T&T’s nat­ur­al gas woes are ex­pect­ed to con­tin­ue for at least an­oth­er four years as the En­er­gy Min­is­ter Franklin Khan con­firmed that pro­duc­tion is un­like­ly to re­turn to the re­quired four bil­lion cu­bic feet per day (bcf/d) un­til 2025.

In an ex­tend­ed in­ter­view with the Busi­ness Guardian, Khan said: “To come back close to 4tcf we will have to wait un­til 2025 when Man­a­tee is on full stream.”

T&T re­quires clos­er to 4.2 bcf/d to meet its in­stalled ca­pac­i­ty for elec­tric­i­ty, petro­chem­i­cals and liq­ue­fied nat­ur­al gas (LNG).

Gas short­ages and high gas prices have forced a num­ber of plants at the Point Lisas In­dus­tri­al Es­tate to close down and hun­dreds of work­ers to loose their jobs.

Khan ad­mit­ted some of those plants will nev­er re-open say­ing the old­er more in­ef­fi­cient plants will not be able to com­pete in the new en­vi­ron­ment.

The En­er­gy Min­is­ter was can­did when he said there re­mains re­al prob­lems in the nat­ur­al gas val­ue chain.

He told Busi­ness Guardian, “I will be dis­hon­est if I do not say that the gas in­dus­try, in terms of the gas val­ue chain in T&T has chal­lenges. Un­like shale gas in Amer­i­ca we can­not get gas at $1 or $2. It is hinged to the same is­sue I spoke about with small fields, high­er unit cost of de­vel­op­ment. There is the is­sue of the NGC as the ag­gre­ga­tor and there is the is­sue of the Point Lisas plants and com­mod­i­ty prices.”

Khan sought to de­fend the in­crease in nat­ur­al gas prices say­ing the up­stream­ers (bpTT, Roy­al Dutch Shell, EOG Re­sources and BHP) made a cred­i­ble case that they have to have high­er gas prices be­cause they will col­lapse.

“A chain is as strong as its weak­est link, with­out up­stream there can be no down­stream, with­out any down­stream there al­so can­not be any up­stream, so they have to live in a sym­bi­ot­ic re­la­tion­ship,” the En­er­gy Min­is­ter said.

Khan said the days of cheap gas are gone and the time when NGC as the ag­gre­ga­tor could charge a mar­gin for gas and make a good prof­it while the down­stream com­pa­nies al­so made a good prof­it and every­one was laugh­ing to the bank, ap­pear to be over.

He said the chal­lenge was to en­sure that every­one can make a liv­ing with­out su­per prof­its.

“But you can­not en­ter in­to price ne­go­ti­a­tion in an en­vi­ron­ment where there isn’t full dis­clo­sure, be­cause up­stream will have their is­sues, the NGC will have their is­sues, down­stream will have their is­sues. So that is the con­cept of deal­ing with the val­ue chain in its en­tire­ty. We brought every­body to the ta­ble, every en­ti­ty signed con­fi­den­tial­i­ty agree­ments, so we could share the da­ta, with­out dis­clos­ing it to any oth­er par­ty and work out a nu­mer­ic mod­el un­der the su­per­vi­sion of Gas Strate­gies, so that you could put the ne­go­ti­a­tion in­to con­text,” he said.

Khan added: “The coun­ty has ad­van­tages in­clud­ing in­ter­na­tion­al play­ers in up­stream that will sup­ply gas, ‘the price you may query it.’”

He said the NGC plays a cru­cial role in the mid­dle of the val­ue-chain as ag­gre­ga­tor, al­though their role has di­min­ished: “That’s why they de­clared a loss for the first time be­cause the ag­gre­ga­tion busi­ness has shrunk.”

This is in di­rect con­tra­dic­tion with the NGC’s as­ser­tion to the Par­lia­men­tary over­sight com­mit­tee which in a pub­lic hear­ings heard the chair­man of the NGC and its pres­i­dent claim the loss was due to un­col­lect­ed bills from T&TEC.

“You know their busi­ness is un­der threat, but their is al­so a role for them as a trans­porter, and more im­por­tant­ly a role as a vol­ume ag­gre­ga­tor. Be­cause imag­ine you give the down­stream op­er­a­tors the op­por­tu­ni­ty to en­ter in­to agree­ments with an up­stream­er and that up­stream­er plat­form goes down, that plan has to shut down you know. But if you come through the NGC, it ma­nip­u­lates the en­tire na­tion­al vol­ume and ser­vices every­body,” Khan not­ed.

Ac­cord­ing to the Min­is­ter there is mer­it to the NGC be­ing in the mid­dle of the val­ue-chain and that will con­tin­ue with the com­pa­ny hav­ing a role “as both a price and vol­ume ag­gre­ga­tor.”

Khan con­tin­ued to in­sist that a big part of the chal­lenge fac­ing the in­dus­try was low glob­al com­mod­i­ty prices.

“There are some old plants un­der threat be­cause of their in­ef­fi­cien­cy, but all those plants are al­ready amor­tised and paid for...that chal­lenge will be sort­ed out with the ne­go­ti­a­tion in my view and it de­pends a lot on the re­bound in the glob­al econ­o­my and com­mod­i­ty prices. You can­not have an in­dus­try Cur­tis where half of your de­mand drops,” he said.

Khan ad­mits high gas prices a fac­tor in cri­sis :

The En­er­gy Min­is­ter added, “It is not se­cret that we said that the up­stream­ers, with some cred­i­bil­i­ty, built a case for high­er prices.We have nev­er de­nied that. But now it is a bal­anc­ing act.”

He was asked: “Would you say to­day that the high­er up­stream prices are part of the prob­lem fac­ing the down­stream.” To which he re­spond­ed; “Yes it is, but the sig­nif­i­cant chal­lenge at this point in time is still low com­mod­i­ty prices.”

“With­out get­ting too much in­to the gas pric­ing for­mu­la a lot of it is linked to com­mod­i­ty prices be­cause there is the net back pric­ing...the chal­lenge is re­al­ly the floor price and who takes the risk on the floor price, be­cause if the floor price is above your thresh­old then you in trou­ble.That’s where the ma­jor chal­lenge is and the floor price is­sue on­ly comes to the fore be­cause of low com­mod­i­ty prices.” Khan ar­gued.

He said UK con­sult­ing firm Gas Strate­gies has to do two re­ports, one on the gas val­ue-chain and the oth­er is a new gas mas­ter plan to 2030 with most of the work to be com­plet­ed be­fore the end of the year and in the case of the val­ue chain with­in a few months.

He lament­ed the con­stant pub­li­cis­ing of ne­go­ti­a­tions but said he ac­cept­ed times had changed.

Khan told BG, “’The is­sue is that in the past all these dis­cus­sions were done in sealed board­rooms un­der con­fi­den­tial cov­er and it was sort­ed out. So you did not have ball by ball com­men­tary, but the world has changed so where these is­sues are now in the pub­lic do­main and in my case where I have to an­swer like al­most every week in the Par­lia­ment on what is hap­pen­ing. In the past it didn’t hap­pen like that.”

Changes in Fis­cal Terms for small pools and strand­ed gas:

The Min­is­ter al­so re­vealed that the blocks that were not tak­en up in the 2019 shal­low wa­ter bid-round will be put back out for bids, but with new fis­cal terms. He ex­plained that the failed bid round showed the terms were too tough.

“The Shal­low wa­ter bid round is telling us that we have to come up with a new eco­nom­ic mod­el for mar­gin­al and strand­ed gas and we are about to start to do that.” Khan said.

He added; “I un­der­stand so, we are go­ing to re-look at the terms and put the blocks back out.”

In an hour and a half long in­ter­view Khan al­so talked about plans to go out for a deep-wa­ter bid round in 2021 and de­fend­ed the sev­en year hia­tus be­tween bid rounds.

Deep wa­ter Bid Round

“I am not jus­ti­fy­ing the six years but now is the most op­por­tune time based on the his­tor­i­cal cy­cle of the ex­plo­ration pro­gramme to come out with a deep-wa­ter bid round. And a deep wa­ter bid-round was not put for­ward in the last five years be­cause of neg­li­gence.”

Khan said it must be re­mem­bered that when the deep wa­ter bid-round went out in 2014 nine blocks were tak­en based on a lim­it­ed amount of ge­o­log­i­cal da­ta avail­able, that had some spec­u­la­tive 2D seis­mic sur­veys and lim­it­ed well in­for­ma­tion.

He said in the last six years had an in­ten­sive ex­plo­ration pro­gramme

“They drilled 11 wells. They are now in the phase of re­lin­quish­ing the acreage that they dont want, but with a vo­lu­mi­nous da­ta set, that adds val­ue to the acreage. We have been suc­cess­ful in ne­go­ti­at­ing with BHP that all the seis­mic will be­come avail­able in the next bid round. None will be clas­si­fied, even the seis­mic with­in their acreage.”

He said it would have been im­pru­dent and al­most fool­ish to go out with a par­al­lel bid-round when you know in­for­ma­tion was forth­com­ing that will en­hance the prospec­tiv­i­ty of the very blocks that you were go­ing to bid on.

“So that is why I am say­ing all things be­ing equal by the end of this year we will go out with an­oth­er deep wa­ter bid round and the on­ly thing to stop it is the glob­al eco­nom­ics.”

Con­fi­dent of more gas be­ing found:

Khan said was sure more gas will be found in the deep wa­ter but felt oil was a greater risk.

He pre­dict­ed: “There will be ad­di­tion­al gas found. I am quite con­fi­dent of that. Oil is still a lit­tle more risky.”

On the failed BHP Broad­side well the En­er­gy Min­is­ter said; “When BHP drilled Broad­side...they iden­ti­fied the risks as reser­voir and charge. The found reser­voirs you know, they found sands, but they did not find a ther­mo­genic charge, which is the geo­chem­istry re­spon­si­ble for oil. A bio­genic charge brings gas, so there is still some basin mod­el­ling work to do to the South. It doesn’t mean it does not have oil, there is just some work to do. But at least we know there is reser­voir, there is struc­ture.” Khan re­vealed.

The Min­is­ter ac­knowl­edged that the world was mov­ing away from hy­dro­car­bons but felt even by 2050 there will still be a ma­jor role for nat­ur­al gas.

He said “The think­ing is there will be a mi­gra­tion from liq­uid hy­dro­car­bons to the least car­bon in­ten­sive part of the mol­e­cule, which is CH4, and I am be­ing self­ish here for T&T but we hope the pe­ri­od of tran­si­tion will be longer rather than short­er.With more and more peo­ple com­ing out of pover­ty there will be en­er­gy use.I am not say­ing we are go­ing to latch our wag­ons to nat­ur­al gas and hy­dro­car­bons for­ev­er but we can­not throw the ba­by out with the bath wa­ter ei­ther.”

The Min­is­ter said the coun­try still has life left in En­er­gy.