The clear message from the Gas Master Plan (GMP) is that the gas sector has to be restructured, and very hard decisions have to be made in the next five years.
In your first speech as Minister of Energy, you stated that your number-one priority was to reverse the decline in oil production. We have seen the decline stop, but there is not yet much evidence of a significant increase. With the benefit of hindsight, is there anything you would have done differently?
Well, the decline has stopped, and that in itself is an achievement because prior to that decline, there was a 9 percent on average annual decline from 2006-2012. For the last three and a half years, we have not seen a decline.
We have seen it holding, and that has to do with the fact that we’ve got more production from Repsol.
We’ve got more production from the lease operators and the farm-out community, and we’ve gotten BP’s numbers back up a bit with some condensate production.
But to really get it to turn upward, we have to get Southwest Soldado online. That has proven to be a challenge over the last four years.
With the benefit of hindsight, I would say a key to getting oil production significantly back up would be to dig more wells and get more acreage into the hands of the LOFO community.
Do you care to say exactly what those challenges with Soldado are?
There is a natural opposition from the OWTU, because it is their view that Petrotrin must hold on to everything and Petrotrin must produce every drop of oil in Trinidad and Tobago.
The evidence is clear that the LOFO programme has been very successful since its introduction. They have constantly increased their production or held their production level. I think that is something that has to be seriously dealt with.
The whole issue of acreage management on land is something which has to be addressed.
At the Ministry, we had control over State land which which was not under Petrotrin. We gave out 84,000 hectares for the purpose of E&P to three companies: Touchstone, Lease Operators Limited and Range. It will take time to begin drilling. Seismic has to be done first and drilling begins after.
Things take a while to happen in the energy sector but with the benefit of hindsight, I would say better utilisation of land acreage in particular and putting more acreage into companies that are quick, nimble and have low cost structures could lead to a significant increase in oil production.
A case in point would be Leni Gas and Oil which took an abandoned oil field producing 60 bbl and they have taken it up significantly — close to 2,000 bbl per day.
The Honourable Prime Minister has announced the date of the election. Should the PP be returned to Government, what would be your main policy priorities?
Well, we’re just about coming to the end of the Gas Master Plan, and as recent as yesterday (June 12), consultants Poten and Partners did a two-hour presentation to the standing committee to six Ministers and Chairmen and CEOs of state enterprises.
That report is quite possibly the most significant piece of work to be done on the economy of Trinidad and Tobago in almost a decade.
I cannot overemphasise how important that piece of work is. The clear message from the Gas Master Plan (GMP) is that the gas sector has to be restructured and very hard decisions have to be made in the next five years.
It’s also telling us that we need to get more value from our natural gas and that right now we are not getting the optimal value from natural gas.
There is more value that the country could capture from natural gas if we do the right things. It requires a tremendous amount of political will and courage to do what is right and to implement the policy recommendation coming out of the GMP and that is something that will require focus and strategic attention from Day 1 in the new term of the next Government.
In very concrete terms, what are some of the key changes coming out of the GMP?
What the plan is telling us is that it can’t be business as usual in the gas sector and it can’t be status quo being maintained. It has to be a change in direction.
It is telling us a couple things: that where our gas goes domestically, we have to look at the portfolio of industries to which gas goes — iron and steel, ammonia, methanol, power, LNG. And it is telling us that we need to look at that portfolio carefully, because there are areas where we are not getting maximum value. It’s telling us that we have an opportunity to get more value from LNG.
The biggest message coming out is to keep the gas economy moving along at the plateau 4 bcf/d you need to have significant reform of the fiscal regime.
We have had some major reform in the last four years, and that has brought us to this point and will take us a bit into the future, and that reform has been able to re-attract investment.
But to keep us going the next five to ten years we need to have significant reform to unlock a lot of gas.
There are a lot of projects that can deliver gas that are unsanctioned, and to take those projects to sanctioned requires changing the fiscal regime, and it will mean Government having to forgo revenue from, let’s say, existing production, but this is something we will have to take into consideration when we get back in.
In fact, coming out of the meeting yesterday, one of the decisions is that we should immediately start to work on the fiscal regime, given that we will have a budget regardless of the election by September or October 2015.
It also tells us that there is a lot of gas stranded in small pools which are otherwise uneconomic under the current price and fiscal environment.
It’s saying incentivise the upstream, capture more value from LNG and optimise how your gas is allocated internally in Trinidad and Tobago.
Does the GMP also speak to different approaches to management of State enterprises?
The Gas Master Plan spoke specifically to the role of the NGC, which is a major part of the report, but I do not want to reveal specific recommendations right now. These are just recommendations, but we as a Government don’t have to run with everything that is recommended.
But what is happening is that the energy community must know that in the next five years the country is going to approach some very important junctions and the Government has to take some decisions whether to go left or right or forward or backward, and to do that, you have to have the best information.
One of those big decisions is that Train 1 contract which comes to an end in 2019, which is not far away, if you think about it. We will have to sit with the shareholders of Train 1 and begin to renegotiate a new Train 1 contract.
But as I said, it’s not going to be business as usual in the gas sector in the next five years.