Critical times ahead for energy sector

Marking his first week in the post on Tuesday, Khan acknowledged that government was facing the “perfect storm” regarding the energy sector, a trifecta of low energy production, low commodity prices and an inability to match domestic supply with demand for natural gas.

In fact, Khan identified resolving the gas curtailment issue as his number one priority, during his speech as the keynote speaker at AmCham’s HSSE 20th anniversary conference.

“There is a one bcf deficit between current supply and official demand.

To compound this matter, with the reduction in supply on the upstream side, there is now a major conflict with regard to allocation,” said Khan.

His concerns were echoed by Nigel Darlow, the Chief Executive Officer of Atlantic.

“Atlantic is suffering badly from big supply shortages on a scale that we have never experienced before. In 2016, Atlantic has suffered over 30 per cent gas supply shortage,” Darlow said.

The Atlantic CEO projected that 2017 was likely to be worse, with predictions of shortages ranging up to 35 per cent. Khan’s solution is to incentivise the upstream producers to increase supply, though he did not say what form these incentives would take. He also revealed that the ministry was in talks with BP, Shell and BHP Billiton in terms of supplying more gas. He also said talks continued with Venezuela to finalise a cross border initiative to bring gas from that country.

The minister also said the “precipitous” drop in oil production was another item engaging the ministry’s attention. According to Khan, oil production in TT has dropped from 270,000 barrels per day in 1977, to 100,000 barrels per day in 2010, to 66,000 barrels per day currently.

“To boost oil production, there is no getting around dealing with Petrotrin as an issue,” declared Khan.

He acknowledged that Petrotrin was struggling with a number of problems including its massive debt profile versus small margins after primary upgrades, asset integrity and aging infrastructure and a lack of investment capital.

Khan said Petrotrin’s problems were further underscored by the fact that there could be no boosting of production without investment.

Low commodity prices, the third issue the new energy minister identified as a priority, was not helped by what he described as government’s “generous write offs” to oil companies.

He said while the situation appeared grim, as a geologist, he was an eternal optimist.

“The challenges we face are not insurmountable,” said Khan.

Khan said the country had all the resources it needed such as the presence of some of the world’s premier oil and gas firms, a large state energy sector including Petrotrin and NGC, stakeholders such as the professional bodies and the OWTU and that together, these could come together to draft solutions to see the country through this difficult period.