Some light from the gas fields

The project would provide much needed new supplies that could assist in reducing the persistent shortages of gas.

In addition, there are other developments which we must also be aware of as we look and listen to plans for the energy sector.

BPTT started offshore drilling in the Amherstia natural gas field in the Columbus basin off the southeast coast of the country in October of this year. The company plans to drill a minimum of three development wells which are anticipated to result in 6.6mcm/d of production.

While the signing of the agreement and BPTT’s drilling campaign are good news, it is important to remember that this country’s LNG exports declined by an estimated 19.9 percent year-on-year (y-o-y) through June.

This arose from the continued production shortfalls in the country, which fell by an estimated 13.8 percent y-o-y for the month.

Although exports have fallen, we should note that the country’s first cargo that passed through the newly-expanded Panama Canal to Mexico’s Pacific coast in late July.

If as is anticipated, there is an increase in gas production from the start of 2017, the hope is that there will be a rebound in economic growth within the country. Even if growth is experienced over the coming years, the Business Monitor International (BMI) forecasts it will remain constrained, averaging 2.7 percent growth between 2017 and 2020. It has to be noted that if growth does restart, it will be from a GDP figure that is much lower than when the recession started.

The forecast above is premised on the view that the energy sector faces a relatively weak production outlook. While historically investment into non-energy sectors has been poor, at best, and if such investment is to be nurtured, the government will have to address the poor business environment. Additionally, ongoing structural adjustments to address fiscal and current account imbalances will negatively affect public and private consumption sentiment.

By now, despite this news of the signed agreement between Trinidad and Tobago and Venezuela, there are a number of questions that arise regarding the energy sector - what are the strengths and weaknesses? Are there are any threats to the sector, and what, if any, opportunities can be exploited? There are indeed strengths of the energy sector that jump out which include relatively large reserves of natural gas. The Energy Information Administration (EIA) reported that reserves declined to 336bcm in 2015 from 367bcm the previous year. However, according to a 2013 analysis by consultants Ryder Scott, Trinidad and Tobago had estimated 3P (the sum of proved, probable and possible reserve) reserves of 650bcm, suggesting the country has sizable untapped hydrocarbons potential.

Overall resource potential increased significantly by 252bcm to reach 1.12trn cubic metres (tcm).

The findings included the encouraging activity on acreage held by Niko Resources and Trinity, where 3D data suggested an additional 252bcm could be discovered in Block NCMA 2 and 3 as well as Block 4B. This appears to provide hope that there is upside potential. We need to note that the audit did not include the resources that may be available in the recently granted deep-water blocks, which some estimates place up to 868bcm.

Other strengths include that the country has well developed liquefied natural gas (LNG) infrastructure and expertise as well as it is a major supplier of refined products in the region.

There are a number of weaknesses we need to be mindful of. Although we have earlier mentioned the 3P reserves, the reality is that new developments are possibly going to be located in more technically challenging deep water.

In addition, there is also the situation that recent bidding rounds have failed to attract interest. The country also faces the fact that shortages of gas have affected major industries and these shortages are expected to persist to at least 2017 or later, though some officials have said they may not be resolved until 2020.

Trinidad and Tobago’s oil and gas sector experiences these weaknesses but also faces threats.

These include a lower demand for our gas from rising gas production in North America, as well as increased competition from those new LNG producers around the world.

If there is continued increase in domestic energy demand, this will undermine exports and thus affect revenues and foreign reserves earnings. There is also the serious threat from the decline of oilindexed LNG pricing which could see lower gas prices and revenues.

While as a mature society we must consider such threats, we also must identify opportunities which we must seize.

These include the large areas of under-explored deep-water acreage with encouraging estimates of sizable untapped reserves.

We therefore must look to increase our incentives, which should involve favourable fiscal terms and attractive licenses to assist in attracting investor interest. The opening of the expanded Panama Canal in June 2016 enables us to access to new LNG export markets. This we must explore and exploit.

Although oil and gas reserves have fallen, the signed agreement and potential shown in our 3 p reserves offer hope. Let us use the cushion that can be provided to diversify the economy.