The release of the annual audit report into the gas reserves in T&T, conducted by Ryder Scott for the Ministry of Energy and Energy Affairs, has once again led to a series of misleading headlines and public commentary. The fact that the ratio of proven reserves to production (the R-P ratio) now stands at around nine years has once again led many people to incorrectly assume that T&T has "nine years of gas left."
Clearly, both the ministry and the industry need to do a much better job of explaining what the Ryder Scott report actually means and to help the public, other public commentators and the media better interpret the annual audit findings.
The Energy Chamber needs to play a more active role in this regard and we have, perhaps, ourselves been guilty of not engaging more with the public around these issues. The first thing that needs to be understood is that the annual audit is just that: an audit of the reserves data that is recorded in the books of the companies holding acreage. In other words, the Ryder Scott company reviews the data held by companies and the ministry and determines whether the methodology used to determine the figures is fair and reasonable. It does not tell us how much gas is left.
Proved, probable and possible
The media and the population tend to fixate just on the proven reserve figure, but this simply refers to the gas reserves which companies are most certain about being able to produce and which have existing production facilities (wells, platforms, pipelines), or are under development or have firm plans in place for development. To be classified as proved reserves, companies should be more than 90 per cent certain of being able to recover the natural gas in the reserves (so these reserves are also sometimes called P90 reserves). There are also other reserves which companies are less certain about whether they will be able to recover: these are the probable and possible reserves. While there is less certainty about these reserves, they are still assets for which the companies are already putting infrastructure in place to develop or they have some active plans to do so. Companies tend to use the "2 P" reserves (proved and probable) in their internal business planning processes, though it is the "1 P" reserves which tend to get quoted externally, for example, in stock market reports.
Prospective resourses
These "3P reserves" will, in turn, always represent only a portion of the total natural gas which is actually physically in place in the geographical space. Some of the natural gas resources may not be commercial for a company to develop under current market conditions or the financial terms on offer by the Government. For example, they may be in complex or small gas accumulations which are expensive to develop. New technology or changing economic conditions can make these resources commercially feasible to develop in the future. Some of the natural gas may never be recoverable, even with new technology and different commercial conditions.
According to many reports, there are a number of smaller gas fields in T&T that companies have good data about, but which they are not currently planning to develop, given the prevalent commercial conditions.These would not show up in the reserves data, though the companies are reasonably certain about their existence. There are also prospective resources: these are the accumulations of hydrocarbons that have yet to be discovered through exploration drilling, but which the existing geological data suggests might be resources that could be developed. The Ryder Scott audit also considers these undiscovered or exploration resources, primarily through reviewing the Ministry of Energy's data on "leads" indicated in its analysis of the available geological data.
Reserves can go up or down
It is important to note that reserves can increase over time, through a number of different methods, including new exploration activity, re-interpretation of the data on existing reserves, changing technology or changing economic conditions. In T&T, we experienced a major increase in reserves in the period 1994-2000. This increase in reserves came about as companies developed gas reserves to supply the Atlantic facility, which came on stream during this period (See graph). Since then we have seen declines in the proved reserve category, with high levels of annual natural gas production (up to 1.5 trillion cubic feet per annum) there are more limited development of new reserves. The high levels of production and lower levels of new reserve development have led to the decline in proved reserves since 2000. It should be noted, however, that this decline is not linear and that there has been some level of reserve replacement, though nowhere near the 100 per cent reserve replacement that should be our target.
Sustained exploration
New reserves can be added from both exploration resources and from currently uneconomic contingent resources. In terms of turning exploration resources into reserves, the key is to get rapid and sustained exploration activity underway in available acreage. During the presentation of the audit report, the Ministry of Energy and Energy Affairs outlined some of the future expected exploration activity on the acreage allocated in the 2010 shallow and average water bid round. The ministry identified five exploration wells within North Coast Marine blocks and a further well in the East Coast block 4b-all considered to be gas-prone areas-which are due to be drilled in the next 30 months.
They also indicated that seismic data acquisition was due to take place in some of the existing producing blocks, suggesting that new exploration activity was being considered in those areas. While this news is positive, there is a need for sustained activity over many years to ensure that we are able to fully replace the existing high levels of production. Reserves can also be added from the currently uneconomic contingent resources. In some cases, this is merely a matter of time: once companies have developed their current reserves, they will move onto the less attractive smaller reservoirs, which will become more economic if nearby infrastructure is in place. However, developing these resources is also a matter of having an available market to sell the gas at a competitive price. Fiscal terms and the legal framework can have a major impact on whether and how these resources are developed. As the Minster of Energy and Energy Affairs made clear in his presentation at the launch of the audit report, ensuring that there is a market for gas is key to adding new gas reserves.
In T&T the upstream, mid-stream and downstream gas industries are inexorably linked and development plans need to examine the entire value chain. This makes planning and achieving a balance between the competing demands all the more challenging. Increasing understanding of gas reserves is an important element of ensuring a more informed discussion about the various priorities and the future of the gas industry.
ENERGY CHAMBER
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