You are here

PwC: T&T not benefiting from oil prices averaging US$100 a barrel

Published: 
Saturday, September 14, 2013

T&T’s failure to increase crude oil production, especially when in the past year oil prices have averaged US$100, means the country has been unable to cash in on these buoyant prices, said the professional services firm PricewaterhouseCoopers (PwC) in its 2014 budget memorandum. Following is firm’s assessment of the energy sector and the budget.

 

“Notwithstanding this fact, however, all indications are that oil revenue has been maintained and even showed an increase in recent years. In 2012 the average production was approximately 81,000 bpd after a steady decline between 2006-2011. The estimate for 2013 is in line with 2012. “According to the Minister of Energy and Energy Affairs, Kevin Ramnarine, ‘our immediate objective is to optimise acticity in the domestic energy sector.’

 

“The approach identified is via strategies to increase oil production from known reserves and the continuous offer of acreage to facilitate sustained exploitation of hydrocarbons. The reasons for the decline in crude production have been identified as:
• a lack of strategic focus on oil production
• inadequate incentives to stimulate investment
• maturity of the oil fields, and
• priority being given to development of gas resources

 

 

“PwC said the MEEA releases indicate there is a significant increase in exploration and production activity in the oil and gas industry which augurs well for apparent optimism in the sector. There are a number of rigs working both offshore and on land, all aimed at increasing the level of crude production. When our crude oil production is compared to oil-producing countries in Latin America, we find that we are on the lower end.

 

“There have been several efforts to address this, including the provision of additional incentives, the offer of new acreage via bid rounds, as well as ongoing review of the fiscal regime for the sector which, commendably, included input by the various stakeholders. “One wonders, however, how do these efforts dovetail with the country’s energy policy?

 

“The 2012 deepwater bid round was deemed a success due to the number of bids received as interest was shown in five out of the six blocks offered - some would say an indication of confidence in the potential of the sector. “It is hoped that the 2012 onshore (land) bid round, the 2013 deepwater competitive bid round and the proposed 2014 offshore (shallow/average water competitive bid round will attract similar interest.

 

“Even as we continue in our attempts to clear this hurdle, we can probably look at our Latin American neighbours, Brazil and Colombia, where there have been increases in crude oil production over the period 2008-2012, according to OPEC statistics. “In particular, as we seek to incentivise the sector, perhaps we ought to try to understand what has been done in Colombia to set it on its current path.

 

 

Natural gas
“The natural gas position is a lot more positive. T&T is now seen as a gas-producing nation as we produce much more gas on a barrel of oil equivalent basis than crude oil. The 2012 Ryder Scott audit of gas reserves indicate only a one per cent decline in unrisked gas reserves (proved, probable and possible).

 

 

Shale gas
‘The emergence of shale gas presents major strategic opportunities and challenges.’ “The United States is a significant recipient of LNG exports, but this is already changing as a result of that country’s production of shale gas. The US Energy Information Administration reports a 58 per cent decrease in LNG exports to the US over the period 2008-2012.

 

“The gas shortages faced by Atlantic and the Pt Lisas Industrial Estate companies since 2012 continue, albeit its impact has been managed according to the MEEA by streamlining maintenance programmes of these companies with the planned maintenance of the producers, the latter being the cause of the shortage/curtailment. “Increases in the prices of urea, methanol and ammonia compared to the prior year, however, helped revenue levels.

 

“The emergency of shale gas presents major challenges, but also strategic opportunities for the oil and gas industry and for governments worldwide. “While we may suffer the possible loss of the US as our main customer, as the US becomes self-sufficient and even an exporter of gas, we have the opportunity to rethink our strategies and perhaps look to new markets and opportunities.

 

“China has indicated its desire to purchase LNG directly from T&T and a recent Wood Mackenzie report indicated that ‘China may need to boost imports of liquefied natural gas by about 80 per cent from current contracted volumes to meet demand for the fuel.’

 

“While China has a large supply of shale gas reserves, winning that gas requires the development of new drilling and hydraulic fracturing techniques. This provides us with a window that can be explored. China is not the only opportunity that we must pursue as we plan for life after exports of LNG to the US, not the least of which must be more robust and deeper downstream activity.”

Disclaimer

User comments posted on this website are the sole views and opinions of the comment writer and are not representative of Guardian Media Limited or its staff.

Guardian Media Limited accepts no liability and will not be held accountable for user comments.

Guardian Media Limited reserves the right to remove, to edit or to censor any comments.

Any content which is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will be removed.

Before posting, please refer to the Community Standards, Terms and conditions and Privacy Policy

User profiles registered through fake social media accounts may be deleted without notice.