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Are we learning from our gas mistakes?
T&T is still an energy dependent economy just embarking on recovery from the downturn of the last few years. Therefore, as important as it is to accelerate the diversification drive, future prosperity also requires proper development and management of the country’s hydrocarbon resources.
In late 2015, when then Central Bank Governor Jwala Rambarran announced that the country was officially in a recession after four quarters of negative growth, symptoms of the decline had already been apparent.
The most obvious was the precipitous fall in energy prices. But even before that, an extended period of gas curtailment had signalled that all was not well. T&T paid a heavy economic price for not giving enough attention to those warning signs and taking action early enough to, at the very least, mitigate the effects of that approaching downturn.
We have a tendency in our everyday conversations to refer to the “oil money” which we seemed to have in more than enough quantities for a number of years. Even now, many citizens see that “black gold” as the source of the country’s economic fortunes.
However, the truth is that for quite a few years natural gas has been of greater importance to the T&T economy. That has been so since the mid to late 1990s, which was when the country shifted from an oil-based economy to one based on natural gas.
This change presents some unique challenges for the country’s planners and policy makers which must be confronted if T&T is to successfully navigate the international relationships that are vital for our natural gas sector.
Although we have experienced some gas pains recently, T&T is still the largest natural gas producer in the Caribbean. In fact, until the shale gas boom began to change the dimensions of the global industry—this transformation began somewhere around 2014—this country had the distinction, given our small size, of being the sixth largest exporter of liquefied natural gas (LNG) in the world and the largest supplier to the United States.
Unfortunately, along with the upswing in shale gas production, the country got hit by a perfect storm of hydrocarbon lapses, deficiencies and declines.
A temporary halt in investments by upstream producers just around the time of the global economic crisis, an unfavourable fiscal environment and unfortunate miscalculations leading to an inaccurate forecast of an oversupply of gas due to cancellation of downstream projects, were among the elements that combined to send the industry into a freefall.
Although the decline has been halted, returning to a position of growth and strength is contingent upon several factors, including bringing new gas reserves into production to meet existing upstream contractual obligations and to recover from the recent curtailments.
Projects already on stream, or just beginning to come on stream, have yielded some of the positive results that prompted Finance Minister’s declaration a few months ago that T&T, though not yet out of the woods, is on a promising economic path.
The gas projects that have starting to make a difference include the Sercan field located in the East Manzanilla Joint Venture Development Block. This is a joint development between bpTT and EOG Resources with the capacity to produce 250 mmscfd and bpTT’s Juniper project with a production capacity of approximately 590 mmscfd.
There is also the Trinidad Onshore Compression (TROC) project which is optimising the upstream gas delivery system by increasing production from low-pressure wells in bpTT’s existing acreage in the Columbus basin to reduce the current gas supply shortfall within Atlantic LNG so they can meet their contractual export commitments.
bpTT’s TROC and Juniper projects have already boosted the energy giant’s overall production. By the end of 2017 the company’s average production was 12 per cent above their 2016 figures, accounting for 56 per cent of total production last year.
There have also been positive results from efforts by BHP Billiton to increase output from its Angostura Phase III to meet natural gas demands of the downstream sector. This project is estimated to contain 500 bscf of recoverable natural gas reserves.
However, as promising as all these developments are, they must be viewed against the backdrop of the country’s changing natural gas situation, particularly the fact that total proved natural gas reserves have been declining since 2007.
Also, although there has been a lot of talk about shifting to renewable sources of energy, there is no sign of real progress in that direction.
At present, natural gas still makes up the majority of our primary energy consumption, accounting for 99.8 per cent, according to the latest figures from the Energy Ministry.
Even with the recent increases, the current gas production level of approximately 3.4 billion cubic feet of gas per day is below the total installed demand of more than 4 billion cubic feet of gas per day.
The latest Scott Reserves audit puts T&T’s natural gas reserves at 22.7 tcf and gas resources are estimated at 43.7 tcf. This does not include the recent finds of the BHP discovery in Block 5, or the bpTT Savannah and Macadamia fields, however.
These reserves are being consumed at a estimated rate of 3.5bcf/d or 1.2 to 1.4 tcf annually, divided between LNG production of about 60 per cent and downstream industries including power generation, using about 40 per cent of the gas supply.
In this environment, rebuilding upstream capacity is key, but that will take some time.
However, that is just one of several issues in the industry that must be addressed.
By surviving the hardships of 2015 and 2016, the local gas industry has demonstrated its resilience but it would be foolish to take that for granted. There are important lessons that should have been learned from those years when the sector took a battering.
Bearing in mind the fallout, including job losses, that was experienced during the period of decline, the aim should be to avoid making the same mistakes somewhere along the line.
The good news is that bpTT, Shell and the other big multinational players with significant stakes in the local industry have already indicated that they are here for the long haul. In fact, bpTT has committed to invest up to US8 billion in T&T over the next decade.
Even so, this country must press on and accelerate efforts to foster international growth, diversification and competitiveness. The focus should be on strategies to improve the attractiveness of investment in the sector.
The supply situation must be kept firmly on the radar. T&T simply can’t afford another shortfall, particularly one of the duration of the one from which we are only just emerging.
Proper alignment between the upstream and downstream players and Atlantic LNG (ALNG) plants is essential, so that on those occasions when, inevitably, there must be shutdown activity, the resulting reduced supply can be offset by reduced demand from downstream plants.
These should be among the critical elements shaping T&T’s energy policy going forward. Recent negatives experiences should have taught us the importance of having the right structural and commercial systems in place, so that in the forseeable future, the country will be able to better withstand the shocks that can buffer the sector.
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