Home' Trinidad and Tobago Guardian : September 26th 2013 Contents SEPTEMBER 2013 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
Natural gas prices in the Unit-
ed States are likely to
increase between 30 and 40
per cent over the next two
years according to BP PLC s
chief economist Christof Ruehl.
In an interview with the Business
Guardian, Ruehl explained that the low-
price environment in the US is being rein-
forced by the large price differential between
crude oil and natural gas. Ruehl said this
had led to many companies moving away
from dry shale gas to tight oil, but that had
not reduced natural gas production since
there was significant associated gas with
He said with the US expected to become
an exporter of natural gas by 2015/2016,
he expects the demand for gas to increase
and the price of gas to also increase.
"What we should also see is the demand
for gas picking up from the carbon using
industries where in power you have this
big competition with coal. So we will think
prices are set to move a bit higher than
where they are today. But I will not expect
a return to what we saw in the 1990s,"
Ruehl told OGJ.
BP s chief economist said it is the power
sector in the US that drives natural gas
prices and last year there was a record
increase in the use of natural gas in power
generation replacing coal. He argued that
the price of coal will also be a factor in
determine natural gas demand and therefore
natural gas prices.
Ruehl said, "Last year in the power sector
what we saw was the largest increase in a
single fuel for at least 40 years. Last year
natural gas in the power sector increased
20 per cent, coal decreased 12 per cent and
that came on the back of the last five years
where natural gas in power generation
increased on average by six-and-a-half per
cent. Last year there was a large supply of
natural gas and that brought the prices
down to US$1.81 and that made it com-
petitive with coal."
BP s chief economist said if the price of
natural gas continues to increase it could
lead to a slowdown in the replacement of
coal by the power sector.
T&T was once the largest exporter of
LNG to the US accounting for 70 per cent
of all natural gas entering the country. How-
ever, with the virtual collapse of LNG prices
in the US due to shale gas this country
diverted its cargos from the US market.
Ruehl said the LNG market had three
distinct areas. The US market that is char-
acterised by high gas production, low prices
at the Henry Hub, the European market in
which there is some indexation to oil and
the Asian market in which there has been
high prices due to shortages and a replace-
ment of nuclear power by natural gas.
He said T&T was well positioned because
of its ability to diversify its markets and
should be able to continue getting good
prices for its LNG on the spot market.
Ruehl said he did not think the world
will experience massive shocks in crude
prices as occurred in the 1980s and 1990s.
He pointed out that over the last two
years, the US had increased its crude pro-
duction by close to 2.5 million barrels of
oil per day( bo/d) due its success in drilling
and producing "tight oil." He predicts the
US will eventually produce in excess of ten
He said this would mean the world s
largest consumer of energy and energy
products would find itself being able to
meet most of its needs, which had impli-
cations for global supplies.
Ruehl said should there not be supply
curtailment due to geo-political factors,
he expects the world could have as high
as six million bo/d in spare capacity.
He said, "The normal reaction of a mar-
ket to additional supplies in the order and
magnitude which we have seen with tight
oil would, of course, be that prices go down.
But the oil market is not an ordinary mar-
ket. And why not? Because it has OPEC
in it and OPEC acts as a cartel, which has
its own ideas about how to manage sup-
plies. So in oil markets, the question of the
price impact of tight oil, when you take
out all the geopolitical factors, translates
smoothly into how OPEC will react. I think,
on balance, we have reasons to assume
that OPEC is capable, willing and able to
cut supplies to neutralise this additional
US natural gas prices
likely to rise by 40%
BP chief economist:
Christof Ruehl, BP PLC's chief economist
From Page 8
He told investors and analysts that Trinity s net
proceeds from equity raised when it was getting
listed on the London Stock Exchange was US$84.1
million. He said Trinity ended its first half 2013 with
net cash of US$57.4 million.
Just before handing over to Robert Gair, Trinity s
executive manager for corporate development, Ram-
sumair said: "Since the period end (June 30), we
have announced that we have finalised terms with
Citibank for a new US$25 million credit facility to
fund capital expenditures or acquisitions.
"This facility is in addition to our existing US$20
million facility which currently has US$18 million
drawn. The new facility is currently undrawn and
is available to be drawn at any time between now
and August 2014. Pro forma this facility, Trinity had
cash and available debt facilities of US$82.4 million
to fund its forward capital programme."
Trinity to drill five more wells this year
Gair said: "The plan for the rest of the year is very
simple on the production side. We will continue to
drill back-to-back wells onshore with a minimum
of five wells still to come."
He said Trinity will complete the heavy workover
project on the west coast where it has three wells
still to workover, and on the east coast where it will
upgrade the equipment systems on the rig prior to
recommencing drilling in November 2013.
Gair said Trinity is also entering "an exciting explo-
ration phase with two wells spudding shortly."
The first will be El Dorado on the west coast which
will be spud in October 2013.
"This well is testing an undrilled fault block on
the west flank of the producing Brighton field, which
management estimate contains 13.4 million barrels
of oil (mmbbl) and has a chance of success of 51 per
cent. We have producing wells within one kilometre
of this well and are chasing exactly the same pro-
ducing sands, so the key risk is fault seal. In a success
case, we can rapidly monetise this well by tying it
back to the recently upgraded MP-8 platform for a
long term production test and then move to full field
development," he said.
In hydrocarbon exploration subsurface structures
are often segmented by faults. To get the oil or gas,
it is necessary to predict whether the fault is sealing
or leaking and also to provide an estimate of how
strong the fault seal might be. The strength of a fault
seal can be quantified in terms of subsurface pressure,
arising from the buoyancy forces within the hydro-
carbon column, that the fault can support before it
starts to leak.
Gair said Trinity s second well is the GAL-25 (Gale-
ota) well on the east coast, which is drilling an updip
extension of the producing Trintes field. Trinity esti-
mates this prospect contains gross unrisked prospec-
tive resources of 31.9 mmbbl and has a chance of
success of 64 per cent in the three primary horizons.
Again, given the proximity to its existing infrastruc-
ture, Trinity can more relatively quickly to monetise
any discovery there.
"This work programme is fully funded."
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