In May 2022, the Energy Chamber officially launched a six-point plan to secure new natural gas supplies and maximize exports from Trinidad & Tobago.
Each of the six points represents a major area for action by policymakers and the industry. One major thrust of our advocacy work has focused on pushing forward action in all of these areas. The two other major thrusts are on regional energy services integration and on promoting safety.
The six major points covered in our plan to increase gas production and maximise export revenue were:
Speed-up the bid round and approval process
Reform the upstream tax system to incentivize investment
Divert gas from domestic electricity generation through energy efficiency and renewable energy
Invest in reducing the carbon intensity of operations and products
Encourage innovative approaches to small field development
Secure cross border supplies of natural gas
Getting progress on these six issues is vital for the future of our entire energy sector - upstream, downstream and all the service companies and contractors, both big and small. Investment in our gas industry therefore generates economic opportunities for all of our members, creates well paying jobs and secures both foreign exchange for the country and revenue for the government.
Over the past seven months since we released our six-point plan we have seen significant progress in all of these areas, though in many cases these are just the first steps in a long journey.
Speed-up the bid round and approval process
The 2022 Trinidad & Tobago deep water bid round was closed at the T&T Energy Conference in June 2022. When the boxes were opened, there were single bids from a consortium of bp and Shell for 4 blocks out of a total of 17. Speaking on a panel immediately after the announcement of the outcome of the bid round, the Minister of Energy, the Hon. Stuart Young, committed to moving these bids through the assessment process as quickly as possible. At the close of 2022, the Minister announced that the Ministry of Energy would be entering into detailed negotiations with bp & Shell during January 2023 to try to quickly come to an agreement on the production sharing contracts.
The Ministry of Energy also launched an onshore bid round in July 2022, with 10 onshore blocks and one nearshore block on offer. This bid round is scheduled to close on the 9thJanuary 2023, with the Ministry of Energy saying that their aim is to award blocks by April 2023. If this target is achieved, it will represent a much faster approval process than in past bid rounds.
From many public statements made by the Minster of Energy in recent months, speeding up the rate of the approvals process is something that is at the top of his mind.
In 2019, the Energy Chamber commissioned a study on the entire approval process from a bid round, to first gas. The study revealed that significant value is lost by delays in the process and that a faster approval process could significantly add to the net present value of potential projects. Many of the processes involved are sequential and involve decisions or approvals having to be taken across many different agencies and Ministries. The report of this study was publicly shared at the 2020 T&T Energy Conference and we have remained in dialogue with the Ministry of Energy on this topic. We also discussed this study with the Minister of Finance in October 2022 and pointed out that speeding up the approvals process would create additional value that would in turn result in increased revenue to the State.
The Energy Chamber continues to encourage the Government to dig into the details of the approvals process and make improvements to the processes, all with the objective of shortening the time taken to get to first gas.
Reform the upstream tax system to incentivize investment
In order to attract much needed investment in both oil and gas production, Trinidad & Tobago requires a competitive upstream taxation system. This is especially the case with increased competition within major oil and gas companies for capital for projects, in a context where there is uncertainty about long term demand.
In 2020, the Energy Chamber established a Fiscal Reform Taskforce, headed by Peter Inglefield. The Taskforce conducted a thorough review of the fiscal terms under which the upstream companies operate and identified some key areas in which changes were needed to make the overall system more attractive. The focus was especially on making changes that would help attract new investment to maintain or increase production, and also create much needed activity in the services sector.
In 2021, the Taskforce submitted a detailed report to the Ministry of Finance and the Ministry of Energy which outlined the major recommendations for change. The Supplemental Petroleum Tax (SPT) is one of those fiscal measures which the Task Force highlighted as needing major revisions, as it acted as a disincentive to new investment in oil production.
In the 2022 Budget, the Minister of Finance, Colm Imbert, announced some important changes to the SPT regime with a focus especially on the rates applicable to new oil wells and new fields. He also extended previously implemented changes for small onshore producers, which had been introduced in 2020 in response to specific advocacy from the Energy Chamber. The changes were legislated and came into law at the beginning of 2023. These have been welcomed by the industry, though there is a need for continued dialogue on exactly how the new legislation is implemented. The Taskforce has also submitted further detailed recommendations to the Minister of Finance and Minister of Energy on some specific issues about how the new regime is applied.
The Minister of Finance has indicated on several occasions that there will be continued collaboration with the private sector through the Energy Chamber on fiscal changes, all with a focus on increasing investment while continuing to deliver revenue to the State.
Divert gas from domestic electricity generation through energy efficiency and renewable energy
In Trinidad & Tobago, almost 100% of electricity is generated using natural gas. Because natural gas is in such short supply at the moment (compared to demand), the national priority must be to use the gas in activities which generate the most amount of value to the country (in hard currency) – in other words in the petrochemical and LNG industry and not in the electricity sector.
The Energy Chamber has set up a Decarbonization Taskforce which has been tasked with improving the uptake of renewable energy in T&T and also reducing the demand for electricity through energy efficiency.
The Taskforce has highlighted areas where the government has significant losses in revenue through the electricity sector and how the use of natural gas for power, hampers the ability of the National Gas Company to recover the full value from the power sector.
Through the Taskforce led by Dr. Dale Ramlakhan, the Energy Chamber has continued to promote the need for renewable energy and has worked closely with the Ministry of Energy and Ministry of Public Utilities to ensure that the first large scale solar project would become a reality. In December 2022, agreements were finally signed by the government and a consortium of bp, Shell and Lightsource bp to develop two solar facilities in T&T which would generate 112mw of electricity. The project will be the largest of its kind in the Caribbean and a major step forward.
The Energy Chamber also regularly contributes to committees and consultations held by the Ministry of Planning and Ministry of Energy, in pursuit of attaining the national goals set under the Paris Agreement.
Invest in reducing the carbon intensity of operations and products
Establishing renewable energy generation is critical to kickstart reducing the carbon intensity of other areas within the energy industry in T&T.
The petrochemical industry is a major contributor to emissions in T&T, however, plants are already designed to be as efficient as possible and in many cases further efficiency gains would require significant capital investment. There are some areas, however, where emissions can be avoided. One area that has received attention over recent years is the use of green hydrogen which would allow the petrochemical facilities to use hydrogen without CO2 emissions, or blue hydrogen where CO2 emissions are captured and stored in depleted oil reservoirs.
The Energy Chamber has played a major role in promoting the development of the hydrogen industry in Trinidad & Tobago over many years. In late 2022, the Energy Chamber was very excited with the launch of the report into a Green Hydrogen industry developed by National Energy with the support of the InterAmerican Development Bank. We were also delighted to welcome the major French investor, HDF Energy, as a member of the Energy Chamber and to see their investment into the NewGen project to create green hydrogen; a project that was born out of the work of the Decarbonisation Taskforce.
Secure cross border supplies of natural gas
In addition to securing new investment into natural gas production in Trinidad & Tobago, there is potential to import gas to Trinidad & Tobago by pipeline for processing and re-export as LNG or petrochemicals. In the medium-term the most obvious source of natural gas is our neighbour Venezuela, with huge untapped gas resources and lots of gas that is flared in its oilfields (with disastrous climate change implications).
Importing natural gas from Venezuela has been discussed for many years, but the US sanctions regime has meant that this initiative has not been able to progress in recent years.
The Energy Chamber has kept open lines of communication with a number of important stakeholders, both governmental and private-sector, on this issue and we have promoted the economic opportunities that could be available to Trinidad and Tobago if we were able to import gas from Venezuela. The first option is the obvious one where there are known gas fields which straddle the border of Venezuela and T&T. There are opportunities to develop the T&T side of those fields, however the real prize would be the opportunity to develop both sides and tie into existing gas infrastructure in T&T’s waters.
The other opportunity is the capturing of flared or vented gas from onshore oil fields in Venezuela. These oil fields currently flare significant amounts of natural gas, also leading to astronomical CO2 emissions. Capturing this would lead to significant volumes of natural gas and also reductions in CO2 emissions.
Continuing to advocate on issues that impact our members
In conclusion, the Energy Chamber continues to work to serve our members by working toward a robust and sustainable energy sector, not ignoring any opportunities for the development of the industry. This work on securing the future of the gas industry is important to all of our members. We also continue to place a major emphasis on the issue of regional energy services integration and the opportunities that can be created for our service company members.
We have continued to work on the development and enhancement of the Local Content Management System (LCMS) and on addressing issues that work against the maximization of local value retention in the industry. In 2023 we also plan to place a new emphasis on process safety and asset integrity, to complement the work we have done for many decades on contractor safety management.
We look forward to working with all our members and stakeholders in the year ahead and to communicating further on all of our advocacy work and or other activities.