Home' Trinidad and Tobago Guardian : December 19th 2013 Contents DECEMBER 2013 • WEEK THREE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
It is a common misconception that one barrel of oil
is much like another.
Crude varies by viscosity from watery to almost
solid, by colour from fawn to deepest black and by
sulfurousness from negligible to devilish. Around 100
benchmark grades are traded around the world, though
a couple garner the most attention.
Patriotic Americans focus on West Texas Intermediate
or WTI. Most of the rest of the world uses Brent from
the North Sea as a reference. When the two, differing
slightly in quality, cost the same, the distinction made
little difference. In recent years, however, the extraor-
dinary flow of oil from American shale beds has led
to a parting of the spigots.
A barrel of Brent currently changes hands for US$109,
while WTI fetches only US$98. The spread first opened
in 2011 as new supplies of shale oil from North Dakota
and Texas supplemented the barrels already arriving
at Cushing, Oklahoma. This small town, set amid a
vast expanse of storage tanks, is a pipeline hub where
contracts for WTI are settled. It turned out, however,
that there were more pipelines leading to it than away
As shale oil boomed, more crude got stuck in Cush-
ing s ever-expanding field of storage tanks, and the
WTI price sank. However, the price of oil entering the
big refineries on the Gulf Coast, only 500 miles away,
stayed tethered to Brent. To take advantage of the dis-
crepancy in prices, which at its peak hit US$29, barges,
trains and even trucks were pressed into service to
supplement the bursting pipelines leading from Cushing
to the coast.
The construction of new pipelines and a reversal of
the flow in others gradually has undone the bottleneck
in Cushing. The Seaway pipeline, for instance, once
took oil from Freeport, Texas, to Oklahoma. Since
January it has plied the opposite route and will soon
double in capacity to 850,000 barrels a day. In July the
spread between WTI and Louisiana Light Sweet, the
benchmark feedstock for Gulf refiners, almost disap-
peared. However, the clearing of the bottleneck in
Cushing has released a surge of light crude to the Gulf
Coast, creating a new blockage, according to Michele
Della Vigna of Goldman Sachs.
Gulf refineries are using as much light and sweet
American crude as they can, but most are designed
to process heavier, more sulfurous grades from Aroca
and the Middle East. Indeed, America still imports 7.9
million barrels a day.
Refineries in California or on the East Coast could
take more home-drilled oil, but the infrastructure to
get it to them is lacking and the Jones Act, which bans
foreign vessels from domestic trade, means that ships
are in short supply. Light sweet crude can be mixed
with gunkier oil from Canada s oil sands to make a
more suitable brew for Gulf refineries, but that takes
time and requires regulatory approval.
Selling the excess oil abroad would uncork the block-
age, but American law prohibits most exports of crude.
Gulf refiners are turning it into gasoline, diesel and
other products, which can be exported, as fast as they
can. But, according to Amrita Sen of Energy Aspects,
a consultancy, they are running at full capacity.
As oil begins to pool in the Gulf, a gap has opened
between the prices of LLS and Brent, even as LLS and
WTI have moved into alignment. The discrepancy in
prices between the middle of America and the East
and West coasts will persist until someone works out
a way to move the stuff around in greater quantities.
Even if that happens, though, in a couple of years
the whole country will have more light, sweet crude
than it needs. If the oil continues to back up, prices
will fall further compared with global markets, threat-
ening production from high-cost shale beds and perhaps
even smothering America s resuscitation as an oil power.
@2013 Economist Newspaper Ltd. (Distributed
by the New York Times Syndicate)
The when, where
and how much
of oil prices
T&T s upstream sector con-
tinued to be challenged dur-
ing 2013 with another year
of natural gas curtailment
while crude oil production
showed a negligible decline.
In 2013, the shortage of natural gas con-
tinued, although there was a slight improve-
ment in overall production when compared
to 2012. Figures from the Ministry of Energy
and Energy Affairs show production for the
first nine months of 2013 averaging 4.262
billion cubic feet per day (bcf/d) when com-
pared to 4.122 bcf/d when compared to 2012.
A look further into the figures show the
impact of bpTT s improved performance
on overall production. In 2012 the country s
largest natural gas producer averaged daily
production was 2.188 bcf/d while in 2013
that improved to 2.313 bcf/d.
This improved performance is expected
to continue in 2014 as bpTT completed its
heightened maintenance programme, bring-
ing to an end work designed to ensure the
company s asset integrity in the wake of its
Macondo disaster in the Gulf of Mexico.
The maintenance programme ended on
November 16 when the company completed
the planned works (turnaround) on the
The Amherstia turnaround (TAR) began
on November 6, and was originally planned
to last 15 days. The maintenance programme
included turnarounds on the Immortelle,
Kapok, Cassia B hub and Amherstia facil-
BPTT s regional president Norman
Christie said, "At the start of the year, the
safe and timely execution of TARs was iden-
tified as extremely important for several
stakeholders, including BP, gas consumers
and the Government of T&T. We are proud
that our team was able to safety complete
the work ahead of schedule with minimal
disruption to gas supply."
The maintenance programme led to a
shortfall in natural gas production and has
hurt midstream Atlantic and downstream
companies, including those in methanol,
ammonia and urea. This led to companies
on the Point Lisas Industrial Estate averaging
a mere 90 per cent throughput when com-
pared with 97 per cent prior to the gas cur-
Energy Minister Kevin Ramnarine had
explained that even though there will be an
improve in the gas supply situatio, the issue
of cushion gas still had to be dealt with
because bpTT, which, in the past, provided
a cushion by releasing more gas in the system
whenever another producer has a problem,
was no longer able to do that unless it was
able to earn a premium from it.
While there appears to be progress
upstream as it relates to natural gas, crude
oil production has at best been stabalised.
Since 2010, oil production has declined by
25 per cent.
At the end of 2009, crude production
averaged 106,756 barrels of oil per day. Up
to September 2013, it has averaged 81,172
bo/d. But when compared to 2012, which
averaged 81753 bo/d, the decline is negli-
On assuming office in 2011, Ramnarine
made increased oil production his focus,
telling a luncheon of the Energy Chamber
that he intended to ensure there was an
increase in crude production. In 2013 the
minister continued to take steps to achieve
this. In the 2013/2014 budget, Finance Min-
ister Larry Howai announced several meas-
ures aimed at increasing exploration and
production in older stripper fields.
The minister announced Government
would be allowing tax credits previously
only limited to the year in which the invest-
ment was made to be carried forward to
the next year.
There will also be capital incentives,
including a new allowance of 100 per cent
of exploration costs, to be written off in the
year the expenditure is incurred.
Howai also proposed to grant an allowance
of 50 per cent in the first year of the expen-
diture, an allowance of 30 per cent in the
second year of the expenditure and an
allowance of 20 per cent in the third year
for plant and machinery (tangible) and the
drilling of wells (intangible) expenses.
There have been some successes. There
has been a substantial increase in rigs drilling
and in drilling days and depth drilled. If the
theory that the more you drill is going to
lead to crude discovery and production is
true, then it appears progress is being made.
The December 9 announcement by Trinity
plc of its oil discovery could lead to another
5,000 bo/d being produced by 2016.
In 2013, the Ministry of Energy also signed
several production sharing contracts for
deep water and has put out bids for onland.
State-owned Petrotrin has announced a
heightened drilling programme in 2014.
Experts say next year, the country s oil
production should hold.
Energy sector suffered
gas curtailment in 2013
Links Archive December 18th 2013 December 20th 2013 Navigation Previous Page Next Page