Home' Trinidad and Tobago Guardian : August 1st 2013 Contents BG20 | COMMENTARY
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2013 • WEEK ONE
Over the last 20 years, the Gov-
ernment has engaged the
consultants Ryder Scott to
conduct periodic audits of
gas reserves in T&T. Every
year, the release of Ryder
Scott s audit leads to misleading headlines and
public commentary which suggests that there
are common misconceptions about what the
audit really means for T&T s reserves position.
This article was submitted before the release
of yesterday s Ryder Scott audit. Irrespective
of the results of the report, the Energy Chamber
wishes to provide insight on some basic concepts
which will help in interpreting the results of
the report. After reading this you should have
a better understanding of the reserves picture
and how we as a country can better manage
our energy resources.
Concept #1: The definition of
According to the Society of Petroleum Engi-
neers, reserves refer to the amount of oil and
gas (hydrocarbons) which we expect to produce
and sell based on observed accumulations of
oil and gas in the earth, from a given date for-
ward. Reserves are physically located in reservoirs
deep underground and cannot be visually count-
ed. However estimates can be provided based
on the evaluation of data that gives evidence
of the amount of oil and gas present.
All reserve estimates involve some degree of
uncertainty. The uncertainty depends chiefly
on the amount of reliable geologic and engi-
neering data available at the time of the estimate
and the interpretation of these data.
Hydrocarbon reserves are classified as proven,
probable and possible based on the level of cer-
tainty with which they can be produced. Proven
reserves relate to those reserves which can be
produced with 90 per cent of certainty. Probable
and possible reserves refer to those known
accumulations of hydrocarbons which have a
less likely chance of being recovered, when
compared to probable reserves.
Reserves which can be recovered with 50 per
cent certainty are known as probable reserves.
Reserves in the possible category have at least
10 per cent certainty of being produced.
Concept #2: The results of the Ryder
Scott Audit provides estimates of
The first thing that needs to be understood
is that the annual audit is just that: a review
of the reserves data that is recorded in the
books of the companies holding acreage and
the geological and engineering procedures used,
at a specific date. In other words, the Ryder
Scott Company reviews the data held by com-
panies and the ministry and determines whether
the methodology used to determine the figures
is fair and reasonable.
While the Ryder Scott company uses a rel-
atively comprehensive procedure, it is important
to recognise that it is not a full report. The lack
of universal rules and guidelines makes it difficult
to interpret the estimates provided. Differences
in reporting procedures and definitions used
by governments and professional institutions,
inaccurate reporting due to competitive secrecy
and the different methods used to estimate
reserves at different times in the life of a field,
all contribute to variations in estimates and
The results of the Ryder Scott audit should
be interpreted with caution especially since
only a fraction of the information is shared in
the public domain. There is no public knowledge
of the guidelines and procedure used by each
company or of the range of uncertainty.
Concept # 3: The level of reserves
It is quite easy to view our gas reserves as
static with the visual of a storage tank where
withdrawals cause the tank s gauge to perma-
nently head from full to empty. This is not the
There are a host of diverse factors which
impact on a country s reserves trajectory.
The price of energy commodities, techno-
logical advancements, the fiscal/taxation regime
and changing global economic conditions are
among a host of factors which can see a coun-
try s reserves dwindling or increasing over short,
medium or long term periods.
In T&T we experienced a major increase in
reserves in the period 1994--2000. This increase
in reserves came about as companies developed
gas reserves to supply the Atlantic facility, which
came on stream during this period. The demand
led to a spike (See Chart 1).
When we look at the United States proved
reserves picture we also see the impact of tech-
nology as the combination of horizontal drilling
and hydraulic fracking has made previously
uneconomical shale gas acreage valuable. Shale
gas has rejuvenated the US natural gas industry
and has positively impacted on the country s
gas proved reserves.
Between 2006 and 2012, an additional 88.25
trillion cubic feet of gas has been added to
proven gas reserves in the US.
Concept # 4: A decline in the level of
our proven reserves is not a cause for
We must approach any action plan to increase
our reserves with a sense of urgency not panic.
The bottom line is that activity needs to be
generated and both the Energy Chamber and
Government acknowledged and agreed there
needs to be at least nine exploration wells drilled
per year to maintain the country s reserves base.
In 2011, T&T was able to achieve an almost
100 per cent reserve replacement which was
a 60 per cent improvement from 2010 to 2011
(35 per cent in 2010).
This reflects companies almost replacing the
amount of gas they produced for the year and
reflects more activity including drilling activity
and the impact of improved appraisal studies.
The recent signing of PSCs, the 2013 Onshore
and Deepwater bid rounds and the planned
2014 Shallow/Average Depth Bid Round, are
expected to boost our future reserves. However,
it must be recognised that even the most suc-
cessful bid round will not result in new gas
production for at least seven to ten years.
Based on upstream project cycles, companies
obtain leases/contracts, conduct seismic surveys
and appraise the results, then drill exploration
wells and will not undertake infrastructural
development for at least five years, assuming
that commercial discoveries are made.
Despite this cycle, an eagle s eye perspective
must still drive our response to boosting reserves.
Ensuring there is a market for gas both
domestically and in overseas markets is pivotal
in adding to new gas reserves.
The local upstream, mid-stream and down-
stream gas industries are inexorably linked and
development plans need to examine the entire
value-chain. This makes planning and achieving
a balance between the competing demands all
the more challenging. Increasing understanding
of gas reserves is an important element of
ensuring a more informed discussion about the
various priorities and the future of the gas
By addressing the misconceptions around
our gas reserves, the Energy Chamber is not
attempting to provide all the answers but rather
give a better understanding of the entire reserves
We are not an authority on the issue and
even among experienced geologists and other
professionals in the field there is no consensus
on the many issues centred on the Ryder Scott
audit and reserves in general. These specialists
themselves raise questions on the methodology
used by Ryder Scott, the findings of the audit
and what the audit reveals about the country s
The chamber also wishes to incite the pop-
ulace to really pay attention to all dimensions
of the audit and inspire them to use their ini-
tiative to delve deeper into the report and come
up with their own clear understanding of our
gas reserves position, minus common miscon-
ceptions clouding their judgment.
For more information on the article contact
Nazera Abdul-Haqq at firstname.lastname@example.org or
Sherwin Long at Sherwin@energy.tt
4 key concepts for
Ryder Scott Audit
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