The average gas selling prices of two major upstream producers in Trinidad & Tobago declined by approximately 35% between 2015 and 2016, with BP reporting average prices of US$1.72 in 2016 and EOG Resources reporting average prices of US$1.88 per mmscf. These figures are taken from the company’s Annual Reports and SEC filings; in the case of BP, the figure quoted is for their South American region, but as Trinidad & Tobago, is their only gas producing asset in the region, the price can be assumed to be the Trinidad & Tobago price.
It was a disappointing decision not to construct the Angelin platform in La Brea. However, this decision has been driven by the need to ensure that natural gas is available in Trinidad and Tobago by early 2019. There were clear concerns that any interruptions to project delivery, whether due to labour unrest or other factors, would have serious implications for bpTT, the National Gas Company and the downstream processors and users of natural gas. This in turn would have serious implications for the overall national economy.
The highly anticipated Angelin platform, despite its slightly controversial story here in Trinidad, appears to be moving ahead. McDermott, a US-based, provider of integrated engineering, procurement, construction and installation (EPCI) services for offshore and subsea field developments, has announced that they have delivered the pre-FEED (front-end engineering design) designs to BP for the Angelin platform.
Shell is set to ramp up investment activity in its core Trinidad and Tobago east coast natural gas assets over the coming year. The company plans major exploration drilling and seismic campaigns in the east coast acreage, which it obtained as part of the global acquisition of the BG Group last year.
BP Trinidad and Tobago (BPTT) announced that it has made two significant gas discoveries with the Savannah and Macadamia exploration wells, offshore Trinidad. The results of these wells have unlocked approximately 2 trillion cubic feet (tcf) of gas in place to underpin new developments in these areas.
A strong safety culture is vital for the continued success and competitiveness of the Trinidad & Tobago energy sector. Every individual working on any energy sector facility has a duty to stop work at any situation that will put themselves or others in harm’s way. Under Trinidad & Tobago’s Occupational Safety and Health Act (OSHA), companies need to have policies in place where workers are informed of their responsibility to stop any unsafe work and systems in place to investigate any “stop work” incidents. This is also one of the requirements that contractors need to demonstrate in order to be certified under the Safe to Work (STOW) programme. At present, there are over 500 certified companies in the country.
The most recent Petrotrin oil spill, beginning on the afternoon of 23rd April 2017, has put a very clear spotlight on the issue of asset integrity. On that afternoon, the base of tank 70 failed and there was a significant release of fuel oil into the environment. Petrotrin was unable to fully contain the fuel oil and over the next 24 to 48 hours, approximately 300 barrels of fuel oil flowed into the sea around the company’s port facilities.
Shell is set to purchase Chevron’s shareholdings in three blocks off Trinidad’s east coast.
Shell signed an agreement today to acquire the interests of Chevron’s subsidiary in Trinidad and Tobago, including its holdings in the the East Coast Marine Area Blocks 6, 5a and E. This agreement is subject to certain customary conditions.
“Trinidad and Tobago represents a rich opportunity for us to continue building our integrated gas position in country and securing new competitive production,” said Derek Hudson, Vice President Shell Trinidad and Tobago. “Shell continues to actively evaluate other options to increase supply from our existing assets, as well as pursue additional opportunities such as the previously announced purchase of Centrica’s interests in the North Coast Marine Area.”
This transaction, for approximately US$ 250 million, will allow Shell to optimize its developments across the East Coast Marine Area, a core component of Shell’s interests in Trinidad and Tobago supplying gas to both the domestic market and Atlantic LNG. The deal is expected to close around mid-year.
In previous installments we reviewed the history of the electricity subsidy, how it works, its opportunity cost and the role that renewables and energy efficiency can have in reducing government expenditure on the electricity subsidy. In the last installment we paid particular attention to the generation of electricity in Trinidad and Tobago and found that significant improvements in the efficiency of our power generation assets can create increased government revenue and foreign exchange. This is relevant in the context of renewable energy as well. It is unwise to put a solar panel on an inefficient house and it is just as unwise to put a solar farm on an inefficient country. So what is the level of electricity consumption in T&T’s households? To answer that question we have to get an understanding of how we categorize and pay for electricity in Trinidad and Tobago.
Consumption and Price Categories
Residential electricity consumption is priced based on the amount of energy used by a household on a bi-monthly basis. The 3 usage categories are as follows:
Numerous studies have shown that subsidies lead to wasteful behaviors and T&T is no different. Despite having 3 consumption categories at various prices, roughly 43% of all households in the country fell in the highest usage category of >1000kwh. In addition the average bi-monthly consumption of these households in 2015 was roughly 2100kwh (See Table 1). Comparing this level of consumption to other regions highlights a startling reality; 43% of homes in T&T have a consumption level that is on par with the average North American home, twice that of the average European home and 3 times the global average. Moreover, 70% of all residential power in Trinidad and Tobago is consumed by this 43% which to some extent illustrates the level of income inequality in the country.
Why is Consumption in T&T so high
There are approximately 400,000 households in T&T putting the average number of persons per household at ~3 persons per home. While the average North American household is slightly smaller at ~2.6 persons per household there is still a large gap between both the standard of living and income levels between T&T and North America. Taking these factors into consideration it is clear that the reason for the high levels of consumption in T&T comes down to the choices we make. Over the last 15 years, during what some now term the ‘gas boom’, the standard of living and levels of income in Trinidad improved greatly and so did our electricity consumption. However, for many of us the decision to purchase new A/C units, clothes dryers, water heaters, dish washers and appliances may have been done in the absence of energy efficiency considerations. More importantly, low electricity prices result in the population giving less critical thought to overall energy consumption , regardless of whether or not appliances are energy efficient.
How can you get a measure of where your electricity consumption falls?
Using Table 2 you can determine how your electricity consumption compares to the average North American household. The table has been normalized to account for the small difference in the number of persons per household between North America and T&T. Therefore, if you pay more than $900.00 TTD for electricity on a bi-monthly basis you are using more electricity than the average North American household and you are part of the 43%. If you are therefore paying more than $1900.00 TTD you are using more than twice the amount of electricity as the average North American household (See Table 2).
Curbing our consumption
The government has illustrated in the budget that Trinidad and Tobago is being faced with tougher economic times. It has been stated many times that the energy resources of Trinidad and Tobago belong to the people and are the lifeblood of the economy. Taking ownership of our energy resources means that each of us must play our part and take a closer look at how we manage the use of these resources in our daily lives. As we learned from previous installments in this series, reductions in demand for electricity present an opportunity to increase government revenues by further reducing the power sector’s consumption of natural gas and increasing the export of gas based commodities. Therefore those of us who live in households that are part of the 43% must consider that reductions in our energy consumption do have a knock on impact on the wider economy. Similarly, the government needs to lead by example and ensure that government offices use less as well. In addition, the government has to create the enabling environment to allow citizens to easily purchase energy efficient appliances through Duty and VAT exemptions on the import of these critical items.
Over the past few installments we have thoroughly examined where we stand with respect to subsidies and energy efficiency. Next we will be taking an in depth look at renewable energy and how the economics stack up in the Trinidad and Tobago context.
This is part 4 in the series Understanding the Electricity Subsidy in Trinidad & Tobago by Christopher Narine Thomas, Chairman of Energy Efficiency and Alternative Energy at the Energy Chamber.
The effect of price movements on the subsidy can be clearly seen through the period 2014 to 2016 when commodity prices began to fall sharply beginning October 2014. By the start of 2016 commodity prices had fallen by almost 60%. This had a downward effect on the magnitude of the electricity subsidy as the gap between the price paid for gas for used in petrochemicals fell closer to the subsidized price paid for gas for used in electricity. Consumption of electricity also had an effect on the downward movement of the subsidy.
One of the key factors affecting Petrotrin is the margins under which they operate, this according to Petrotrin head, Fitzroy Harewood in May at an Energy Luncheon held by The Energy Chamber. Harewood provided a frank look at the company’s future given the “lower for longer” price environment. He said that the only way for the model to work is keep the cost of the raw materials down, and maximise the cost of finished products.
All responsible stakeholders in the country must be disappointed by the decision not to construct the Angelin platform in La Brea. However, this decision has been driven by the need to ensure that natural gas is available in Trinidad & Tobago by early 2019. There are clear concerns that any interruptions to project delivery, whether due to labour unrest or other factors, would have serious implications for bpTT, the National Gas Company and the downstream processors and users of natural gas. This in turn would have serious implications for the overall national economy.
A strong safety culture is vital for the continued success and competitiveness of the Trinidad & Tobago energy sector. Every individual working on any energy sector facility has a duty to stop work in any situation that will put themselves or others in harm’s way. The misuse of this stop work duty by trade unions, as a cover for illegal strike action over pay, is extremely damaging to safety culture and undermines the entire safety management in the sector.
BP has a long history in Egypt and has been helping the country meet its energy needs for more than half a century, investing over $30 billion during that period. They also claim that with its partners, BP provides almost 10% of the country’s oil production and 40% of its gas and noted record investment in major projects in the Nile Delta set to significantly boost the supply of much-needed domestic energy.
BHP has recently moved its North American Petroleum Accounting and Reporting functions from Houston to Port of Spain, Trinidad and Tobago. At first sight, this may not seem a particularly newsworthy event, but the relocation of this important function represents a rare win in Trinidad and Tobago’s national diversification strategy, which has emphasised the development of service exports to complement the traditional export of oil, gas and petrochemicals. By relocating accounting services from Houston to Port of Spain, BHP will be exporting accounting services from Trinidad and Tobago to the USA and other countries in the region.