Trinidad & Tobago’s energy sector is predicted to make a modest recovery in 2019, on the back of increased natural gas production and hence increased LNG and petrochemical exports. However, this recovery is fragile and could be threatened by continued low oil prices, especially if gas and petrochemical prices also decline. While gas production is predicted to increase, the future of oil production largely relies upon the successful transformation of the legacy Petrotrin upstream assets into the new Heritage Petroleum company and the ability of the new company to attract capital and successfully drill new wells, improve the integrity of its existing assets and improve operational efficiency.
Gas production outlook
Trinidad and Tobago’s gas production trended upwards in 2018, after years of falling production post the 2010 peak. The current projections indicate continued growth through 2021, when production is predicated at 4.14 bcf/d, meeting expected demand from existing plants. Trinidad and Tobago’s peak natural gas production occurred in 2010 at 4.3 bcf/d.
With existing wells showing average annual declines in production of approximately 12-15 per cent per annum, the increase in gas production is expected to come from new fields, in addition to compression projects and additional development drilling from existing platforms.
Trinidad’s newest gas producer, De Novo, successfully brought the offshore west coast field, Iguana, into production in December 2017.
In terms of new field development, projects that are currently either in execution or in advanced planning stages include BPTT’s Angelin field and Shell’s Bounty and Endeavour fields, all off Trinidad’s east coast. In addition, Shell is developing its Colibri project off the north coast. The recently announced Matapal project will develop the gas resources discovered by BPTT in 2017 with the Savannah exploration well. The project will be a three-well subsea tie-back to the existing Juniper platform, with first gas in 2022.
BPTT is also executing an offshore compression project with a new platform, Cassia C, due to be installed to increase production from existing east coast fields starting in the third quarter of 2021.
It is unclear if the much-anticipated import of gas from the Dragon field in Venezuela, via the Hibiscus platform, is included in the projected gas production figures given by the Ministry of Energy.
While these new field developments will significantly offset declining production from existing fields, continued investment is needed in new exploration drilling if Trinidad and Tobago is to maintain a plateau of production above 4.0 bcf/d into the next decade.
2019 Bid Round
In this regard the shallow water bid round, due to close in May 2019, is an important event for the energy sector. The bid round offers acreage off the east, north and west coasts of Trinidad and the government will be hoping to attract significant interest in the blocks from both the existing international operators in T&T and new players as well.
The deepwater exploration campaign undertaken by BHP will continue in 2019. The initial focus will be the northern sector, following on from the successful Bongos 2 exploration well drilled in 2018. Niall McCormack, BHP’s vice-president with responsibility for global exploration will be presenting at the T&T Energy Conference in February 2019 so further information may be forthcoming at that point.
Petrochemicals and LNG
The major development in the petrochemical sector in 2019 will be the coming on-stream of the Caribbean Gas Chemicals plant in La Brea. For the existing producers the main challenge will remain the availability of natural gas at competitive prices. There was significant progress in contract negotiations between the NGC and downstream plants during 2018, but significant further negotiations remain, and the challenge of gas supply remains a threat.
The difficult negotiations between the government and the suppliers of gas to Atlantic appear to have made significant progress towards the end of 2018. The anticipated extension to the life of Atlantic Train 1 means that there is likely to be a major maintenance project on the plant.
In addition to increasing the supply of gas, NGC has been working closely with TTEC to try to find ways to reduce demand through greater energy efficiency especially in power generation. There has been some progress in this regard, especially with the coming online of the full capacity of the highly efficient TGU plant, but further work on energy efficiency will continue to be a priority in 2019.
Crude oil production
The big story in the Trinidad & Tobago energy sector in 2018 was the closure of the Point a Pierre refinery. For the coming year there will be continued widespread interest in any possible buyers of the refinery assets.
The new Heritage Petroleum company focusing just on upstream exploration and production has a major task ahead of it to turn around oil production, which fell significantly during 2018, and become profitable. The fall in oil prices at the end of 2018 and projected low pricing in 2019 will not help, but the good news is that the first few shipments of crude oil were reported to have received prices in excess of the WTI benchmark.
This improved pricing should also help the smaller oil companies who traditionally sold oil to the refinery at a price lower than WTI. In addition to Heritage, other oil companies operating in Trinidad have announced plans to increase investment in new production and there is some exploration activity underway.
The deleterious impact of the way in which supplemental petroleum tax (SPT) is calculated, meaning the many companies are in a net negative cash flow situation when prices average in the low US$50 per barrel range, needs to be urgently addressed if significant new investment in oil exploration and development is to be realised. The government has repeatedly stated that it is aware of the problem created by the way SPT is calculated, but so far has not taken any action to address the issue.
While increasing profitable oil production is an obvious short-term objective for the local economy, the reality of the global economy is that technological change and environmental and climate policy are driving forward a massive shift towards electric vehicles. This is likely to mean a long-term downward pressure on oil prices as supply exceeds demand.
With the world moving towards renewable forms of energy, developing expertise in this area is a priority for Trinidad & Tobago. During 2018 there was a lot of policy discussion on renewables and interest in the area is high amongst both the general public (especially younger people) and the private-sector. The much-anticipated call for grid-scale renewable energy generation projects is due to close in 2019 and investment decisions coming out of it will be closely watched by many people. A new renewable energy fund has recently been launched on the Trinidad & Tobago stock exchange to generate capital for investment in renewables both here and around the Caribbean.
Energy services sector and local content
The past few years have been extremely challenging for the energy services sector, with continued downward pressure on their prices and stiff international competition. The closure of the refinery has obviously been a major hit for many local energy service companies and contractors who have had to adapt to a new environment. The high-levels of investment in offshore gas production do not necessarily translate into significant business for many of the local service companies, which is why a continued focus on developing local content in these activities is crucial.
Guyana, Suriname and French Guiana
The other potential area for growth of local energy service companies is in export markets. The huge exploration success of Exxon in Guyana and the fast-track development of the resources has obviously created a lot of interest from energy service companies from across the globe. Many Trinidad & Tobago service companies are actively exploring the Guyana market, with some notable success stories. Continued interest and investment into Guyana are expected to continue in 2019.
The exploration success in Guyana has spurred interested in neighbouring Suriname and French Guiana, with exploration activities underway in both countries. These exploration activities create some short-term business for Trinidad-based service companies while success will obviously create further business opportunities. Events in both countries will be closely monitored by the energy sector in Trinidad.