Home' Trinidad and Tobago Guardian : December 31st 2015 Contents As 2015 comes to an end,
the outlook for the local
energy sector over the
next 12 months appears
far more bearish than it
was at the end of 2014.
During the last 12 months, the local sec-
tor---which is a global price taker---has seen
the virtual collapse of crude oil prices while
natural gas prices remain lower than they
started in 2015. When this is added to the
12 per cent fall in natural gas production,
it creates a cocktail that is sure to challenge
the confidence of the most optimistic.
On Tuesday, Brent crude oil was trading
at US$37.67 a barrel, which is down by
US$48.42 from its average price in January
this year and down from US$111.87 in June
2014. Meanwhile, natural gas prices in the
Far East and Europe have also fallen even
though they have not declined to the same
extent as crude prices.
The fall in commodity prices will signif-
icantly hurt the government s coffers with
lower revenue in taxes and royalty. In addi-
tion, the lower prices means that oil com-
panies are not paying the Petroleum Levy
which, in 2013, was in excess of $3 billion.
In an interview with the Business
Guardian, the chief executive officer of the
Energy Chamber, Dr Thackwray Driver,
identified low global commodity prices as
a major challenge for the oil, gas and petro-
chemical sectors in T&T.
On the issue of oil production, Dr Driver
said while it has been stabilised it has done
so at significantly lower levels. "Oil pro-
duction has stabilised but at a historically
low level, after a long period of decline. Oil
production could easily slip again if there
are cuts to drilling programmes. The energy
sector, therefore, faces a very serious chal-
lenge of trying to increasing production
during a period of low commodity prices."
Crude production as of October 2015
averaged 79,455 barrels of oil per day (bo/d),
having started in January at 83,888 bo/d.
BP s natural gas production in T&T has
fallen by almost 20 per cent during the
course of 2015, leading to significant natural
gas curtailment and impacting LNG,
methanol and ammonia production. Accord-
ing to statistics from the Ministry of Energy,
between January and October 2015, bpTT s
daily natural gas production fell from 2.181
bcf/d to 1.760bcf/d or a fall of 421mmcf/d.
The company refused to say what has
caused the precipitous drop in production.
In a one paragraph response, bpTT said:
"In line with regular business activity, there
are, from time to time, normal operating
activities that may have a short-term impact
on production such as infrastructural work,
rig moves, heavy lifts or delays on the drilling
programme. We strive, as far as possible,
to work with all stakeholders including the
government and downstream, to co-ordinate
these activities to mitigate impact on their
The shortfall has meant a 15 per cent
curtailment in methanol and ammonia pro-
duction and has also significantly hurt
Atlantic LNG and when combined with a
30 per cent decline natural gas from BGTT
down to 674 mmcf/d from 975mmcf/d. It
has meant that T&T s natural gas produc-
tion has now fallen from 4.117 bcf/d to
3.474bcf/d or a decline of 0.643 bcf/d.
Figures from the Ministry of Energy and
Energy Industries show that the country s
two other major natural gas producers---
EOG Resources and BHP Billiton---actually
increased their production during the same
period of time but their increases were so
small it had little chance of offsetting the
massive declines in production from bpTT
The curtailment has hurt government s
coffers in terms of taxes on Atlantic LNG,
net back in gas exports and royalties on
gas companies and taxes on the petro-
Dr Driver said while the Energy Chamber
does not know if this situation will improve
next year, investment was required in the
"Increased gas production can only come
about from increased investment in the
upstream, especially in drilling activity.
We, therefore, need a policy environment
that encourages investment into new gas
production. The low-price environment
and the global cuts in capital expenditure
make this an even more difficult task to
The natural gas curtailment comes as
Ryder Scott also points to a continued fall
in the country s proven reserves.
The findings of the 2014 Ryder Scott
report showed that T&T s proved natural
gas reserves fell 6.0 per cent to 11.5 tcf at
year end 2014 compared with 12.2 tcf at
year end 2013.
The Ryder Scott s survey showed a slight
decrease in probable reserves to 5.47 tcf in
2014 from 5.53 tcf in 2013. Possible reserves
also were down, falling to 5.7 tcf at yearend
2014 vs. 6.1 tcf at year end 2013.
When combined, the country s 3P
reserves are 22.7 tcf as of yearend 2014
compared with 23.9 tcf at year end 2013.
Ryder Scott s survey also revealed that
in the last 12 years, there has been a steady
decline in the country s proved reserves by
an average of nearly 1 tcf/year.
In 2002, proved reserves were 20.8 tcf,
probable were 8.3 tcf, and possible were
6.1 tcf for a total 3P of 35.1 tcf.
While Ryder Scott found that 3P reserves
continue to fall, the nation s exploration
potential jumped by nearly 4 tcf to 43.8
tcf at year end 2014. Sources say this is
likely due to the results from bpTT s Ocean
Bottom Cable survey, which has reportedly
given the company sharper images of the
subsurface and, therefore, made it very
optimistic of far more gas in the Columbus
basin than previously thought.
The 2014 exploration potential is also
14 tcf more than it was in 2002 and perhaps
reflects how technology is showing far
more possible gas accumulations.
While the outlook is, at best, gloomy for
2016, there is a glimmer of hope as BHP
Billiton is expected to drill its first deep
water well in T&T.
Dr Driver said this provides significant
opportunities for local service providers.
"There are significant opportunities for
Trinidad-based service providers to support
deep-water drilling, both in T&T and
Guyana. During an exploration campaign
the opportunities are likely to be limited
to a small number of experienced compa-
nies, but further opportunities will become
available if the project eventually moves
into a development stage. Local companies
need to plan for this possibility and build
the necessary competency. The Govern-
ment should have a strategy in place to
assist in this process," said Dr Driver.
BG8 ENERGY: YEAR IN REVIEW
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 31 • 2015
Saudi Arabia s planned cuts in spending and energy
subsidies signal that the world s largest crude exporter
is bracing for a prolonged period of low oil prices.
The OPEC heavyweight shows no signs of wavering
in the long-term oil strategy it has orchestrated since
last year. Instead, it appears willing to continue tol-
erating cheap crude to defend market share and wait
for the market to balance without cutting supplies,
oil sources and analysts say.
In one of the strongest signals that the kingdom
will stay the course despite the impact on its finances,
Saudi Aramco s chairman Khalid al-Falih said it could
"We see the market balancing sometime in 2016,
we see demand ultimately exceeding supply and
soaking up a lot of the excess inventory and prices
in due course will respond regardless of when and
by how much," Falih told a news conference late on
Monday detailing next year s budget.
"Saudi Arabia more than anyone else has the capac-
ity to wait out the market until this balancing takes
place," he said.
Analysts said the plans announced on Monday to
shrink a record state budget deficit with spending
cuts, reforms to energy subsidies and a drive to raise
revenues from taxes and privatisation showed Riyadh
was expecting lower revenues.
"We don t see any changes to Saudi Arabia s oil
policy---in the context of oil production," said Amrita
Sen, chief oil analyst at consultancy Energy Aspects.
"The budget changes suggest they are expecting
oil prices to stay low for some time and the reforms
are a small step towards addressing that."
The 2016 budget and reforms announcements
marked the biggest shake-up to economic policy in
the kingdom for over a decade and aimed to cut the
government deficit to 326 billion riyals, down from
367 billion riyals or 15 per cent of gross domestic
product in 2015.
Next year s budget projects spending of 840 billion
riyals, down from 975 billion riyals spent in 2015.
The government also said it was hiking prices for
fuels, water and electricity as well as gas feedstock
used by industry, as part of politically sensitive subsidy
"Saudi Arabia can either spend its way out of the
current scenario or start belt-tightening. In the past
the country has spent lavishly on health, education
and infrastructure in difficult times knowing that oil
prices will be supportive," said Asim Bakhtiar, head
of research and investment advisory, Saudi Fransi
"If oil has entered a down cycle then belt-tightening
Falih, who is also the health minister, became chair-
man of Aramco, the world s biggest state energy firm,
earlier this year after more than 30 years in the com-
pany. As one of one of a handful of Saudi figures
whose views are closely watched by traders and ana-
lysts for any insight into the kingdom s oil thinking,
Falih has long been considered a possible successor
to Saudi oil minister Ali al-Naimi.
His appearance at the news conference with two
other ministers, during which he shared his views
on oil prices and market assessment, was seen as a
possible signal he could be named oil minister when
Naimi, 80, eventually retires.
The Organisation of the Petroleum Exporting Coun-
tries (OPEC) rolled over its year-long strategy of
pumping at will in its December 4 meeting, raising
the stakes in its survival-of-the-fittest market strategy.
Falih said the policy had borne fruit.
"Over the last year we have seen the down cycle
in the oil markets have a significant impact on both
supply and demand. Supply has plateaued in North
America and started declining by significant amounts
and we expect that to continue or perhaps accelerate
in 2016," he said.
Lower prices, lower output
T&T's energy sector in review
shake-up shows it is
planning for cheap oil
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