Good Morning Everyone!
Over the past year, there have been many positive developments in our energy sector here in Trinidad and Tobago. The Atlantic restructuring has been completed; the Dragon license has been signed; the onshore/nearshore bid round was closed, and the winners announced; new production sharing contracts for deepwater exploration blocks were issued; a new shallow water bid round was launched; the first large-scale solar energy project began construction; and new gas supply contracts were signed across a wide cross-section of the downstream sector.
From where I sit as Chairman of the Energy Chamber, it has been most heartening to see the tremendous amount of collaboration among all stakeholders, in the achievement of these milestones, which are all positive for the future of our industry. I would like to acknowledge in a special way, my fellow Board members, some of whom have had direct roles in these various initiatives. To the entire Board, I thank you for the open and collaborative approach we always have at the Chamber.
However, even as we are celebrating these announcements, we need to acknowledge that the present situation remains very challenging for the industry and for many of our member companies, especially for our smaller member companies, and for many individuals who work in the industry.
Most of our member companies are small to medium-sized businesses, which collectively account for the majority of jobs in the energy sector. Many of these companies have been struggling for a number of years. While the medium-term future holds promise, the immediate circumstances remain difficult for many of our member companies. In order to take advantage of the future opportunities that have been created over the past year, and to have an industry which is viable over the longer term, we need to ensure that the smaller service companies and contractors are able to survive. As we all know, the energy industry is an ecosystem, and we need to look after all members of our industry.
In the Energy Chamber we have put much emphasis on helping our members to adapt to the changing environment, and have sought to strengthen the relationships between the major operator companies and service companies and contractors. In late 2023 we had a very successful Local Content Forum where players across the industry – both large and small – came together to discuss and find solutions to the problems they are facing at this time. It is important that we continue to work on creating the environment in which our member companies are able to not only survive, but thrive. This is the only way we can maximize the value of our resources for industry and country.
To our smaller member companies, in order for your business to be successful, it is critical that we attract the massive inflows of international capital required to keep the industry running. So even as we continue to look after your interests at a working level, the big announcements are important to all our member companies and to the citizens of Trinidad and Tobago.
We must recognize, however, that attracting the volumes of capital we require has become more difficult over time. Some of this is simply geological. As the basin matures there are less fields which are easy to develop and as we move on to smaller fields and into deeper waters, the economics become more difficult.
As an emerging issue, we need to have the right policy and regulatory environment to support late-life oil and gas reservoirs. Proper decommissioning of facilities will become an important activity and we need to have the regulations and standards in place to support that work. The good news is that this is a potential area of business development for some of our service company members, with the opportunity to create additional employment.
Even as our basin matures there are things that can be done to make ourselves more attractive as an investment destination. Our advocacy agenda, based on our six-point plan to increase gas production and ensure our commodities can access international markets, outlines the actions we believe are important to create the necessary investment climate.
Over the past year we have seen some positive developments with respect to most of these advocacy areas. There have been some changes to the fiscal regime, for example with Supplemental Petroleum Taxes. We still think that more is required in this area, and we are in active dialogue with Government and hope to see further changes soon. We especially need fiscal measures that will help the economics of investing in small gas fields.
We have seen the first major renewable energy project begin construction and the recommendations from the Regulated Industries Commission to increase electricity rates. Following the publication of these recommendations, the Energy Chamber issued a detailed statement to members, explaining how increased rates could drive energy efficiency and reduce the burden on the natural gas value chain, while also sharing our own recommendations to the RIC to create greater equity and cushion the impact of increased rates.
There have been continued discussions on decarbonisation, with many companies taking actions to reduce their carbon intensity and invest in efficiency. The restructuring of Atlantic was on the critical path for investments in reducing the carbon footprint of our LNG industry and it was therefore excellent news to see that agreement being signed.
And of course, we have had very significant developments with respect to importing gas from Venezuela. It was during this conference one year ago, that the US granted an OFAC license, granting permission for Trinidad & Tobago to negotiate with Venezuela for the Dragon field without facing economic sanctions. It is very impressive to see that in less than a year we have had the license signed for the Dragon field development. This will allow physical activity to begin in 2024, to assess the infrastructure and determine the work required on the field to bring it into production in due course.
So with respect to our six-point plan, the results so far have been quite encouraging. But the work has to continue apace and indeed it has to accelerate. There remains a tremendous gap between our gas supply and demand. There are major projects that have the potential to increase gas production in Trinidad & Tobago, but these are not going to be delivered in the next two years. For now, our efforts are around trying to offset decline and to be as efficient as we possibly can, in how we use our precious natural gas resources. We need to think about how we increase value from the commodities that we produce. This includes potentially developing Trinidad as a hub for low carbon marine fuels such as methanol and LNG.
We also need to maximise how much value we retain from the investment dollars that are being spent during this period. This means even greater collaboration among operators and the service industry to maximize the work that is done in-country.
Even as we stress the importance of Accelerating Action to improve the present situation and secure our future, Energy Chamber Board members have reported some recent positive examples of approval processes being fast tracked. One reported a very quick approval process for a new road for a drilling programme, as the relevant agencies worked in parallel. Another Board member reported a noticeable reduction in time for an approval from the Environmental Management Authority. These examples show that approvals can move faster: we need to ensure that these gains are repeated and become the new norm.
At this conference in 2020 – just before the pandemic struck – we presented the findings of a report that outlined all the steps needed to take a gas field from bid round to first production. The report found that there were 33 approvals needed across 8 different agencies, with an average 12 years from the launch of a bid round to first gas. The study also calculated that if that time could be shortened by one year, the net present value of a typical T&T shallow water gas field would increase by US$120 million. Apart from making an investment more attractive, this is value that could be shared across the value chain for the benefit of all stakeholders, including the people of Trinidad & Tobago – simply by doing things faster.
In closing, the Energy Chamber’s offer to the Government at this year’s conference is to work closely with you to make that target – of reducing the time taken to first gas – a reality. That is a win – win – win proposition for the government – for the people – and for all our member companies, big and small.
Ladies and gentlemen, I wish you all a productive and enjoyable conference over these few days.
Thank you very much.