Petrotrin: The new gas player?

Excepts of a presentation made by Allan Russell, Petrotrin’s Exploration and Development Manager, at the Petroleum Conference and Exhibition at the Hilton Trinidad recently, where he provided highlights of the company’s current involvement in the gas value chain and offered  some insights into future natural gas projects and developments. The title of his presentation was the “New Gas Player.”

In the past Petrotrin has concentrated on winning crude oil in order to augment supplies of feedstock into our Point-a-Pierre refinery. But as far back as 1998 the company embarked on plans to enter the gas production and marketing business in consort with other companies via the monitisation and development of the North Coast Marine Area with British Gas, Veba, now Petro-Canada, and Agip. Discoveries with new joint venture partners are certain to change this picture and we stand on the threshold of being involved in many aspects of the value chain.
Today, we produce over 100 mmscf/d from sources in the North Coast, Trinmar Operations, Vermilion Joint Venture and from other sources. We aim to increase this production to 150 mmscf/d within one year’s time. Let us take a closer look at our involvement in LNG. This map highlights the main gas fields and major pipeline systems installed within Trinidad and Tobago. The Hibiscus platform was installed in over 500 feet of water and is connected via a 24-inch pipeline for supply of gas to ALNG Trains 2 and 3 located at Point Fortin. Petrotrin holds a 19.5 percent unit interest in the NCMA.

Specifically, Petrotrin is the licensee of the Block 9 acreage that contains a major portion of the Chaconia field and a portion of the Hibiscus field. Poinsettia and SW Poinsettia are included in the Unit to meet  20-year supply considerations.

The Hibiscus field is on production at 290 mm/d and Train 2 is in the start-up/commissioning phase. LNG cargoes are being sold into the USA. Predecessor company Trintoc discovered the Chaconia field with the drilling of the Chaconia 1 and 2 exploration wells followed by the discovery of the Hibiscus field during 1981. The Hibiscus field is being developed first and Chaconia second. Poinsettia may be brought on in five to 6 years in order to maintain production rates. The North Chaconia prospect is a fault-controlled trap that has been defined on some 2-D lines to the west of the structure. What we do not know is whether the structure is closed to the east and if there are any hydrocarbon indicators such as obvious “bright spots”. Seismic acquisition is planned for 2003. Gas sales to Atlantic LNG is via long term contracts. On the downstream end the LNG produced is shipped and sold on a joint basis. The arrangements required involve gas sales agreements, LNG purchase agreements, shipping contracts, re-gasification arrangements and finally sales agreements with the prospective buyer. Petrotrin holds a 19.5 percent interest in the NCMA and  PFLE which allows Petrotrin to be involved indirectly in LNG purchase from ALNG Train 2, shipping on a long term basis, re-gasification at the un-loading terminal and final gas sales at the exit point of the re-gas terminal. In this arrangement maximum control of costs and derivation of revenues are obtained.

However, many contracts are needed that are ‘back-to-back’ to each other and offer great challenges in these rather complex contractual arrangements. LNG is only a means of connecting the supply side to the demand side of the market. In so doing, a number of activities must be undertaken that leads to the existence of different players. The LNG pricing arrangement is on a “netback” basis. From the sales amount, re-gasification costs, shipping, liquefaction and pipeline tariff costs are deducted. The remaining money or price is retained by the upstream producer. In summary, GAS and LNG FLOWS DOWN while MONEY FLOWS UP.  (He then showed the various points of sale for gas and LNG.)  There are four existing LNG terminals along the eastern seaboard of the continental United States. Running from south to north they are Lake Charles in Louisiana, Elba Island in Georgia, Cove Point in Maryland and Everett in Boston. 

Gas prices generally increase from south to north due to increased pipeline costs. Highest prices occur in the New York and Boston metropolitan areas. Henry Hub is a transfer point located at the southern end of the US natural gas system. Natural gas is sold in the United States on a widely traded index called the Henry Hub which is physically located in Louisiana. As in oil and product markets there are sophisticated marketing products on offer, eg Forward sales, Future sales, swaps, hedges etc. The Henry Hub Index over the past 12 months have shown a general increasing trend up to US$5.60/mmbtu but is expected to return to lower levels in the near future. What are the ingredients to achieving this level of participation and  success. I wish to highlight the excellent working relationships with all the partners involved in this unit, buoyant gas prices and great reservoir performance. The Vermilion/Petrotrin joint venture discovered rich gas and gas condensates in exploration well Carapal Ridge No 1. The Central Block is located in the middle of the island running in a north-east south-west direction. Drill Stem Tests concluded that ample supplies of gas were found but a more deterministic measure of quantities needed to be ascertained.

The partnership worked together to develop plans to conduct a long-term test on the well and to determine the productive capacity of the discovery. Gas production began in December 2002 with sales going to the refinery at Pointe-a-Pierre.  Good deliverability rates and condensate yields have been obtained. The Carapal Ridge discovery has the potential for long-term supply of wet gas and condensates.  At the end of the six-month test, the partnership will be in a position to better contract out supplies. By far there are serious advantages to finding gas on land. By far, the existence of existing infrastructure makes a short time from discovery to production start-up. The big advantage that land gas has over offshore deliveries include existing infrastructure to move the gas to the consumer/customer and lower development costs since no platforms are required.

The keys to success has been the great working relationship with our partner Vermilion in this venture, good permeable reservoirs and rich condensates. Let us look at the west coast area comprising the Soldado fields and the North Marine acreage. Gas production from the Trinmar Operated areas are generally dependent on the level of crude oil production since most of the gas is associated. At current levels production is 35 mm.d. However, there have been gas wells drilled in the last drilling campaign that shores up evidence of non-associated gas that can deliver up to 10 mmscf/d of wet gas supply per well. Seismic mapping have shown up several amplitude anomalies that need to be tested. If successful this supply can increase our gas reserves picture. Petrotrin is an integrated petroleum company and as such has both gas sources as well as a demand side of its business.
 
Demand for gas at the refinery is for hydrogen generation and fuel for steam generation. The E&P operations utilise gas for thermal recovery of shallow heavy oils and for fuel.

Natural Gas Liquids recovery

Natural gas liquids are recovered by PPGPL under contract with Petrotrin. The extracted liquids are sold and the dry gas returned to Petrotrin. The current situation with respect to involvement in the gas businesses is both exciting and rewarding to Petrotrin. On the supply side we have proved up by ourselves and in consort with partners additional gas discoveries. On the downstream side we are involved in many new arrangements.  Growth is currently taking place and we are hopeful of additional discoveries.Our short term desire is to increase production to 150 mm/d and prove  up additional gas prospects. Our next adventure would surely be to prove up additional gas within the context of the Block 9 area.