Energy Lessons

If  John Brown, CEO at BP, the global energy giant had his way,  no other company in the world would be allowed to drill for oil and gas. That’s the view held by Greg Noval, President of  Canadian Superior Energy Inc.

Noval, whose company is a an independent involved in the exploration of oil and natural gas in Canada,  may be a newcomer to Trinidad and Tobago’s energy landscape but that does not mean that he steps gingerly into the energy arena. “BP wished it had a big fly swatter, so no other company could enter the market,” he said, pumping his hand up and down, in an interview after his presentation at the Hilton Trinidad where he outlined his company’s prospects in TT. He  took the novel view that government should shrink the size of the land grants and reduce the blocks given to companies for oil and gas exploration, noting that block reversion argument was not as farfetched as it seemed. “The government should think about shrinking the blocks,” he said, evoking an audible  buzz from those attending the conference.

When told that his comments may not be popular with BP or BG, Noval’s response was, “we never are.” In so doing, he reasons that this country will reap far more out of the relationship with the big oil and gas players than it is doing right now. He cited Alberta as an example, where the government shrunk the blocks — 90 percent in five years. It caused a controversy, but Alberta governmet reaped the benefits in the long run. Give the “big guys” five years to develop the existing oil and gas reservoirs, he said, an obvious reference to BP and BG. “Sure they are going to fuss and say, ‘We going to leave,’ but they always end up staying. They won’t leave. “The independents will take up the slack if they want to cry foul,” Noval said, referring to his own company, Canadian Superior. “We can keep up the pace.” The company was recently awarded two offshore blocks off the east coast of Trinidad, a fact Noval  emphasised at last week’s energy conference organised by Morgan Stanley, the US financial services powerhouse. 

The Calgary-based company is racking up business as it goes along. The press releases issued spoke of a company with a track record:  completed equity financing totalling $29.9 million 2002 and how it expanded the company’s operating credit facilities. It also talks of a company positioned to lever its onshore and offshore expertise in other “world class basins to create home run opportunities for shareholders.” Its primary area of focus is exploration blocks on the Scotian Shelf, offshore Nova Scotia, which the company is developing with its joint venture partners, El Paso Oil and Gas Canada and El Paso Pipelines. In Western Canada, the company holds large acreage in Northwest and Central Alberta and Northeast British Columbia. His company has developed drilling expertise offshore Nova Scotia and joint-ventured with El Paso Energy on two wells that are targeting natural gas prospects in the 1-2.5 Tcf range. Canadian Superior’s arrangement with Petrotrin is a joint venture, he said, where the capital outlay is going to come from Canadian Superior. Asked what the split was, 60-40, perhaps, Noval would only say that it was a “good deal.” “It was tough negotiating with Petrotrin,” was all he would say. But before the joint venture deal was signed though, Noval said he had two companies at his door wanting to do farmout. He turned them down. “We worked hard to get those two blocks,” he said, noting that his company beat out two competitors.  

The outspoken President is keenly aware of the immense wealth that this country is sitting on and wonders why the unemployment rate is so high. By global standards, Noval admits that Canadian Superior is small with a market capitalisation of $193 million, but is clear that he is not going to let this stop him. In a recent interview with Oil and Gas Investor, a publication on oil and gas issues, Noval said TT was under explored. “Trinidad caught my eye because it is the major country identified with future LNG to North America, particularly to the US. Moreover it one of the most under explored geological regions in the world, not only for oil — as the huge Angostura discovery suggests.” “The dynamics are shaping up well for the future,” he said at the Hilton, noting that an interesting but often overlooked fact was that one sixth of BP’s seismic budget was spent in TT. Also, of the top 25 wells drilled by BP, 15 are located in TT, he said. Canadian Superior’s blocks lies between two older oil fields - Gallate and Nanette and goes at depths between 6,000 and 10, 000 feet. “While we’re targetting in each case potential oil reserves of 250 million or more, its possible we could instead find gas reserves totalling more than a TF,” he told Oil and Gas Investor. He reasons that there is plenty of infrastructure in place: Petrotrin with its onshore refinery as well as major gas pipelines that go right across his company’s licenced blocks. The company plans to have Western Geo conduct a $4-$5 million 3-D seismic survey across the blocks. “That is good enough reason to be here,” he said, noting that “if our little company wishes to get a lot larger, we see TT as the place to do it.” Asked what Canadian Superior saw in TT, this country, he said, is a world class basin with multiple exploration and development opportunities and has a stable fiscal and financial regime.

In addition, TT was “user friendly in terms of production sharing, operating costs and environmental regulations. “We would not be here if the government was not supportive of the oil and gas.” He noted too that this government  did not include punitive measures in its contracts, like Nova Scotia, where the government taxed operators for bringing in a rig from the North Sea. Noval is all in favour of the TT government taking its pound of flesh in the energy sector. “Companies like BP and BG have been taking advantage of the system for too long and now have to pay for that.” Royalties, he said, must be more “reflective of what is going on.” What it comes down to is the fiscal regime of old versus the new. “The old is paid for, that is paid for,” he said, referring to the contracts governments had tied itself to. The TT government is on a learning curve, he said, and they are learning fast. He said it was no secret that in the past “oil companies took the money and ran,” noting that this was something to think about. Describing his company as a minnow in a big sea, Noval said he had worked hard to get the exploration licences. The Mayaro/ Guayaguayare blocks cover about 55, 000 acres some 20 miles southwest of Angostura. The company hopes to start drilling by June or July next year.