Bringing home the oil booty

Williams comments came following the signing of a US$22 million production sharing contract between the Government, Primera Oil and Gas Ltd and the local subsidiary of US petrochemical giant Kerr McGee at the Hilton Trinidad.

That signing was the third in a series of PSCs signed last week by the Government and various energy companies. Government signed PSCs worth US$80 million with Petrotrin and Petro-Canada and then followed up with a PSC with EOG Resources Inc and Primera.

Asked about the significance of last week’s series of signings, Williams said, "This is just the end of the bid round and we hope that it will result in more reserves (oil and natural gas) in the country."

The Minister said the legislation to establish separate tax regimes for oil and gas was "pretty far along" but the fact they were not law yet did not mean the country was losing out on valuable revenue from the energy sector.

Williams explained that the current system of PSCs ensures that the country receives maximum benefits from the exploration and production activities currently undertaken by local and foreign oil companies in TT.

"What we have found that the production sharing contracts are quite progressive and quite aggressive. There is a sliding scale for volume and price. So we are actually getting a very significant sum at this time," Williams said.

As part of the Primera/Kerr McGee PSC, the Finance Ministry receives a signature bonus of US$1 million (payable within ten days of the effective date of the contract) while the Tertiary Education Ministry will benefit from an annual pledge of US$50,000 to the petroleum geosciences programme at the University of the West Indies.

Government will also benefit from sums of US$125,000 (prior to commercial discovery) increasing at six percent annually and US$150,000 (post commercial discovery) increasing at six percent annually, paid to the University of TT.

From the EOG/Primera PSC, Government obtained a US$3 million signature bonus in addition to the usual hefty contributions for administrative fees, training and research and development.

With the country already gaining significant socio-economic benefits from the PSC’s signed to date, the Minister hinted that these benefits will be further enhanced once the new oil and gas taxation regimes take effect. Williams reiterated that as Government seeks to make the most of the nation’s energy resources, it is looking beyond the direct financial returns from contractual arrangements with its private sector partners and enhancing local content is very much on the frontburner.

"The social and economic advantages to be realised from enhanced local participation, local content and local capability development are just two of the objectives of the Government of TT’s strategic plan for the energy sector and the reason we were determined to include it as a criterion in all new energy contracts," he said. Williams also disclosed that Government was very close to establishing a permanent local content committee for the energy sector and at the present time, its policy position is to ask foreign energy companies operating in TT to assist smaller local energy companies.

With respect to the Primera/Kerr McGee PSC, Williams described the entry of Kerr McGee into the local energy arena at this time as quite significant. Kerr McGee is one of the largest US-based energy and chemical companies with assets of more than US$14 billion and is regarded as one of the world’s premier independent oil and gas exploration companies. As of December 31, 2004, Kerr McGee’s total production from its global activities (US onshore, Gulf of Mexico, United Kingdom North Sea and China’s Bohai Bay) was 1,218 million barrels of oil equivalent (MM BOE) and the company’s 2005 daily production is projected to be in the range of 352,000 to 367,000 MM BOE (55 percent natural gas and 45 percent crude oil).

Kerr McGee TT Offshore Petroleum Ltd general manager Douglas Neese said TT has a "world-proven petroleum system" and Kerr McGee was very optimistic about the potential for "good discoveries" in TT. Neese said the company hopes to begin shooting 3D seismic surveys later this year in marine acreages off Trinidad’s east coast, drill two exploratory wells and was not preferential about whether it discovered oil or gas. "We’ll be happy with any type of economic fortune," he stated.

Neese stressed that Kerr McGee will conduct its business in TT in accordance with Government policies and ensure that its operations are safe and efficient.

Primera director Ramper-sad Motilal said his company’s joint venture with Kerr McGee was quite significant since it opened the door for Primera to venture into deepwater energy exploration which up to now has been the realm of foreign energy multinationals.

"Primera wants to be the first local oil company to successfully participate in deepwater exploration," Motilal said. He added that this objective was achievable given the vast experience which Kerr McGee has in the area of deepwater technology.

Motilal was optimistic that the PSC with Kerr McGee will derive maximum benefits for the country while dealing with the company on a fair and transparent basis.