Is the “viability” of the all-important gas sector in Trinidad and Tobago being “threatened”?
Yes, says Poten and Partners, the UK consultants hired to prepare the Natural Gas Master Plan by the previous People's Partnership (PP) administration.
The Plan was received by Energy and Energy Affairs Minister, Kevin Christian Ramnarine, only a few days before he went out of office following the party's defeat by the People's National Movement (PNM) in the September 7 general election.
So far, the new Energy and Energy Industries Minister, Nicole Olivierre, has declined to publicise its findings, nor has she chosen to do so in relation to the companion document, the Ryder Scott Gas Reserves report for 2014.
But the Natural Gas Master Plan takes a rather pessimistic view of the future, pointing out that “the reserves base has been falling steadily since 2002 and the proven reserves to production (R/P) ratio was 8.3 years at the end of 2013, significantly lower than most hydrocarbon exporting economies.”
What's more, upstream producers have indicated that new gas sales contracts and fiscal terms will need to reflect the higher exploration, development and operating costs encountered in the upstream sector. This has significant implications for the downstream gas consuming sector.”
Whether that still applies to the same extent now that both oil and gas prices have tumbled since the Natural Gas Master Plan was written, and upstream operators have presumably been obliged to drop their own prices, is a matter of conjecture.
Nevertheless, the “guiding principle” of the Plan is to “maximise the value accruing to the government from the exploitation of Trinidad & Tobago's gas resources on behalf of the people”, which means “maximisation of value across the whole sector, i.e ensuring optimum supply of gas to the existing downstream gas portfolio, while also seeking to maximise the benefit to the government across the various value chains from the gas resources that are produced.”
How this will be done is outlined by the Plan as follows:
• Ensure that new exploration is undertaken to the maximum extent possible, consistent with economic realities of the upstream sector and Trinidad & Tobago's end markets.
• Ensure all suppliers develop and supply their gas resources to the market in an optimal manner.
• Maximise rent extraction for the government from the gas sector subject to ensuring that all players along the chain are sufficiently incentivised to perform optimally for the country.
• Ensure sufficient gas supply for strategic downstream sectors based on national importance (e.g. the power sector and large employers).
• Ensure that if gas supply curtailment is required, it is applied on a transparent, consistent and fair basis.