Home' Trinidad and Tobago Guardian : January 15th 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 2015 • WEEK THREE
Argentina s Chubut province, the country s
largest oil exporter, is spearheading talks with
peers, the federal government and crude producers
on rules to help the country brace for prices below
US$50 a barrel.
Chubut Governor Martin Buzzi, who heads the
oil provincial group known as OFEPHI, initiated
talks after the province lowered royalty fees paid
by producers yesterday, Ezequiel Cufre, Chubut s
oil minister, said in a telephone interview.
Chubut is being hurt by lower oil prices more
than other Argentine provinces, such as Neuquen,
home to the Vaca Muerta shale formation, because
it exports the most crude.
Still, Cufre said all provinces need to seek solu-
tions amid expectations for Brent to hover around
US$45 a barrel for the next few months.
"We need to come up with new ideas as in this
price scenario nobody will be an island," Cufre
said in a phone interview from Buenos Aires,
where he is holding talks with federal authorities
and other provincial counterparts. "From one
month to the next our sales were cut in half."
The province saw its export price slide 47 per
cent to US$52.22 a barrel, based on last year s
average price for Brent oil, the international bench-
mark used by Argentina.
In Argentina, oil prices are set and regulated
by the federal government. Starting January 1,
regulators set the price for Medanito crude at
US$77 a barrel, down from US$83.90 in December
and Escalante, which is produced in Chubut, at
US$67 a barrel, down from US$74.
To encourage production, Chubut lowered roy-
alties paid by producers yesterday. Oil companies
that increase output from 2014 will pay reduced
royalty payments, while new projects will pay a
royalty rate of 7.5 per cent, down from the current
15 per cent, Cufre said.
The cuts will be made on a graduated basis in
proportion to the amount of increased production,
Chubut is making the offer to Pan American
Energy, which operates Cerro Dragon, the coun-
try s biggest oil field, and other producers such
as YPF SA and Tecpetrol SA to help keep daily
crude exports at 30,000 cubic meters a day
(188,694 barrels). An average 120,000 cubic meters
a day was produced last year in Chubut.
Brazil s state-run oil company says it failed to reach
its year-end production target even though its daily
oil output increased 5.3 percent in 2014.
The oil firm Petrobras said in a statement late
Monday that last year s daily output was about two
million barrels compared with 1.9 million barrels in
In November, the company reduced its 2014 pro-
duction increase projections from 7.5 per cent to
between 5.5 and 6 per cent because of delays in the
construction and delivery of offshore platforms,
licensing processes and the connection of some wells.
The reduced output figures come amid a probe by
prosecutors into allegations of the company s alleged
involvement in a multibillion dollar kickback, inflated
contracts and bribery scheme. AP
The Government should
not be afraid to sign addi-
tional gas contracts for
projects on the basis of
the present gas curtail-
ment being faced by the
downstream and mid-
Helena Innis, former director of resource
management at the Ministry of Energy, told
the Business Guardian that the current gas
shortage has nothing to do with the amount
of gas that T&T can produce but rather
with suppliers only being prepared to pro-
duce enough gas to meet their contracted
"The gas supply situation will not improve
the way the country seems to want it to
because every supplier is going to ensure
they supply at the quantities contracted for
by the NGC and no more. Therefore any
unforeseen circumstance or even those pre-
dicted will result in a shortfall of supply to
Innis, who now works as an energy con-
sultant, added: "The gas shortages being
experienced have nothing to do with the
gas that is in the ground. It is to do with
what can be currently delivered. I am sure
that should the Government announce it is
within signing distance of having a new
project, you would find the upstream sup-
pliers fighting to be the first to supply and
therefore going after the gas in the ground."
Over the last four years the natural gas
shortage at the Point Lisas Industrial Estate
has cost the country billions of dollars in
tax revenues and the companies billions of
dollars in lost revenue.
In fact, the situation has become so bad
that the Point Lisas executives have been
forced to pen two letters to the Minister of
Energy complaining that the gas shortages
are hurting their businesses, estimating that
it has cost them $10 billion in four years.
The situation has become increasingly
contentious with Energy Minister Kevin
Ramnarine, accusing the executives of play-
ing politics on the issue. The shortage is
also no longer being blamed on bpTT s
maintenance schedule and the minister has
now talked about the coming online of the
Starfish and Juniper platforms as the solution
even though both BP and BG say the projects
are, in the main, to replace gas lost during
the natural decline in production.
In addition, it is expected that later this
month the consortium of Japanese firm
Mitsubishi and Massy Group will announce
a final investment decision to build a
methanol plant in La Brea which would
require additional gas.
Innis said the solution to the current gas
situation lies with the NGC as it needs to
weigh its contractual agreements careful-
"Should the NGC contract for more gas
with the current suppliers, it could find
itself, in times when the downstreamers are
offline or if there is a cut in downstream
production for whatever reason, holding the
take-or-pay bag. The answer may lie in gas
storage, if this is not too expensive an option.
The answers are not simple, a solution needs
to be arrived at in which the objectives of
upstream, midstream, downstream and the
Government are realised. Until that happens,
the gas supply situation will remain as it
is."Innis said that while the gas curtailment
issues are not yet hurting the country s rep-
utation, the situation cannot be allowed to
continue in the long run.
"Our reputation as a reliable supplier will
suffer in the long run if the situation con-
tinues as is, but for now I think people will
adopt a wait-and-see attitude."
for US$45 crude
Brazil's Petrobras fails to
meet 2014 output target
Sign more gas contracts
The gas shortages being experienced have nothing to do with the gas that is
in the ground. It is to do with what can be currently delivered.
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