Home' Trinidad and Tobago Guardian : July 18th 2013 Contents JULY 2013 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
BPTT's president Norman Christie has
said the cost of exploiting T&T's
hydrocarbon reserves has gone up as
T&T has been in the business for
more than 100 years and due to
changes in the international energy
"Most of our large discoveries in shallow waters
have already been produced or are at the tail end of
their lifecycle. The new prospects that we are devel-
oping that will meet the industry's demand for gas
in the short- to medium-term are now in much more
complex geology, in deeper waters, and are more
costly developments. In many respects, bpTT has
already gone after the low hanging" fruits,'" he said.
In April, Christie repeated to the Business Guardian
a statement he made at the January 2013 Energy
Conference at the Hyatt Regency Trinidad hotel that
the company's costs were rising.
"We are now seeing an escalation in costs, increased
global competition and significant changes in the
risk reward distribution across the gas value chain,"
he had said.
Christie gave more details on rising costs in the
industry at Monday's pre-budget consultation hosted
by the T&T Chamber of Industry and Commerce at
its Westmoorings head office.
"You may have heard me speak in the past on the
rising cost in the industry. It is not a T&T only phe-
nomenon, but rather a challenge facing the gas indus-
try globally. To put it simply, the costs in the sector
are very closely linked to high oil prices which drive
the demand for energy services. Marine, aviation,
rig costs and the like, are being pushed by global
activity or global demand."
Christie gave some of the technical challenges in
drilling bpTT faces.
"The prospects that remain are more technically
challenging. Two examples of the challenges we face
are drilling to deeper reservoirs through depleted
sands and drilling far distances from existing infra-
structure, which means wells are drilled at more dif-
ficult angles. Both of these factors impact well design
and execution, which also make drilling more expen-
Abiding by new industry standards is also driving
costs up, Christie said.
"While these requirements are necessary and
enhance the safety and environmental footprint of
the operation, they add to the cost of doing business.
Rising costs are a part of business, and I am sure you
will all agree, not unique to the energy sector. I'm
sure that is a reality for everyone in this audience.
"In the face of rising costs, companies are driven
to improve efficiency. As in other sectors, one approach
the energy sector uses to mitigate rising costs is lever-
aging technology. BPTT, for example, leverages tech-
nology in use in the wider BP operations to add pro-
duction more efficiently."
Attracting and keeping investors
He said if T&T wants to remain competitive, it
must create the conditions to attract foreign investors
and keep them.
"The terms and conditions of the new blocks
attracted current and new players to our shores,
thereby proving the late Citibank chairman Walter
Wriston's view that capital goes where it is welcomed'.
What is also needed now in T&T is focus on the
second part of Wriston's analysis, which states that
capital stays where it is well treated."
"It is bpTT's view that we can get more out of the
existing, producing acreage in T&T if the terms are
right to make those developments economic and to
attract the investments required to do so. The Gov-
ernment has been receptive to our conversations and
we understand that changing fiscal terms is a long
and involved process."
He said bpTT remains optimistic about T&T's
energy outlook and plans to invest billions of dollars
over the next few years.
"In fact, we are prepared to spend about US$6
billion over the next six years to achieve this. Our
level of investment, however, is contingent upon the
'above the ground' factors, that is, ensuring T&T
has an environment that encourages investment.
The "above-the-ground" factors include fiscal incen-
tives, but go further to factors, like price structure
and factors affecting the wider economy.
"With the experience that T&T has, we are con-
fident the Government and business can work togeth-
er to ensure T&T's energy sector remains compet-
"T&T's ability to meet gas demand needs in the
next five years depends on the industry progressing
reserves in already-producing acreage. More needs
to be done to incentivise new field developments
and other forms of production enhancing invest-
Christie said T&T still has significant amounts of
"We believe there are material amounts of hydro-
carbons to be found in T&T. I start here because
quite often the country's focus on energy starts with
the context of the natural gas audit and the accom-
panying concern about how many years' worth of
gas remain in the ground.
"The outlook is much more complex than a simple
reserve to production or R to P ratio. It continues
to evolve and includes a number of factors. With
our optimism, we also recognise challenges remain
as to how best to exploit those resources and ensure
a long term future."
Despite changes on the energy landscape globally,
he believes it will not affect T&T's markets once they
"In terms of natural gas, two trends are important:
the rapid growth of shale gas in the United States and
the expansion of global liquefied natural gas (LNG).
Natural gas demand is expected to grow at around two
per cent per year as it increasingly competes with coal
as a source of power. It will continue to be the world's
fastest growing fossil fuel.
"Many people have shared concerns over the shale
revolution' and its potential impact on demand for
T&T's LNG. The global outlook, however, predicts that
the demand for LNG will continue to outpace LNG
supply and T&T remains well placed to continue to
benefit from increasing global demand for LNG."
Despite attempts to diversify, Christie expects energy
will continue to drive T&T's economy.
"It is clear the world will continue to need hydro-
carbons and natural gas will continue to play a role in
meeting energy demand. At a local level, energy will
continue to be the driving force of the economy.
Although global demand is set to grow, we need to
ensure the local industry is well placed to fulfil that
demand. T&T is a prolific hydrocarbon-bearing province
and the outlook remains encouraging," Christie said.
He said T&T must continue to ensure the sus-
tainability of its oil and gas production.
"Credit should be given to the Government which
recognised the need to enhance the attractiveness
of new acreage. The result has been six production
sharing contracts signed for deepwater blocks. One
of the biggest successes, I would add, would be the
opening up of a new hydrocarbon province: the
deepwater. The success of the last two deepwater
bid rounds demonstrates that when the investment
climate is right, the investments will come to T&T,"
He spoke about the Columbus Basin, upon which,
he said, "the economic health of the country will
be largely determined."
"The Columbus Basin is a prolific province and
it remains attractive. A good example of this was
the discovery at our Savonette Field. That discovery
was one trillion cubic feet and doubled our estimates
of gas in place for the field. Three more development
wells have been planned for Savonette as a result of
the discovery. In May of this year, bpTT completed
its Ocean Bottom Cable Seismic programme in our
existing acreage," Christie said.
Fiscal incentives key to
T&T investment decisions Mexico's national
oil company Pemex
expects to invest
40.6 billion pesos
2015 in the offshore
light crude project in
the Tabasco coastal
region, according to
a project evaluation
by upstream watch-
Pemex's E&P unit
PEP has laid out a
plan for the project
through 2037 which
includes drilling 31
new wells, six of
which will be gas
and water injection
wells; reopening six
and repairing five
the project will in-
clude nine produc-
tion platforms, one
subsea tree and 12
CNH also recom-
mends PEP conduct
4D seismic to better
determine the vol-
ume of hydrocar-
bons in place.
The offshore proj-
ect was producing
crude and 520Mf3/d
gas (14.7Mm3/d) in
June, but its produc-
tion is expected to
drop ten -20 per
PEP expects to
produce 435Mb light
crude and 1.52Bf3
gas from the project
through the same
investment of 109
CNH issued a fa-
vorable ruling on the
project, saying it
would benefit Mex-
ico's energy security
and was an efficient
use of state fi-
BPTT president Norman Christie
PHOTO: SHIRLEY BAHADUR
in light crude
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