Mega projects look for gas in Trinidad and Tobago this year

There was little expansion in the oil and gas and downstream energy sector in 2009 and not much to boast about by way of additional crude oil or natural gas.
With much fanfare and no doubt great relief, Energy Minister Conrad Enill formally opened one mega-plant -- MHTL's AUM complex -- on October 31. It was the lone energy-related project that started production last year.

Among the mega-projects that have been on Government's drawing board for the past five years, all of which are behind their start of construction schedules, Alutrint's attempt to get off the ground with its controversial Union Estate aluminium smelter was thwarted by lack of proper EMA certification. Construction works on that project remained on hold at the beginning of 2010, but the associated power plant, a much smaller project, is under construction.
Those plants that failed to even break ground were Essar Steel (speculation is the Indian company has abandoned the project), the ANSA UAN plant, the Eastern Caribbean Gas Pipeline, Lurgi/Air Liquide Syn Gas plant, the Westlake Ethylene project and the Port of Claxton Bay, plans for which were scaled down from nine to two berths.

There were no major oil or gas discoveries, although 14 oil and four gas wells were described by the Ministry of Energy as "completed". The oil wells were mainly on land, secondary recovery types, yielding "small crude" while the gas wells were deep-sea, offshore and expensive.
The new year began with news that Mittal Steel and the Oil and Natural Gas Corporation, two Indian companies that secured drilling rights for a $ 300 mm gas platform, have pulled out of the project.

Natural gas production peaked in February at 4.309 bn cfpd, but averaged 4.152 bn cfpd up to November. Gas utilisation averaged 3.8 bn cfpd, with Atlantic LNG using the lion's share-2.25 bn cfpd.
Other major gas consumers were power generation (272 mm cfpd), ammonia (554 mm cfpd) and methanol (564 mm cfpd).

Natural gas prices fell below the critical level of $ 4 per mm Btu (1,000 cf) and there were strong concerns over this country losing significant revenues. However, by Q4 2009 prices had rebounded to over $ 5 where they are expected to stay.
During the low-price period that prevailed mainly on the US market where most of the country's LNG is sold, shipments were diverted to more lucrative markets in Europe and the Far East.

Atlantic LNG's four trains produce around 11 mm tons of liquid gas a year
With "Train X" on hold, Atlantic LNG will continue to produce the same tonnage even as the global consumption is expected to rise from 210 mm tpy in 2008 to 500 mm tpy by 2015. Atlantic LNG's rated capacity is 15 mm tpy.
Experts project a growing gap between demand and supply up to 2012, with buoyant prices.

Qatar, which has gas proved reserves of 900 tcf, recently started production at its newest train, taking its annual production level to 77 mm tpy. And neighbouring Venezuela, with proved reserves of 171 tcf, expects to have three LNG plants coming on stream within the next three years with a production capacity of around 15 mm tpy.
What must be worrisome for the Government, and by extension the country, is the fact that the country's total gas reserves-proved, probable and possible-remained flat, at around 30 tcf. There is consensus by experts in energy that based on current utilisation levels the country needs to add at least one tcf reserves replacement every year.

In September, the then president of the South Chamber (STCIC), Methanex's chief executive Charles Percy, criticised Government for "not providing incentives earlier to halt the decline in gas reserves".
Speaking at the STCIC's annual general meeting, Percy said: "If we are going to turn things around, we need to take urgent action to stimulate significant new exploration activity. The South Chamber data is in line with the Ministry of Energy's estimate that we need nine major exploration wells per year if we are going to have reserves replacement above 100 %."

One year earlier, Percy's predecessor and MHTL's chief executive Rampersad Motilal, had told: "The existing stock of petrochemical plants is relatively new or well-maintained and one can only assume that the owners will look forward to stable operations over the next 20 years. When LNG is included, we will require approximately 34 tcf of gas for stable operations over the next 20 years. If a lesser horizon of 15 years is considered, we will still require approximately 25 tcf of gas to satisfy industry."
Oil production for 2009 averaged 107,248 bpd, with 84,000 bpd coming from marine sources and 23,000 bpd from land. Trinmar, a wholly owned Petrotrin subsidiary, led the way with 23,500 bpd, with bpTT in second spot 20,500, and only Repsol and BHP Billiton (15,000 bpd) of any significance.

Besides secondary recoveries, the main hope for any increase in oil production lies in condensate. Of note is the stark reality that Trinidad is a net importer of crude oil. Up to last November, to meet throughput requirements (139,000 bpd) of the Petrotrin refinery, we imported 31.9 mm barrels. In contrast, we exported only 17.9 mm barrels.
Our imports came in the main from Russia (8.7 mm bbl), Gabon (7.8 mm bbl), Colombia (7.5 mm bbl), with neighbouring Venezuela trailing with 1 mm bbl. Imported crude goes to the Petrotrin refinery where it supplements Trinmar's to produce a range of products that are sold locally and abroad. These include motor gasoline (11.2 mm bbl), gas oils and diesel (12 mm bbl), fuel oils for export (16 mm bbl) and kerosene/jet fuel (5.5 mm bbl).

So while any increase in crude oil prices will suggest more revenue for the country, it also signals higher cost of feedstock for the refinery. Of course Petrotrin would make a profit by exporting refined and partly refined products.
Ammonia production remained steady in 2009, with eight plants-the newest being MHTL's AUM complex-producing just over 5 mm tons of the base fertiliser. Ammonia price remained substantially lower than its peak in2007-08, but recovered from a low of $ 100/ton to around $ 230/ton. Because most of our plants are new, hence efficient, they continue to be profitable, albeit at lower levels than they enjoyed 18 months ago.

The next most important downstream energy industry, methanol, the seven plants, which include two of the biggest in the world (Titan and M5000) maintained production levels that will have yielded around 6 mm tons in 2009. While prices are nowhere close to the spikes in 2007/08, they bounced back to $ 280/ton in late 2009.
Early last year when methanol fetched as low as $ 100/ton, some plants shut down some of their production capacity and conducted maintenance works. They are all back up to full production.

What does the future of the energy sector hold for Trinidad and Tobago?
A summary of Business Monitor International (BMI) oil and gas report (Q1 2010) points out that the country produced almost 20 % of regional gas (Latin America and the Caribbean). BMI projects a 1 % drop by 2014.
On a positive note, BMI says: "Trinidad and Tobago now ranks equal fifth, alongside Argentina, in BMI's updated Upstream Business Environment rating, thanks largely to its natural gas resource base and rising output. It stands four points clear of Ecuador, and its combination of attractive licensing terms, competitive landscape and moderate country risk is probably sufficient to keep it safe from hostile advances over the medium term. The country now ranks equal fourth with Peru in BMI's updated Downstream Business Environment rating, reflecting its modest level of oil consumption, region-leading refining capacity expansion and relatively high retail site intensity."

The main international oil and gas agencies (EIA, IEA, BMI) project crude oil prices averaging just over $ 80 a barrel through 2012 and increasing demand for natural gas, although, with a number of new LNG plants coming on stream, they see prices hovering just under $ 6 per mm Btu.
Trinidad and Tobago's challenge is to engage in intense exploration and increase recoverable reserves by 1 tn cfpy. With frenetic drilling activities underway in Caribbean countries as varied as Cuba, Jamaica, Barbados, Guyana and Suriname, this country could face stiff competition in another five years to retain its natural gas market edge.

Our biggest advantage is the advanced state of our downstream energy industries.
If new reserve replacement is slow in coming, Government may have to turn to Venezuela, with its vast proved reserves, for additional gas to fuel these mega-plants.