel­er­at­ing growth in glob­al oil con­sump­tion and con­tribute to de­clin­ing oil prices.

Based on these fac­tors, it is ex­pect­ed that Brent will av­er­age US$60/bbl in 2022.