Home' Trinidad and Tobago Guardian : June 8th 2017 Contents The recent announcement of
a discovery of 2tcf of gas is
welcome news for T&T but I
suggest we keep it in perspec-
tive before we give anyone the
impression that our gas woes
Trinidad's gas production is currently about
3.3 bcfd, while demand is about 4.4 bcfd. If
our fields were able to produce 4.4 bcfd we
would be producing 1.6 tcf per year, so the
"new" reserves are equivalent to 1.22 years
of additional life.
Of course, hydrocarbons do not follow such
simple rules. Gas reservoirs come on stream
and a particular field builds up the production
rate as wells are put on production one by one.
So the chart of gas rate looks like a steep up-
ward slope followed by a long declining slope.
Traditionally, gas sales used to be managed
by controlling the rate so there was a long pla-
teau of stable production that equalled the sum
of gas contracts in force. It seems we have long
left that comfy situation and are scrambling
for any gas we can get then produce it "bat out
of hell" then hope to find some new reservoir
so we can get it on production before decline
starts all over again.
Now consider there is not one single gas
reservoir. There are many of them. Some pro-
ducing, lots of different start dates, some being
developed, some not yet fully explored so a
long way from production. (I put the quotation
marks above because I do not believe this new
find is, in fact, new.)
There are lots of considerations when mak-
ing a new gas sales contract. One of them is
the urgency. Right now we are losing revenue,
jobs and foreign exchange because we simply
don't have the production capacity to satisfy
Having lost the steel industry for economic
reasons, we have already shut down two meth-
anol and two urea plants for lack of gas, and
the decline continues.
We are frantically negotiating with the Ven-
ezuelan government for some of their gas. We
have been doing that for many years. I predict
many more, and when we get it, remember it's
their gas, their royalty, their sales contract,
their petroleum tax, so apart from keeping a
few jobs, not much benefit to us.
But negotiating new gas contracts when we
are desperate for gas does not result in the best
deal for T&T. Far better to have conditions in
the licence that gas contracts must be nego-
tiated well in advance of the expiry of the old
one, penalties for failure to deliver, a competent
NGC that can produce a contract in time, and
a policy that rates will be controlled to give a
We appear to be determined to maintain the
shortage of gas for ever more, so will always be
at the mercy of producers when negotiating
a sales contract.
But the truth is despite the producers claims
that they will only do the projects earning the
best returns, Messrs. BP, EOG, Shell, BHP
Billiton, De Novo etc actually have only one
customer in T&T---and that's NGC. And they
have some big investments that they would
like to remain profitable.
My guess is the future will look something
like the table:
By natural decline I expect the existing fields
to have about reduced to about 3 bcfd by the
end of 2017.
If we add the additional production rates
from the table, maybe we will have 4 bcfd. So
we still will not have satisfied demand. There
are no doubt other smaller fields to be devel-
oped which will be announced from time to
time and there is that big BHP/bpTT find way
out east in the ultra deep water that may one
day be worth developing, if a world shortage
ever occurs again and prices rise.
Remember all these new fields start to de-
cline shortly after their onstream date and de-
cline from the "old" fields becomes steeper
with on shore compression.
It appears that there is no possibility of a
20-year plateau where we have surplus gas rate
potential to cover upstream maintenance or
unplanned events, and clearly we will continue
to be in the unfortunate bargaining position
of a buyer who is desperate for gas. So the law
suits will rage from methanol and ammonia
producers who can't get enough gas.
In view of all this, how is it we have Massy/
Mitsubishi building a new plant while others
are closing down for lack of gas?
I have raised this question with many em-
inent persons in the industry, and all the in-
dependent senators with no one taking up
the challenge and demanding answers to the
question. It seems we are destined to be forever
begging, coaxing and giving away incentives
to try to convince our upstream producers to
go look for and develop new reserves, then lose
any benefit due to our weak position in gas
Do we really have a gas strategy? Didn't we
just do a Gas Master Plan?
JUNE 8 • 2017 guardian.co.tt BUSINESS GUARDIAN
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Still nursing a dependency syndrome
It is said that to diversify an economy, say from being
a plantation, what is needed is a crisis and a political
leader with a vision for its reconstruction and the
determination to get it done.
In the minds of this government it appears that
the current recession is/was just an interlude before
we find more petroleum and the prices in the world market
turned up again. At worse, we were told to tighten our belts.
Hence, the management of the economy was simply to keep
the on-shore ticking over until such time: by selling assets,
borrowing, small reductions in subsidies and tax increases and
drawdowns from the HSF and foreign reserves with a negligible
depreciation of the TT dollar.
But the Trini-God has come to the rescue, or did she?
BpTT has found 2tcf of natural gas along with 590 cuft/day
from Juniper this year and another 690cuft/day from Angelin
in the first quarter of 2019.
The exploration technology has improved such that the
petroleum locked away from sight has now become visible
given the new seismic technologies. The earth has reopened
her resources to our foreign investors who are promising us
the sought after billions of investment locally along with and
subject to the collateral incentives.
The Barbados God has not been so generous to the Bajans.
The Barbados economy is similar to ours in that it depends
mainly on one product, tourism, to bring in the foreign exchange
that is the lifeblood of a small open economy that must import
almost all that they need to exist at a tolerable standard of living.
DeLisle Worrell, the ex-Governor of the Barbados Central
Bank, is on record as recommending that the aggregate demand
has to be reduced in Barbados to match the dwindling supply
of foreign exchange and its reserves.
The Minister of Finance of Barbados has, at last, recognised
that he cannot continue printing money even to keep some
economic activity going.
Hence the recent budget of that country just read, includes
measures to severely reduce aggregate demand; increase of
the levy from 2.0 per cent to 10 per cent on all imports and
domestic production in addition to VAT, all foreign exchange
transactions will accrue a tax of 2.o per cent, gasolene and
diesel prices are to increase, improvement in tax collection to
include self-employed, sole trader, artisans and sale of assets
(the Hilton Hotel).
At least Barbados recognises it is in a crisis and it has moved
to cut demand in the country and has chosen fiscal means
instead of a devaluation of the Bd$. However, the opposition
leader, Mia Mottley, says that these fiscal measures have in
effect devalued the Bd$.
Diversification in our plantation economy is about trying
to free ourselves from the dependence on the rents from the
commodity sector, from the off shore. Hence living it up in the
boom and managing to adjust during the bust does nothing
to free the economy from this dependence. Yet, escape from
this phenomenon requires an integrated effort among the gov-
ernment, a private sector that can adapt and the knowledge,
This is the only way to create a sustainable economy as ar-
ticulated first by Schumpeter, through Porter then Etzkowitz,
the last in his theory of the Triple Helix.
In the interim, it is possible to compete with other underde-
veloped and low-skilled nations by offering incentives to the
developed world to provide off-shore services, ie competing
on our comparative advantages.
We have indeed been actively pursuing this option via,
Tamana and Cove Parks, the International Financial Centre.
Further, we hear a minister of the last People's Partnership
government talking about embracing the green economy and,
in particular, a position of the current prime minister in en-
couraging the use of green energy; solar cells, wind, etc. These
may indeed reduce our production of greenhouse gases, but
they do nothing to diversify the economy in the context of
providing competitive exports.
Asking a Chilean university to help our UTT is at best a waste
of time, until we have an innovation system set up in which
industrial activity for export can be driven by acquired and
created knowledge, and financed by our savings.
Building such an innovation system was mentioned in the
PNM's Vision 2020.
The implementation of such a system was started under the
PP government which was dropped after ministerial chang-
es and replaced by, at best, serendipity- the i2i programme,
business incubators and whatever growth poles were, with
the celebrated liming spot, the Chaguramas boardwalk, not
to mentioned the zip line.
Vision 2030 again mentions a national innovation system
though the immediate interest of this government seems to
be about resuscitating the energy sector, the generator of the
traditional rents and, lately, facilitating the Chinese attempt
to expand its global trade network to Latin America with the
hope that T&T could be China's gateway into those countries.
Mary K King
Where's our gas strategy?
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