Trinidad sees slow-down in depletion of reserves

Oct 16, 2005 02:00 AM

by Reg Potter

With the trend toward ever more ambitious budgets, it is time to again take a look at our hydrocarbon reserves that must finance this trend.
At the risk of repetition of some information in previous letters, I will attempt to summarise the big picture.

The Ministry of Energy and Energy Related Industries has now available the Ryder-Scott reviewed reserves report for our situation effective January 1, 2005. This report shows proven reserves at 18.774 tcf, which is essentially the same as it was the year before (see table). Note the amounts are described as “unrisked” reserves, which means that the probable and possible numbers will almost certainly be less without new discoveries or prospects.
Recent confirmations of border-crossing reserves, and the Chachalaca field no doubt will provide some improvement to the above but not enough to provide any substantial relief to concerns about our long-term hydrocarbon future. Of course, additional reserves will eventually be movedinto the ”proved” category, but this is the situation now.

I have written over the last several years about the serious lack of reserves to support existing and proposed projects, and the absence of any logical justification for the rate of expansion of our gas economy. An article in Business Guardian (September 29) by the South Chamber of Industry & Commerce, using information from BP, showed that our “reserves to production ratio” is the lowest among several major LNG producing nations, viz Indonesia, Malaysia, Algeria, Oman and Egypt.
This ratio (which in the simplest translation, represents the theoretical number of years at current production rates to deplete existing reserves), lists Trinidad and Tobago as having a value of 19.2 versus the others listed which range from 34.9 to 69.1.

In other words, we are producing our reserves at a rate that will completely exhaust them, in a much shorter time span than other established LNG producing nations. But the picture is actually far worse than shownin that article. As I have repeatedly explained the only category of reserves that can be used to justify projects and fiscal planning are proved reserves. So lets’ recalculate our true picture based on publicly available information.
The latest monthly bulletin on the Ministry of Energy Web site is May 2005 which shows that total gas production was 3.197 bn cfpd). To this we must add rates required by projects under construction plus approved which include:

LNG Train IV -- 800 mm cfpd
Methanol M5000 -- 175 mm cfpd
Clico (70 %) melamine -- 87 mm cfpd
Petrotrin gas to liquids -- 50 mm cfpd

Then let’s add some others under feasibility studies:
Alcoa smelter electricity -- 150 mm cfpd
Union Estate smelter electricity -- 80 mm cfpd
Otaheite offshore smelter electricity -- 80 mm cfpd
Eastern Caribbean Pipeline -- 150 mm cfpd

All these represent an additional demand of 1.572 bn cfpd bringing the national total to 4.769 bn cfpd. And these are only the ones I can recall. Thereare others, plus demands from industrial parks in south Trinidad and Tobago.
If we divide our proven reserves of 18.774 tcf by the anticipated production rate of 4.769 bn cfpd the result is that all reserves will be exhausted in 3937 days, which is 10.8 years. Even if only the approved projects are considered, the figure is 11.9 years.

Some believe that some of our gas investments may be fuelled in the long term with imports from Venezuela’s adjacent Deltana Plataforma offshore area. There is nothing in Venezuela’s introverted past history, far less her present political scenario, to suggest that this is a good bet. The final death blow to this hope is the recent announcement that Venezuela will develop their own reserves to feed an LNG plant at Guiria and markets in Eastern Venezuela.
With a few more $ 34 bn plus budgets behind us we will be truly addicted to this type of expenditure, and there will be hell to pay when the revenue quickly dries up. Please note that much of the budgeted spending ison unnecessary glamour projects that will leave a trail of additional maintenance costs to be added to the recurrent expenditure in future budgets. These are liabilities -- not assets.

However, in addition to the short-sightedness of just burning up our reserves too fast and causing “boom” revenues that are then spent badly, there is another major concern looming. Recent writings in the industry are again raising the possibility that world oil production has “peaked.”
World production now at 85 mm bpd imposes an enormous strain on the ability of producers to simply replace what they produce with new discoveries. Every oil major is now struggling to achieve this and, in many cases, failing.

So how will they cater for the projected increasing demands from China, and the Third World who all aspire to consume like the developed world?
The world’s largest reserve capacity has always been Saudi Arabia, but that nation refuses external scrutiny of its stated reserves and has not been able to increase its production in response to recent price surges. Whatever analysts believe the fact is that world oil and gas reserves are finite, the limit will be reached and enormous hardship will be experienced when world production starts its inevitable decline.

The prospect of low oil or gas prices no longer exists, so look out for $ 100/barrel oil. Gas prices will rise accordingly, and all those deals we keep making to provide gas at $ 1.57 per mm cf will look increasingly sick as time passes.
The peaking of world production has been raised many times in the past and always proved wrong as more hydrocarbons are discovered to meet rising consumption. Consequently, politicians are inclined to scoff at such warnings rather than examine new evidence.

In our anxiety to demonstrate a “favourable investment climate” we have traditionally allowed rapid development of discoveries, leading onto the even more ludicrous over-commitment of what we have. Concerns about getting the best price for our gas and extending this revenue source are one aspect, but what about our long-term energy security?
When the hydrocarbons run out we will be in the same position as our impoverished Caribbean neighbours, but have the added handicap of negligible tourism alternative, high wages, addiction to high wasteful government spending, and poor work ethic after a long training period of URP, Cepep and militant trade unionism.

The message from all this is: we don’t need the current rate of revenue from over-rapid gas development, we don’t need the wasteful glamour expenditure, all gas that remains in the ground appreciates in value so is a true investment unlike most government spending, we need to better plan our very long-term energy security and revenues.

Trinidad and Tobago’s reserves (tcf)
January 1 Proved Probable Possible Total
2000 21.26 4.77 3.46 29.49
2001 19.67 7.69 5.47 32.83
2002 20.35 8.12 5.86 34.33
2003 20.76 8.28 6.06 35.1
2004 18.8 8.6 5.9 33.3
2005 18.774 9.028 7.066 34.868

Source: The Trinidad Guardian
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