While the Trinidad and Tobago onshore province represents very mature acreage, the recent exploration success of Touchstone shows that it is still possible to make new finds and develop new fields in this mature setting. Onshore production in mature provinces will typically attract attention from smaller producers, rather than major oil and gas companies, which was the case in this bid round.
The company bidding on most blocks (five) was Primera Oil and Gas, a subsidiary of Touchstone Exploration, which has bid for blocks in central and southeast Trinidad closer to the existing Coho gas field and their Cascadura development. The St. Mary’s block, covering over 10,000 hectares across south Trinidad, received the most bids. The biggest block on offer, Guayaguayare Onshore, covering 30,000 hectares of southeast Trinidad, also received multiple bids
The sole offshore block offered did not receive any bids, and neither did the two small Cory D and F blocks (which had active oil operations back in the 1930s and 1940s).
The adjustments made to the tax regime by the Minister of Finance in the 2022 national budget and codified in the Finance Act (2) that came into effect this month would have helped make these blocks more attractive to bidders. These were changes which the Energy Chamber has pushed for many years, and we continue to believe that reforms to the taxation system will help make acreage more attractive and encourage further activity.
This is especially the case as the blocks offered in this bid round are being offered with exploration and production (E&P) licenses, rather than the production sharing contracts (PSCs) favoured in offshore bid rounds.
The reduced rates of supplemental petroleum tax (SPT) for new fields and for smaller producers would have positively impacted the projected economics of any oil find in this acreage. The Energy Chamber takes pride in the fact that our advocacy work on fiscal terms seems to be having a positive outcome on investment levels. Onshore oil and gas exploration, development, and production create more jobs per unit of oil or gas produced than offshore fields. It also typically has higher levels of local content, meaning that while the total amounts invested are much lower than a big offshore project, a higher percentage of the investment into these developments circulates in the local economy. This also creates economic opportunities for local contractors and local people in rural communities with high levels of poverty.
The tax system is, however, just one variable among many that would have been considered by companies bidding for this acreage. The significant technical work undertaken by the Ministry of Energy and the quality of the data available to bidders would also have had a positive impact. Finally, the existence of significant markets for natural gas —an unmet demand—is attractive to any explorer who finds gas-rich resources.
The Minister of Energy has promised that the licences for these blocks will be issued as early as April 2023. This would represent an accelerated approval process and would be a very welcome development. As the Energy Chamber has repeatedly emphasised, the clock is ticking and we should develop all of our resources as quickly as possible while there is still a market for oil.