Welcome to the first energy conference of the new decade. Your presence here today is proof that these remain very exciting times for the energy industry in the Caribbean. The start-up of oil production in Guyana and the recent announcements of major hydrocarbon finds in the deepwater areas of both Suriname and Trinidad & Tobago mark a new phase for the hydrocarbon industry in the Caribbean. That excitement is mixed with an urgency for action to address climate change - which presents both opportunities and threats to the region.
Clearly 2020 is heralding a period of transformation for the industry – an era of new possibilities.
I am sure no one here needs reminding, but the spotlight on the oil and gas sector regionally and globally is growing increasingly bright.
Exploration and territorial deepwater finds in Trinidad & Tobago and neighbouring Guyana and Suriname, are focusing intense attention on the region.
Led by youthful voices around the world, there is a courageous challenge to the discourse on climate change and the future of energy. Oil and gas companies are increasingly asked to be part of the solution.
Governments everywhere are constantly asking about the relative share of return to country as well as the responsible management of natural resources.
As an Energy Chamber, we see it as our responsibility to ensure that all these issues get fully aired and critically analysed.
Against this backdrop, the Energy Conference remains committed to driving forward the discussion on the issues shaping the energy agenda. Given the critical juncture we are at as a region, this role is arguably even more important. We must stand at the front edge of the issues that will shape our energy future. This thinking has shaped the conference agenda which reflects the collective views of the industry - represented by the Energy Chamber.
I suspect that over the next 48 hours, there will be rich discussions around the implications and the possibilities for the future state of energy in the Caribbean landscape.
Here in Trinidad and Tobago, we are experiencing a gradual erosion of our “first-mover” status. Our first mover advantage in both the LNG and petrochemical business has well and truly been eroded. This new reality is driven by tight supply conditions and the increased development costs for bringing fields – now smaller - on to production and magnified by the lower natural gas cost in the US due to shale gas. Responding to the new reality has meant some tough decisions have had to be made in Trinidad & Tobago. It has slowly, but inevitably driven constant and deep reflection of the future state – a state that will be in the best interest of all the players. While progress has been made, significant challenges remain and we must not shy away from making the appropriate, strategic decisions, for the sustainable future of the Industry.
While this is our current context, the technological innovations that led to the rise of shale oil and gas and the massive deepwater finds around the world, not least in Guyana and Suriname, have laid to rest the conversation around “peak oil” that was at the fore a decade ago. In fact, the conversation has shifted to “peak demand” for fossil fuels and the need to rapidly de-carbonise energy production to meet global climate change objectives.
The stark reality is that, bar any unexpected global upheaval, a “peak demand” scenario drives expectations of “lower forever” oil and gas prices. Operators are responding to this expectation with a relentless drive to keep input costs as low as possible. The near to mid-term implications for our contractors and service community are obvious. However, rapid developments in automation and artificial intelligence present significant opportunities for the service industry. Evidently, technology and innovation will be an essential feature of success in the future. I encourage you to tour the exhibition booths to see the encouraging signs of innovative and entrepreneurial efforts amongst our members in the service sector.
Survivability demands flexibility and a commitment to continuous change. No doubt, a core part of the evolution of the local service sector will inevitably consider the development of the hydrocarbon industry in Guyana and Suriname and opportunities in the rest of the Caribbean. Natural gas, renewables and energy efficiency all present some interesting considerations towards the Caribbean Single Market and Economy. An integrated regional approach speaks to a much bigger market for energy services and exciting opportunities for companies from across the entire Caribbean region – and we need to be careful to not be overly T&T-centric in this push.
We have noted with great satisfaction the recent moves to reinvigorate the CSME and to deepen regional economic integration. Greater regulatory alignment and improved freedom of movement, especially for technicians and skilled workers, benefit all of CARICOM. We urge the regional political leadership to continue to advance this common objective. In that regard, we are happy to see that in addition to an address by our own Prime Minister, Dr. the Honourable Keith Rowley, there will be an address by the current CARICOM Chairman and Prime Minister of Barbados, The Honourable Mia Mottley.
This is a good place to remind us that in 2017, at this Conference, operators signed a Charter committing themselves to increasing local content from their operations and the Energy Chamber has been using that Charter to drive our strategy. Importantly, the Chamber sees a correlation between the regional integration discussion and the local content agenda. We will share more on this in our last session.
Trinidad & Tobago’s most recent audit of our natural gas reserves showed an increase in proved, probable and possible reserves. This is very positive news and indicates that notwithstanding the problems that we face, the sector potentially has a long-term future. Developments in the Trinidad & Tobago - deepwater in particular - are very exciting and could be a game changer. Nevertheless, the best-case scenario would be to see that deepwater production come into the system towards the end of this decade. In the meantime, the challenge to Trinidad & Tobago is to try to maintain gas production at a match between supply and demand at as high a level as possible - and for as long as realistically possible. This must be done in a way to ensure that all players along the gas value chain are able to sustain their business.
If the local energy sector is to return to growth in the near term, there are three possible opportunities: firstly to ensure that we maximise the value that is returned from the gas industry; secondly, to seek new, innovative and non-traditional gas resource access; and thirdly to look for short-term growth in oil production.
Trinidad & Tobago clearly has a significant opportunity to deliver growth through increased oil production. We do have a very mature oil industry, but there is still significant oil that can be brought to market.
New player, Heritage, has created the space for significant new investment in upstream oil from the traditional acreage. Enhanced oil recovery techniques can boost oil production from our mature production areas, but this requires the right investment climate. The Energy Chamber has long called for changes to the Supplemental Petroleum Tax – or SPT – fiscal regime in order to attract investment in this sector. The changes made in the most recent budget are a start but more is needed to encourage any new investment. You will hear more about the role of mature oil during the conference from those who are materially invested in this issue.
In terms of maximising value from the gas industry, the government has placed emphasis over the past few years on seeking better returns to the country from the sale of LNG. These discussions have at times been tough, but the government and the upstream operators continue to work together to find a solution that creates a win for all parties.
The next stage in these negotiations is the proposed commercial restructuring of Atlantic, that was announced just last Friday. The successful conclusion of these discussions should underpin future investments across the value chain and ensure that Trinidad & Tobago continues to have a world-class LNG industry that remains globally competitive.
We must commend all involved for ensuring that these discussions have continued to operate within the key principle of sanctity of contract.
Specific to value optimization we need to seek new, innovative and non-traditional gas resource access. Smaller players with different strategic imperatives offer complementary goals of resource maximization. It will require a different mindset in some areas – dealing with issues such as shared pipeline capacity and infrastructure, possibly innovative incentives to create different farm-out options and fiscal incentives to help offset the massive upfront capital investments for new entrants.
This is not a radical idea – this is how the North Sea was able to lengthen the overall life of the industry. For us to do so, an improvement in the ease of doing business is an imperative and can play a huge role in increasing competitiveness of the petrochemical sector. The Energy Chamber recently commissioned a study that looked at the upstream regulatory process. The details of that study will be released tomorrow, but we can say now that the headline is that “improvements in the regulatory process can speed up the time taken to bring new gas fields into production and add significant additional value to our resources.”
I end by commending the pioneering spirit that drove the development of the natural gas economy. It was founded upon a shared sense of vision and fair value. This country led the way in demonstrating the phenomenal results that collaboration between industry and country could achieve – together. Our past success at creating a world scale business should inform our approach to the energy future – by pushing boundaries on what is possible - together. I do believe that over the next two days, we will drive conversations that create a Caribbean Energy Future that works to the benefit all the parties involved - and which will powerfully address and find meaningful solutions to the challenges facing our industry and our region.