Home' Trinidad and Tobago Guardian : March 6th 2014 Contents MARCH 2014 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
The nation s drivers will not
move to compressed natural
gas (CNG) unless the Gov-
ernment takes the hard
decision to remove the fuel
subsidy from petroleum
That is the view of energy consultant
Gregory McGuire and chief executive officer
of Unipet Ron Milford.
In separate interviews with the Business
Guardian, the two men agreed the fuel prices
are too low, and even if the Government
builds sufficient service stations, people are
unlikely to convert to CNG unless there is
a financial reason to do so.
Their position comes as the National Gas
Company (NGC) last week signed a mem-
orandum of understanding (MoU) with the
Chinese company, ENN Group, for the pro-
vision of advice to help ensure the successful
implementation of NGC s five-year $500
million CNG conversion plan.
Milford said he agreed with McGuire that
there was no incentive to push people to
CNG, but said the challenge was both on
the demand and the supply sides.
"With diesel prices where they are and
gasoline prices so cheap, I agree unless you
remove the subsidy, then people will not
move to CNG. But you first have to ensure
there are sufficient service stations and offer
people the alternative to switch before you
raise the prices of fuel." Milford said.
The Unipet executive said the original
CNG Task Force had authorised seven CNG
stations to be build. Unipet was given two
at Brentwood in Chaguanas and Tacarigua
and both have been constructed and are
operating. However, the National Petroleum
Company was given five, none of which has
"I don t think the problem has to do with
technology because the technology we are
using in our service stations is fine. The
real challenge is in constructing the stations
on the part of NP. I can t say why this is
so, but the fact is we have built and can
build the service stations."
Demand side challenges
McGuire said the problem the Govern-
ment faced was more on the demand side
than on the supply side.
"Unless we ensure that people pay the
market price for liquid fuels and the gasoline
prices remain low, we will not get people
to convert to CNG. So even if you had the
entire network, we would still face the prob-
lem of people not wanting to convert to
CNG because there is no real need to.
"I am of the view that people should pay
the market price and let the subsidy be
then channelled into areas that need it,
including building the country s productive
McGuire said the Government was mov-
ing from a position of subsidising liquid
fuels to subsidising CNG. He insisted that
the plan does not lead to market prices
being paid for CNG and that the NGC was
being used as a cash cow to provide funding
for the project with no financial benefit to
He conceded that state companies some-
times have to do things that may not meet
strict financial standards, but must still be
done in the nation s interest.
He was also concerned there is only one
company doing the conversion from diesel
and gasoline to CNG and raised the pos-
sibility of Government funding going to
companies supportive of the present admin-
"We have to keep a close watch on this
issue. The Government is going to pay for
the conversion of all the large users, maxi
taxis and so on. It s a lot of money involved."
Milford said there is money to be made
and he expects to see many businesses
offering conversion as long as the demand
McGuire said he was not convinced NGC
was going the right way in seeking Chinese
technology. He explained there is better
technology in other parts of the world, and
this deal could mean that T&T is forced to
set up its CNG infrastructure based on Chi-
"I am concerned that we are going to be
locked into Chinese technology when there
may be better technology out there, so I
do not necessarily feel that is the way we
McGuire said NGC would face significant
challenge in building the infrastructure for
the CNG network because the process
required to develop a pipeline network is
tedious, including getting approvals from
NGC chairman Roopchan Chadeesingh
explained that over the last three decades,
the country has been trying to convert a
high percentage of its motorists to the clean-
er-burning and cheaper CNG, but without
Speaking in China during Prime Minister
Kamla Persad-Bissessar s official week-long
visit, newspaper reports there quoted
Chadeesingh as saying, "It s more than 30
years now that T&T has been trying to get
drivers to convert from diesel and gasoline
to CNG. ENN operates out of Langfang City
(in Hebei Province), which has a population
of four million, and they have been successful
in getting the drivers there to convert to
"They have the capacity, the know-how,"
he added, "so we are looking forward to
(benefiting) from ENN s experience and
technology. We have invited them to assess
our facilities in T&T to advise us on what
is required to introduce this programme
Britain's oil and gas industry has warned it faces its
"biggest challenge in 50 years" due to the low levels of
Industry body Oil and Gas UK said only 15 wells were
drilled last year.
That was despite strong levels of investment, reach-
ing a record last year and sustained this year.
Exploration drilling was down from 44 wells six years
ago, only sufficient to recover a fraction of the esti-
mated oil and gas remaining offshore.
The annual activity survey by Oil and Gas UK found a
rapid increase in production costs, up by 15 per cent last
The average cost of extracting a barrel of oil was up
by 27 per cent in only a year, to reach £17.
The number of fields with cost per barrel above £30
has doubled in the last 12 months.
Rising costs were cited last week by Centrica, which
has decided to focus future investments in Norway and
North America, rather than UK waters.
With rising costs, production tax payments to the UK
Treasury are expected to fall from £6.5 billion during
the 2012-13 financial year to £5 billion in the current
However, there is a more positive picture from high
levels of investment in known reserves.
That is estimated to reach £13 billion during this year,
slightly below the £14.4 billion record set last year.
Much of that was focused in four big fields.
Investment is scheduled to fall by nearly half within
three years, according to the industry survey.
Following the rapid decline in oil and gas production
from UK waters in recent years, the rate of fall slowed
during 2013; down by eight per cent to 1.43 million bar-
rels of oil per day, or its gas equivalent.
Output is expected to rise during this year, as 25 new
fields come on stream.
Malcolm Webb, chief executive of Oil and Gas UK,
said the results showed the contradictions at play be-
tween high investment but worrying trends in drilling,
output and costs.
He said: "Even if currently planned wells proceed, the
rate of drilling is still too low to recover even a fraction
of the estimated six to nine billion barrels yet to be
"Britain's waters contain an abundance of oil and gas
yet to be found and it is critical we find the means to
turn the current state of exploration around. Rig avail-
ability and access to capital are the two main barriers
noted by our members."
In addition to exploration wells, the industry last year
drilled 120 development wells, a similar level to 2012.
Much of the activity was in existing offshore oil and
gas reserves, known as brownfield sites. Of 26 such
projects, 23 were linked to new tax breaks from the UK
Scottish Secretary Alistair Carmichael said: "The UK
government is committed to doing all it can to ensure
the oil and gas sector has all the support it needs.
"While capital investment remains at near record lev-
els, this survey shows that this key sector faces real
challenges around production and exploration.
"That is why we commissioned the Wood Review
which was published earlier this week and that is why
we are taking forward all its recommendations."
And Scottish Energy Minister Fergus Ewing said:
"This demonstrates the range of opportunities and
challenges facing the North Sea oil and gas industry at
"We now have Sir Ian Wood's key recommendations
on how to take the regulation of the industry forward.
These should be implemented as soon as possible."
UK's oil and gas
in 50 years'
CNG drive lacks
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