April 11, 2017
Author: Kjetil Solbraekke, Head of Rio Office, Rystad Energy
Trinidad has a long-standing oil industry that has influenced the country’s industrial development and culture for over a century. Even the country’s music is heavily influenced through the steelpan developed through Trinidad’s creative population and access to empty steel oil barrels. Steelpan music is still alive and very popular, while the oil and gas industry is struggling more to keep up production of both oil and natural gas.
“Falling of Mt Trinidad” was the front-page headline in the magazine from the Energy Chamber in Trinidad and Tobago in March. Reference was made to Rystad Energy’s outlook for the gas production forecast for Trinidad (see figure 1). It shows that gas production would continue to fall at a rate of 13% annually from 2019 unless new development is decided upon urgently.
What has happened in Trinidad and Tobago? Did they run out of natural gas? Have the fields generated less gas than expected? Have the field costs increased and made discoveries uncommercial? In this article, we will show that there are several reasons for the problems currently experienced by the industry and government in Trinidad. We also indicate some measures in order to prevent falling off the cliff.
Maintaining production of oil and gas requires continuous new developments and investments
It is hard to maintain production of oil and gas unless new reserves are discovered and developed. In figure 2, we can see the low rate of new fields being developed in Trinidad over the last 5 years. While Trinidad sanctioned 1.5 Tcf of gas annually in the period from 1990-2005, the level dropped to about 0.7 Tcf of gas in the period from 2005-2016. Still significant volumes, but when producing between 1.1 and 1.5 Tcf of gas per year in the same period it is clearly not sustainable.
The problem in Trinidad can also be recognized by the fact that exploration results and efforts have been lagging the necessary level in order to maintain production at the level of total consumption by the gas industry.
Looking into figure 3 one can also see that the level of gas discovered in the last decade is also below the production level. In other words, Trinidad and Tobago was gradually running out of discoveries and developed reserves without taking necessary actions to prevent the decline. Today the downstream industry including the LNG export facilities depending on gas supplies is paying the price.
History shows the importance of long-term strategic knowledge and insight into the government and regulatory agencies. The supply situation should have been possible to predict at an earlier stage by the authorities in Trinidad, and actions should have been implemented at a much earlier stage.
Steps that could have prevented today’s shortfall situation should have been taken 5-10 years ago. Such decisions include:
What now in Trinidad - Falling off the cliff or building a bridge to the future?
Trinidad and Tobago is still a rich country with significant resources to be developed. Rystad Energy believes that only 40% of the total gas resources in the country has been produced so far. Trinidad needs to incentivize the operators to develop the existing discoveries and motivate the industry to make new discoveries. Rystad Energy believes that transparent dialogue between all players in Trinidad is essential in order to overcome the current challenges linked to supply of gas to the industry and return to the production levels experienced in 2010-2014. All above-mentioned areas should be developed and the country should avoid becoming dependent upon only one solution especially if that includes the commitment and cooperation of a big neighbor country.
Trinidad and Tobago has a fantastic strategic position as a hub for a lot of surrounding activity. As seen in the map in figure 4 we can easily see Trinidad perfectly positioned between Guyana with its recent exploration success, undeveloped fields in Venezuela, exploration opportunities in Barbados and also deep water Colombia, in addition to all the volumes that are expected to be discovered at the continental shelf off Trinidad and Tobago. According to published news, Exxon is already considering using Trinidad for refining the oil from the Liza field in Guyana, and many more opportunities will come in the future. A lesson has been learned in Trinidad, and the lesson should be studied by other nations as well. To maintain consistent industry activity and understand the flow of new project development and underlying decrease in the production of existing assets is a key planning tool for any country that wants to reduce uncertainty.
In figure 5, we show the total resource potential including recoverable volumes from yet to find resources in the region. It clearly shows how Trinidad is in the center of a rich petroleum region and potentially has more resources to be discovered than what is currently developed. Long-term strategic thinking should be applied to ensure that the country is prepared for a promising long-term future as a hub in the region, a significant hydrocarbon producer and producer of gas fed downstream products. New gas discoveries made in Trinidad and Tobago have a significant advantage compared to gas found anywhere else in the world. The infrastructure for LNG and petrochemical industry is already in place and begging for additional gas to be connected. However, the potential will not be realized without actions: new licenses, improved government take for upstream companies and third party access to gas pipelines are some of the areas the government needs to sort out. If they get it right, the population in Trinidad and Tobago need not worry about falling off the cliff, but should be able to get back on top of the mountain and appreciate a great view into a bright future.
Kjetil Solbraekke, Head of Rio Office
Phone: +47 24 00 42 00
Therese Fuglerud, Administration Manager - South America
Phone: +47 24 00 42 00
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), as well as Singapore and Dubai.