Home' Trinidad and Tobago Guardian : August 28th 2014 Contents AUGUST 2014 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
Houston-based Ryder Scott Consulting
Group will tomorrow reveal that this
country s proven natural gas reserves con-
tinues to decline for a fourth year running.
This as T&T produced more than a trillion
cubic feet of gas, but
there was no major discovery in 2013.
Well-placed sources in the Ministry
of Energy have confirmed that despite
increased activity in the upstream, proven natural gas
reserves have fallen.
The decline means that since the Kamla Persad-Bissessar
administration has come to power, there has been a constant
decline in natural gas reserves. In 2012 natural gas reserves
fell by 200 billion cubic feet per day, by two per cent in
2011 and seven per cent in 2010. In addition, crude pro-
duction has also fallen by 25 per cent in the same peri-
od.At the end of 2012, the proven reserves currently stoods
at 13,106 billion cubic feet, probable reserves at 6,142 bcf
and the possible reserves at 5,987 bcf with the un-risked
exploratory resources are 31,616 bcf.
The audit is a geological and engineering evaluation con-
ducted on the updated data set available at the end of each
year. The primary objective of the audit is to prepare a cer-
tified statement of this country s non-associated natural
gas reserves in the categories of proven, probable and pos-
sible, as well as to offer an independent expert assessment
of the exploration resources in accordance with accepted
Helena Inniss-King, former director of resource man-
agement in the Ministry of Energy, said she is not surprised
by the finding of a reduction in the country s proven
"Yes, because there have been no new gas discoveries
over the past year. There will be a rearrangement of the
numbers because there would have been movement of gas
from one reserve category to the next. All the drilling that
has taken place has been to backfill to ensure that companies
could maintain their deliverability of gas and ensure that
demand and supply are aligned."
Inniss-King said she did not feel the constant decline
in reserves will negatively impact people wanting to invest
in the downstream sector.
"Ryder Scott has often said that with respect to reserves,
it is a chicken and egg situation. Com-
panies don t go out exploring for gas
unless there are projects to which the
gas can be delivered. Exploration wells
cost in the region of US$100 million. Do you drill these
wells on the off chance that there will be projects? The
opposite has proven true in Trinidad. The gas drilling frenzy
of the 80s and 90s and into the next decade was due to
the fact that LNG was viable market for the gas."
She added, "I would think that one of the greatest incen-
tives to get exploration drilling for gas on track would be
the announcement of defined and agreed downstream proj-
ects. Even so, its not quite so simple, with gas reserves, you
just don t want it to sit there looking pretty or increasing
just for the sake of increasing. Venezuela) has reserves of
more than 100 tcf of gas, but what are they doing to monetise
it? By the time they are ready to bring it on stream, gas
maybe totally irrelevant to the scheme of things in the
Inniss-King said what downstream investors should look
at is the potential and the ability of T&T to attract exploration
companies to its upstream. Some of the gas blocks which
were given out in 2011 and 2012 are still to be drilled and
it is likely there will be substantial discoveries of gas in
some of these blocks: NCMA 2 and Block 5(d).
"There is also BP s OBC seismic, which was acquired on
its shelf acreage, which is already bearing fruit which is
already positively impacting on the reserves figures. I think
all you have to do is look at BP s posture and listen to their
president and you will see that the company is focusing
their efforts on their shelf acreage, which is gas-prone and
they would not be spending millions of dollars to restart
exploration efforts on the shelf if there was not a high prob-
ability of making substantial gas discoveries. I think potential
investors would look at all of this and be encouraged."
Britain s oil industry is facing the threat of a cascade of North Sea rig
closures, unless ageing platforms can urgently source more gas to help
squeeze out the remaining barrels.
The potential threat to oil revenues looms as Scotland prepares to vote
in September s independence referendum; a debate in which oil production
forecasts have become a political football.
The affected Northern North Sea (NNS) is a very mature part of the
basin where producers are trapped in a vicious circle of falling output,
rising costs to patch up ageing platforms, and dwindling power supplies.
To lift more oil from these depleted reservoirs, producers need to inject
vast quantities of water; a power intensive process that requires a reliable
source of energy, known as fuel gas.
Some platforms are not able to generate enough of their own fuel so
have to try and import the shortfall from neighbors, but the overall net
position in a key part of the NNS will go negative as early as 2016. This
could force the early abandonment of rigs, with the loss of critical platform
hubs sounding the death knell for dependent fields.
"We may be near a production efficiency precipice," said Calum McGregor,
economics and joint venture manager at Taqa Bratani, speaking at Oil &
Gas UK s Aberdeen conference earlier this summer. "Because of the inter-
connected nature of this area, there is a domino effect that kicks in."
McGregor presented findings from a cross-operator work group he co-
chairs which seeks to improve co-operation amongst producers focused
on the NNS "Rejuvenation Area". This includes Taqa s Cormorant and
BP s Magnus hubs, which will leave the most stranded assets if they shut
The fall in production efficiency means that time is running out. The
NNS Rejuvenation Area is now producing at just seven per cent of its
peak, compared with 29 per cent for the UK Continental Shelf as a whole.
To arrest this decline, producers need to lay their hands on fresh power
supplies. Under government auspices, a Gas Work Group is looking at
ways to source, transport and deliver reliable fuel gas. It is due to report
back by the end of October.
Possible solutions include installing a power ring main, rationalising
power generation equipment, bringing fuel gas in by tanker, sacrificial
decommissioning and new pipelines.
"We ve got to get this fixed---a very small amount of gas could make
a lot of difference to this area," McGregor said. "If you can improve water
injection then it delivers a significant incremental uptick in barrels."
Currently, small producers trying to access gas find it difficult because
there is not much upside for the seller.
"An individual platform doesn t need large volumes of gas for fuel,
especially when you can couple it with your own production, so that
means you are immaterial to the operator," said Ian Sharp, chief operating
officer at Fairfield Energy, also speaking at the Aberdeen conference.
Producers say the terms on which they are offered gas can be unhelpful.
Sellers may offer to make "reasonable endeavors" to supply another
platform, but if they fail to deliver, there is no penalty to pay.
"You can t always rely on the gas and power supply, even if you persuade
people to sell it to you," one engineer said, speaking on condition of
anonymity. "Reasonable endeavors means it could be turned off when
they like and even an hour s outage every three weeks can hinder your
As output has declined in the NNS, platforms have become increasingly
dependent on each other for fuel gas supplies and to spread fixed costs.
The leveraging effect of any one party withdrawing is getting bigger as
margins are squeezed. (Reuters)
UK oil output
out of juice
Proven natural gas reserves
on its 4th year of decline
Ryder Scott audit report:
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