Home' Trinidad and Tobago Guardian : July 3rd 2014 Contents JULY 2014 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
State-owned Petrotrin has
been forced to signifi-
cantly reduce its produc-
tion of refined products
as it tries to limit the
losses at the Pointe-a-
Pierre refinery and avoid it going out of
business like two other reional refineries.
Company president Khalid Hassanali
has admitted that well into the future,
Petrotrin s production is likely to remain
at less than 130,000 barrels of product
a day as refinery margins remain soft due
to the United States shale gas revolution
and discounted crude prices.
He said, "You know that the shale rev-
olution in the United States has allowed
their refineries to have energy at a very
cheap price. In addition, there are the
issues of discounted prices which has
hurt all the refineries in the Caribbean.
So we are surviving, but we have to opti-
mise the refinery and not maximise pro-
duction. So we have deliberately reduced
our refinery throughput and I don t see
up getting back to those numbers any
time in the foreseeable future."
The more than 25 per cent reduction
in production is hurting the company s
cash flow and its overall finances, but
Hassanali insisted it is an integrated com-
pany and at this stage, it is exploration
and production (E&P) that is carrying
Earlier this year that Mado Bachan,
Petrotrin s head of refining and marketing,
talked about the significant challenge
Petrotrin s refining and marketing business
faced. He explained that Petrotrin has
had to import 60 per cent of the crude
it uses to refine products and the other
40 per cent comes from domestic pro-
duction. Bachan said this means the com-
pany has been importing crude at high
prices and then has to refine it and make
a profit on the products.
Margins are essentially the difference
between the cost of a barrel of crude oil
and the money you can earn from a barrel
of product, inclusive of cost of producing
Bachan explained that margins are
reflective of the global spare refinery
capacity and in 2014, that spare capacity
is averaging close to 20 million barrels of
"The amount of spare capacity will
put a cap on margins globally because if
you have this amount of spare capacity,
you want to run, but as you start to run,
you have all this product. So that, with
slow demand, you have all this excess
capacity and the issue is how do you treat
with this surplus capacity at a time when
margins are weak?"
He added, "As you know, it s your gross
margins that affect your profitability
because it is from your gross margins
that you have to find money for your
operating costs, including utilities, inputs,
labour and so on."
Bachan said the closure of refineries in
the Caribbean was not necessarily the
global trend because there continues to
be construction of modern, highly efficient
refineries. He pointed to Saudi Arabia
building additional capacity as that country
seeks to refine even more of its crude.
For Bachan, the real threat to Petrotrin
is the shale revolution, which has led to
millions of barrels a day of crude oil being
produced, but not exported.
"Before all this shale development, you
must recall that the US was not a net
exporter of crude oil. There are, of course,
laws that prevent the export of crude oil
from the US, except in isolated circum-
stances, like the export of crude oil to Canada
if it is being consumed in Canada.
He explained that while the US cannot
export oil, it can export refined products.
This is a major problem because it means
the US oil producers can only sell to US
refineries and with the challenge of getting
from areas like North Dakota to the refin-
ing areas on the Gulf coast, the refineries
in the US are receiving discounted crude,
which in fetching a lower price at Cushing.
This means the refineries are able to bring
more product onto the market and still
enjoy great margins.
Cushing, Oklahoma, is a major trading
hub for crude oil and a famous price set-
tlement point for West Texas Interme-
diate on the New York Mercantile
Figures from the Ministry of Energy
and Energy Affairs show for the first
quarter, refinery throughput averaging
only 85,896 bop/d.
Hassanali admitted that billions of
dollars were spent to upgrade the refinery
to make more gasoline and make the
refinery profitable was not bearing fruit
because gasoline prices have recently
been lower than crude oil prior to it even
being refined. He also conceded that
diesel was the fuel with the best margins
and Petrotrin was now trying for the
refinery to make more diesel.
He said within the next month,
Petrotrin will be meeting with the Oilfield
Workers Trade Union to present it with
a five-year plan which would see E&P
carrying the company with increase pro-
duction of domestic crude.
Spanish energy giant Repsol believes
it has discovered an additional 40
million barrels of light sweet crude
oil in its Teak field, according to well-
placed sources and confirmed by the
Ministry of Energy and Energy Affairs.
The Business Guardian has been told the Repsol s
well TB 14 hit pay dirt and while two more wells are
planned to test the extent of the discovery based on
flow and other testing, including the sand, it is believed
the company could add an additional 40 million bar-
rels to its reserves.
In addition, Repsol has reported success in its two
other infill wells TB 13 and TB 12, both drilled in the
Teak field off the coast of Guayaguayare in shallow
water. Both wells are producing in excess of 1,000
barrels each and Repsol s crude production is up by
more than 2,000 barrels per day.
Figures from the Ministry of Energy bear this out.
In January this year, Repsol s average production was
9,385 bo/d. This increased to 11,248 bo/d by April
this year. The figures show that Repsol is the second
largest oil producer after state-owned Petrotrin and
well ahead of BHP Billiton following the continued
rapid decline of the Australian outfit s production
which, as of April, stood at a mere 8,862 bo/d.
The discovery is good news for Repsol, which suf-
fered a major setback earlier this year when it drilled
a dry hole. The company had failed to find any hydro-
carbons on its Pinter One well which was drilled off
the east coast. The dry hole represented a major
failure for the company which had been trying to
boost its falling crude from its Teak Samaan and
In addition, the dry hole was further bad news for
the country as the Pinter One well was expected to
sure-up a discovery made by Bayfield Energy Com-
pany in its EG8 well on the Galeota block. Bayfield
has since been acquired by Trinity Explorations and
Production Company Ltd.
Respol started drilling that Pinter One well on
December 26, 2013, after it was approved by the
ministry s chief technical officer Richard Jeremy, and
it was wrapped up in February after reaching its total
depth and failing to find hydrocarbons.
Bayfield at the time said EG8 was deviated from
its surface location towards the south west in order
to target the crestal area of mapped horizons in the
prospective EG2/EG5 Central fault block.
"The well encountered ten hydrocarbon-bearing
sandstone reservoir zones between 1,364 feet (416
metres) and 6,000 feet (1,829 metres) below mean
Preliminary analysis indicates that the vertical
thickness of net hydrocarbon-bearing EG8 discovery
was announced in March 2012 with great fanfare by
the Prime Minister Kamla Persad-Bissessar and Energy
Minister Kevin Ramnarine. It was drilled to a total
depth of 8,133 feet (2,479 metres with well sands
totals 421 feet (128 metres), of which 352 feet (107
metres) is gas and 69 feet (21 metres) is oil."
The failure of Pinter One also meant that the EG8
discovery is now estimated at much smaller than it
was originally estimated.
Repsol s new discovery will benefit from lower
taxes as was contained in the 2013/2014 budget.
Repsol finds 40 million
barrels of crude in Teak
US shale boom forces
Petrotrin to cut output
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