Home' Trinidad and Tobago Guardian : April 17th 2014 Contents BP PLC has farmed out the
majority interest of its two
deepwater blocks to Australian
outfit BHP Billiton. The Busi-
ness Guardian has confirmed
that the deal was concluded
just over a month ago and both companies
have so far been tight-lipped about it.
On Tuesday, BP confirmed the deal in an
e-mail response to questions from the Business
"BP confirms that it has completed nego-
tiations with BHP Billiton about farming out
an interest in deepwater Blocks TTDAA 14
and 23(a)", the e-mail read. It went on to say
that while the two companies had reached
agreement, it was awaiting approval from the
Ministry of Energy and Energy Affairs.
Should the deal be confirmed by the Per-
sad-Bissessar administration, it would mean
that BHP Billiton will be the operator on all
of the deepwater blocks offered since they
have also been awarded the other four blocks
that have been signed in the last two years.
It also means that the country's largest ener-
gy producer is now not taking all the risk in
the two deepwater blocks and is sharing it
with BHP Billiton.
It was back in July 2011 that BP Exploration
Operating Company was awarded 100 per
cent interest and operatorship of Blocks 23(a)
and TTDAA 14 offshore the east coast of
Trinidad. Spanning 2,600 square kilometres,
Block 23(a) is located in waters averaging 2,000
metres deep, about 300 kilometres northeast
of BP's Galeota Point onshore processing facil-
ity. The adjacent TTDAA 14 covers 1,000
square kilometres with similar water depths.
Under the production sharing contract, the
company had promised to shoot its seismic
since last year, but did not meet its commit-
ments under the PSC and was given the go
ahead by the Ministry of Energy to delay the
seismic ostensibly so it can save costs by jointly
shooting it with BHP Billiton.
It has now been revealed that the two com-
panies were not just in talks about BHP farming
into the block, but also taking over operatorship
of the block.
Energy consultant Anthony Paul has said
the move is not in the best interest of exploring
what is frontier basin.
"I am on record as saying that giving all
the first four blocks to a single company (BHP)
wasn't the best way to explore a frontier basin,
as you want to get different approaches to
work for you."
He explained that the limited bids can be
taken to mean the blocks are not geologically
attractive. It may also mean the marketing of
the blocks had limited impact.
"With frontier areas, a strategic, targeted
approach to attracting investors is required.
The fact that the winners of a bid round turn
around and farm out operations leaves one to
wonder how much analysis went into the ten-
der process. T&T has been down this road
before and we've learnt a few lessons that we
would have done well to apply. I had hoped
we would have done better in the exploration
But energy economist Gregory McGuire said
the farmout will make no difference. He said
the companies believe it is best if there is one
operator in the deepwater blocks.
"There are some obvious economies of scale
to be derived from such a decision. For exam-
ple, working independently would mean sep-
arate arrangements for drilling rigs, etc. Working
collaboratively means that the exploration
effort can now be sequenced in a more efficient
and cost-effective manner.
"Lower exploration and production costs
can mean lower asking price for gas, but that
really depends on whether the companies are
prepared to share some of the savings derived
from this arrangement. I have my doubts about
that. Everything else remains much the same
McGuire said if oil or gas is found, then the
agreement between the companies and the
PSC terms will determine the spilt between
Government and each company. He said he
did not see this arrangement as disadvanta-
geous to the Government's share in any way.
BUSINESS GUARDIAN www.guardian.co.tt APRIL 2014 • WEEK THREE
BP farms out
to BHP Billiton
There are some obvious
economies of scale
to be derived from such
means that the
can now be
sequenced in a more
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