Ministry of Energy data for the first quarter of 2016 has revealed a significant drop in crude oil production from the smaller onshore oil companies in Trinidad, mainly operating under lease-out, farm-out or incremental production sharing contracts (LO/FO/IPSC) with the state-owned oil company Petrotrin. Activity in this sector has significantly decreased, with serious knock-on negative implications for service companies, general economic activity and employment across south Trinidad. 

Over the past decade, these smaller oil companies have been one of the bright spots in Trinidad’s general declining oil production situation, with their production growing by 68% between 2005 and 2015, during a period when overall national production was declining. However, the low price environment appears to have now taken its toll and their production is on a downward trajectory. Production from this sector in Q1 2016 was down 12% on the 2015 average. Well placed industry sources have told EnergyNow that this decline in production has continued through April 2016, though Ministry of Energy data is not yet available. 


The increase in production in the LO/ FO/IPSC sector in the 2005 – 2015 period was driven by investment activity, primarily drilling new production wells or work-overs of existing wells. The low price environment has seen a number of investment programmes being postponed or cancelled and a very significant decrease in drilling activity. The total feet drilled per month by companies in this sector in Q1 2016 was only approximately one third of the average number of feet drilled per month in 2015. For the first time since 2010, Petrotrin is now recording more rig days onshore per month than the LO/FO/IPSC companies. 

This decrease in drilling activity in this sector has serious implications for many service companies and contractors who provide services to the LO/FO/IPSC companies across south Trinidad. 

Decreased crude production from this sector is also bad news for Petrotrin, as the company has to import more expensive crude from international markets to replace the decrease in domestic production, in order to keep the Pointe-à-Pierre refinery running near capacity. From an overall macroeconomic perspective, the decrease in domestic oil production from this sector represents further bad news as precious foreign currency is needed to finance the importation of crude oil from international markets. 

According to Baajnath Sirinath, Senior Advisor to the Chairman of Massy Group – Energy and Industrial Gases Business Unit, “In June 2014, there was an inadvertent increase in local royalty payments from 0 to 12.5% on revenues from the most marginal fields which produce under an average of five barrels of oil per day per well. In addition, in 2016, the realised price from Petrotrin is some US$8 below West Texas Intermediate for these same small fields. Despite significant reduction in activity and cost-saving measures these smaller producers continue to operate at an ever-increasing cumulative loss. The time to save them from collapse is fast running out." 

Business Development Manager at Anfield, Michael Anton, says many service companies made large capital outlays before the oil price crash. He added that service companies are finding it difficult to service these debts with product utilisation at an alltime low. Given the economic climate, service companies are forced to offer discounts up to 50% and also encounter very long payment periods from clients which make it difficult to be sustainable. He also indicated that this is exacerbated since many onshore oil companies have begun doing some work in-house. This means that some of the work that would traditionally be contracted out, now remains within the company which has made the onshore market even more competitive.