Home' Trinidad and Tobago Guardian : March 31st 2016 Contents BG4 COVER STORY
BUSINESS GUARDIAN www.guardian.co.tt MARCH 31 • 2016
In 2010, which was a record year for
bpTT, its production was in the order
of an average of about 460,000 bar-
rels of oil equivalent per day because
all of the fields on which the company
had been working---Cannonball,
Cashima, Serrette, Savonette---came
onstream at the same time.
In 2016, bpTT s output is on average about
380,000 barrels of oil equivalent per day.
When it is commissioned, Juniper will add
a maximum of 100,000 barrels of oil equivalent
to bpTT s natural gas production. But Christie
is quick to point out that it is not simply a
question of adding Juniper s new production
to the current production in 2016 because the
company s natural gas output will continue
to decline until the third quarter of 2017, when
Juniper is commissioned.
"That s because there are no significant
bpTT fields that are coming on between now
He said bpTT now has three rigs in oper-
ation in T&T, one targeted at Juniper and two
at its existing fields.
"The hope is that with all of the drilling
that we are doing, we get some of the recovery.
But there is risk because if some of that does
not play out when we are drilling, then you
are in a worse situation. If it does play out,
you are in a better situation," he said.
Asked about bpTT s tax contribution to
the Government in 2016, in the context of
statements by Minister of Finance Colm Imbert
about the significant decline in energy revenue
this year, Christie opted first to provide some
He said that it is important to go back to
the conversations that bpTT had with the
Government before Juniper was sanctioned.
"There was a worry that we would not be
able to get Juniper sanctioned because of the
cost related to the platform, mainly as a result
of the fact that Juniper is in about 350 feet
of water, which is slightly deeper water and
higher cost. Therefore, the economics of
Juniper were not working.
"For several years, we were in discussions
with the Government to make Juniper an eco-
nomic project. A great deal of work was done
but unfortunately there was delay in getting
the sanction for Juniper."
While he made it clear that most of the
delay was during the administration of the
People s Partnership, Christie said he was not
ascribing blame because "trying to get the
right fiscal incentives took time and until that
was concluded, Juniper s sanction got delayed."
He said the delay in the PP government
agreeing to the tax incentives for developments
like Juniper, which eventually took place in
2014, pushed the platform s production of
natural gas out to the third quarter of 2017.
"This created a part of the problem men-
tioned earlier with the absence of production
and therefore the prevalence of a shortfall,"
said Christie, adding that what bpTT is doing
now is spending in manner that has been
incentivised by those tax changes.
"What Minister Imbert has alluded to with
regard to tax impact is actually a three-fold
impact: lower production (because investments
were missing); lower prices and the capital
recovery (tax incentives) portion. Roughly, we
see about a one-third impact of production,
prices and incentives on tax revenue.
"It s a long-winded way of saying that I
cannot give you a specific figure with regard
to bpTT s tax payments in 2016, but it is going
to be significantly lower than in previous years
mainly because of lower prices and production
(two-thirds) but also because of the capital
recovery (one-thirds) as a result of the con-
vergence of those factors at the same time."
He explained that the tax incentives agreed
to by the PP administration in 2014 were for
all developments aimed at reversing the decline
in T&T s natural gas production and they had
to be completed by the end of 2017.
"The incentives were put in place recognising
that there was a shortfall problem. The gov-
ernment wanted investments to occur to ensure
that the shortfall situation did not persist. In
a way, the tax incentives have worked because
at a time when prices are obviously very low
and investments are not occurring in other
jurisdictions, they are occurring here," said
the bpTT president.
In fact, he said the company s investments
in 2016 will be higher than in 2015, and in
2014, "when the price curve is going exactly
the other way," meaning bpTT is investing in
T&T when commodity prices are at multi-
"What s really important is that if the incen-
tives ceased to exist, for whatever reason, and
the investment stopped, then we will be having
this same conversation again in three years,
only worse, because you would not have the
investments made now to counteract the
investments when your decline is worse."
He pointed out that the commissioning of
Juniper would only ensure the additional nat-
ural gas production for two years, to the third
quarter of 2019, at which point the platform s
output would start to decline at its natural
rate if there is no additional investment.
"The field that we are targeting after Juniper
is Angelin and if the incentives are not there
for Angelin, then this is going to be a very
déjà vu-type of situation because the conver-
sations that we are having now about Juniper,
which did not occur fast enough, could play
out again for Angelin, and we would be right
back in a shortfall situation."
What does bpTT want?
In addressing the incentives that the Gov-
ernment needs to put in place to ensure that
bpTT does the investment necessary to prevent
a return to gas curtailment by the third quarter
of 2019, Christie said that it was extremely
important to emphasise that the company was
not asking for tax incentives"
"We are asking for something that is just
as important, which relates to policy. The tim-
ing here is extremely important. Two of our
significant contracts expire in 2018: the NGC
natural gas supply contract and the Atlantic
LNG Train 1 contract.
"If there is no clarity of policy with regard
to those significant contracts, then any investor,
not just us, would not have a basis for investing
because you are not sure what you are going
to get your returns from. You don t know
where the gas is going to go and at what price."
He explained that when BP does its eco-
nomic models: "There is an input of investment
to get an output of production, but that pro-
duction is only of value to us when we know
the price that we are going to get for that pro-
"The price that we get for that production
depends on the market it goes to and the price
we get in that market.
"And what s uncertain now, from where we
stand, is how is that going to play out post-
2018: How much gas is going through NGC
to Point Lisas for exports? How much will be
going through Atlantic? And what would be
the commercial terms for both NGC and for
He said all of those questions would be
answered by policy decisions taken by the
government concerning the policy on volume
allocation and the policy on rent distribu-
tion---both of which would be driven by what
is in the natural gas master plan.
According to Christie, the need for clarity
on policy is something that the government
is "acutely aware of because in the same way
that fiscal (delays) caused investments to dry
up, an absence of policy will cause investments
to dry up."
Adopting the analogy of a pie, the energy
executive said: "Before you get to the rent dis-
tribution in the pie, you have to decide on the
volume allocation or distribution in the pie:
How much of bpTT s gas is going to go to
NGC (for sale to electricity generators and
Point Lisas operators) and how much to LNG.
"Once the volume allocation is decided, or
in tandem with the volume allocation decision,
you also need to decide how the rent is going
to be distributed for each of those components.
How much of the rent stays with NGC and
how much goes to an offtaker, such as a
In terms of the volume allocation, at present
some 60 per cent of bpTT s natural gas goes
to LNG and 40 per cent to NGC, to be used
in electricity generation and for the Point Lisas
industries, he said.
"We are not advocating that that has to be
the split after the policy is done. In effect,
what we are saying is that we can make our
minds up once the policy is clear."
Asked if the current volume allocation works
for bpTT now, he said: "It works for us with
challenges because on the NGC side---some
40 per cent of bpTT s output---a large portion
of those volumes, are under fixed-price con-
tracts that were set at very low prices histor-
He estimated later in the interview that
about 60 per cent of the natural gas that bpTT
sells to NGC is under these low, fixed-price
contracts or about 24 per cent of its total sales.
"We are not complaining; that just happened
to be the time we did those contracts, which
were done at a time of low prices and they
"It means that we are not benefitting from
changes to ammonia or methanol prices.
"The contracts were done then for a variety
of reasons: one was that bpTT subsidises, by
and large, power (electricity) generation. We
were the earliest on the block, we were the
largest so we got the largest subsidy provider
to power generation."
Christie explained that bpTT has tranches
Juniper's output to decline by 2019
2009 ---bpTT begins talks with the
Government on tax incentives
for Juniper platform
---PNM administration signals higher
2010 ---bpTT's production peaks
---April, Gulf of Mexico oil spill disaster
causes BP to look seriously at the
safety of all its operations globally
2012 ---bpTT's natural gas output begins to
decline. First news of gas curtailment
2014 ---August, bpTT provides approval for
Juniper expenditure; to be
completed by third quarter 2017
2016 ---March, bpTT wants policy changes
by fourth quarter 2016, so that it can
start production from the Angelin
facilities in time for 2019
2017 ---Third quarter, Juniper expected to
2019 ---Juniper's production plateaus and
starts to decline
Continues on page 5
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