Home' Trinidad and Tobago Guardian : June 20th 2013 Contents JUNE 2013 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG11
This is a process that the Ministry of Energy has
conducted now for three decades. It is one of the
reasons why this country is highly regarded for its
governance of its hydrocarbon resources. I want to
add, too, that we continue on the road to EITI com-
pliance and we recently signed an MOU with all the
major upstream companies in T&T on the principles
With the execution of these four PSCs, BHP Billiton
is committed to a total investment of approximately
US$565 million for the first exploration phase and a
further US$459 million over the optional phases.
This means that the investment here today is, at
least, US$565 million and, at most, US$1024 million.
That is a significant investment and it demonstrates
BHP's desire to stay and to expand their presence in
Under the PSC, BHP is committed to a Minimum
Exploration Work Programme based on the proposals
put forward in the company's bid submissions. Each
PSC includes provision for cost recovery and the
sharing of production. BHP is also committed to sev-
eral financial obligations that include payments for
administrative charges, training contributions, research
and development contributions, technical
assistance/equipment bonuses, production bonuses
The committed Minimum Work Programme
involves the acquisition of approximately 5,330 square
kilometres of 3D seismic and the drilling of six deep-
water exploration wells. Preliminary estimates of the
combined unrisked natural gas resource potential of
these blocks are in the range 2.4-23.6 trillion cubic
feet (tcf) and unrisked crude oil resources are in the
range 428-4,200 million barrels of oil. That is 4.2
billion barrels of oil.
I would like us to consider the gravity of the
moment. The signing here today has enormous eco-
nomic potential. I would venture to say that what
we are signing here today has the potential to radically
reshape the economic landscape of this country in
This signing is a significant achievement for the
Government and the nation as we seek to increase
oil and gas revenues, the main contributor to our
economic development. The Ministry of Energy and
Energy Affairs, once again, looks forward to partnering
with BHP Billiton to enhance the energy security of
this country for this generation and the ones to come.
Following on the heels of the 2012 deepwater, on
May 16, 2013, we launched the onshore bid round.
This is for three blocks on land in south Trinidad.
This bid round has attracted significant interest an
indication of which is the fact that we have sold ten
data packages thus far at a price of US$40,000 per
package. This bid round closes on August 30.
I will shortly take to Cabinet the draft Competitive
Bidding Order to give effect to the 2013 deepwater
bid round. Interest in this is good. We had a roadshow
last week in Houston and will conduct one next week
in London at the T&T High Commission. Interest
in this is also high as evidenced by the fact that we
hosted 75 persons in Houston last week. We are also
considering a shallow/average water bid round for
early 2014. This will mop up all the open acreage
that remains in the shallow and average depth water.
T&T's upstream sector is in a period of heightened
activity. There are currently six rigs working in our
waters and there are discussions to bring in two more
rigs. We are also encouraged by what we have seen
thus far from BP's OBC 3D seismic.
So these are busy times for the MEEA. In closing,
I would like to put on record my sincere thanks to
the Attorney General, Senator Anand Ramlogan, SC,
and the officers of his ministry. Without their timely
input, we would not be here today.
In the last two years, I can say that our excellent
relationships with both the Ministry of Finance and
the Office of the Attorney General have contributed
to greater efficiency for the energy sector. I would
note that the entire process took 14 months; from
the opening of the bid round in April 2012 to the
signing here today. This is an improvement over the
previous deepwater bid round by some two months
and a vast improvement on what obtained years ago
when the process took some two years.
Let me also recognise the work of the Legal depart-
ment of the Ministry of Energy as well as the Resource
Management Department. I would also like to recog-
nise the leadership of Vincent Pereira, who has been
a great leader for his company and a patriot of this
What is cost recovery?
Cost recovery is a mechanism that is used the
world over in PSCs for the oil and gas industry. It
has been part of the PSC environment in T&T since
the 1990s. It is also used in other industries such as
agriculture. It allows the operator (investor) to recover
his capital in a structured manner against revenue.
The rate of cost recovery in T&T refects the risk. In
T&T's deepwater, a cost recovery rate of 80 per cent
(the highest rate) applies.
A simple example is if an operator spends 200
million in capex to develop a field and his revenue
for year one is 100 million he is allowed to recover
80 million of his capex (or 80 per cent of 100 million)
in year one. The balance of capex to be recovered is
now 120 million. In year two if his revenue is again
100 million, he can recover another 80 million, leaving
a balance of 40 million in the capex pool to be recov-
ered in year three.
Eventually, the capex pool is diminished. What the
increased rate does is allow the operators to recover
their capex faster, thus enhancing the overall NPV.
This has a direct bearing on the expected monetary
value (EMV) calculation, which is a key metric used
in decision analysis in the oil and gas industry.
Colombia's future gas exports in
the form of LNG will incentivise
further exploration and development
of the country's gas reserves, said
Eduardo Lima, senior VP of project
development for Pacific Rubiales
Energy, at BNamericas' Seventh
Andean Energy Summit in Carta-
Under Colombia's regulatory
framework, gas export permits are
authorised as long as there are
reserves to satisfy demand for at
least eight years. Current reserves
are certified by the mines and energy
ministry for 14 years, but reserves
have been dwindling, creating a
need for investment in exploration.
Development of Pacific Rubiales'
500,000t/y floating LNG liquefac-
tion, regasification and storage unit
(FLRSU), to be located on the
Caribbean coast is on track for com-
missioning in 4Q14 with exports
beginning in early 2015, according
The terminal will initially export
140,000-160,000m3 cargos to
international spot markets every six
weeks, and will eventually supply
the small-scale power generation
markets of Central America and the
Caribbean, Lima added.
The terminal is being developed
in conjunction with Belgian gas
exporter Exmar under a 15-year liq-
uefaction tolling agreement.
Development of new floating
LNG terminals and the growth of
the small-scale market is driving
the commoditization of the LNG
market, moving it away from the
more structured long-term suppli-
er-receiver contract structure. This
makes it is easier to market LNG
cargos, according to Lima.
Pacific Rubiales' subsidiary, Pacific
Infrastructure, which is developing
the Puerto Bahía crude oil/products
terminal and port on the bay of
Cartagena, has requested licenses
for a FSRU import terminal with a
160,000m3 storage facility. The
import terminal could be used to
alleviate gas shortages during peri-
ods of high demand for thermo-
electric generators during dry sea-
sons. (Business News Americas)
Continued from Page 10
Kevin Ramnarine, Energy Minister
LNG expected to drive
Colombia gas development
Petrobras of Brazil plans to
import about 60 cargoes of LNG
this year, up from 56 in 2012.
"This year, (thermoelectric
demand for gas) passed industrial,
rising from 49 to 51 per cent.
It's an important point and
demand this year is due to be
rather big," Reuters cited Hugo
Repsold Júnior, the company's
manager of gas and energy as say-
Petrobras imports liquefied nat-
ural gas through purchases on the
spot market and offloads it through
the Pecem and Guanabara Bay
LNG import terminals in Brazil.
(LNG World News)
Petrobras to import 60 LNG
cargoes this year
KUALA LUMPUR, Malaysia---
Malaysian national oil company
Petronas has announced a multi-
billion dollar plan to extract, liquefy
and export natural gas in western
Canada to energy-hungry markets
in Asia, officials said.
Arif Mahmood, Petronas' vice
president of corporate planning,
said between US$9 billion and
US$11 billion would be invested to
construct two LNG liquefaction
plants. Target date for the project's
completion is late 2018.
The site will be designed with
the potential to add a third plant
and LNG storage tank, the com-
pany said on its Web site.
Another US$5 billion will be
invested in a pipeline 750 kilome-
tres (466 miles) long, to be built
and operated by TransCanada Cor-
poration, to supply gas to the
plants, Arif confirmed in an e-mail
to The Associated Press.
The Pacific NorthWest LNG
project, located on Lelu Island in
the Port Edward district in British
Columbia, will liquefy and export
natural gas produced by Progress
Energy Canada, which Petronas
Separately, Progress Energy
Canada said it plans to spend "sev-
eral billion dollars on activities
related to natural gas extraction."
This will bring the total project
cost to around US$20 billion, the
company said by email through a
Petronas recently sold a ten per
cent stake in the gas facility to
Japan Petroleum Exploration Com-
pany to secure its first long-term
buyer, and is hunting for more buy-
project to export
LNG to Asia
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