Putting a few things right about Trinidad's reserves

Mar 10, 2004 01:00 AM

by Reg Potter

Recently, there have been statements from the Minister of Energy on Trinidad reserves in the proven, probable, and possible categories relative to plans for additional LNG trains being installed at Point Fortin. These have been reported in the press together with statements about the very large figure of 990 mm barrels of reserves in oil equivalents.
While most commentators seem happy to jump onto the band wagon of illusory limitless natural resources, currently only the fearless Dr Jim Lee Young seems to be sticking his neck out by challenging some of these easily misleading statements and the soundness of projections for ever more LNG trains. It should not be forgotten, however, that prior to Train IV approval, several well-known figures close to the industry publicly doubted the existence of reserves to supply that investment.

Small wonder these national debates continue given the confusing and often conflicting reports we get via the media. First we should understand what the various categories of reserves mentioned in the industry are and what use they should be put to. The only category of reserves that has any degree of respectability and can be used for any serious financial accounting or planning purpose are proven reserves.
These are the amounts of hydrocarbon (oil or gas) that can be reasonably expected to be economically extracted and have been demonstrated with reasonable certainty, under existing technology, to actually exist.

Even with such sober qualifications, proven reserves are recalculated every year and often found to be wrong to some extent. The most recent example is the normally conservative Shell, which had to admit last year that their proven reserves were overstated by 20 %. This is a very serious error with substantial ramifications.
The corrupting influence here is the desire to overstate reserves which makes a company look more valuable and inflates paper profits under standard accounting methods. Any bright young engineer who is unlucky enough to discover overstated reserves and thus the task of explaining this to his management, faces a rough ride in-house with negative effects on his career prospects.

Probable and possible reserves are exactly what they sound like and reflect the increased influence of the explorationists within an oil/gas company. They are the official company dreamers who boast that their science is as much an art as it is technology. Bless them because we need them as we do all the disciplines active in the industry, but please treat the numbers only for what they are intended.
Similar to the engineers, the explorationists career prospects depend to some extent on the ability to see upbeat possibilities. Unfortunately as the business and political world tends increasingly to be influenced by appearances, image, presentation style, and short-term goals, these corrupting factors often dictate the nature of the message.

A company and a competent government must always attempt to keep aware of the probableand possible reserves in planning, project approval and licensing processes but committing hard cash or a nation's future is quite another matter. Good governance requires this to be based almost completely on the proven numbers.
Now we have been repeatedly told that our gas proven reserves are approximately 20 tcf. This number seems to have held fairly constant over a couple of years of LNG production so clearly the companies have been adding to this category by diligent delineation and exploration drilling plus engineering practices. But lets consider what 20 tcf represents in terms of reported production rates, and thus estimates of how long we can, with confidence, expect to stay in business.

From the Ministry of Energy Web page we can see that total national reported gas production was 2.76 bn cf per day in August 2003, as a typical month example. Of this about 1.5 bn cf were used to make LNG so it would appear that about 1.2 bn cf is used for electricity, ammonia, steel, urea, methanol, refinery and field use which all are lower sales value uses of our gas.
When Train IV comes on stream, it will use an additional 800 mm cfpd bringing the national total to 3.56 bn per day, and this does not even include the additional rates of low priced gas to new methanol plants. If we assume that discovery rates are maintained and our proven reserves are still 20 bn cf when Train IV starts up, we divide 20 tcf by 3.56 bn cf getting 5,618 days or 15 years.

Source: Petroleumworld
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