Given T&T’s reliance on the energy sector as its main avenue for revenue generation, it is imperative all citizens are able to grasp certain key energy-sector-related-concepts.
In many instances, issues and concepts related to the T&T energy sector, such as its performance, shortcomings, and possibilities are aired publicly.
Although these issues and concepts may be straightforward to many within the industry, a large percentage of the population still experience some difficulty in understanding them.
As the representative business association for the T&T energy sector, the Energy Chamber is compelled to educate the public and raise awareness about the sector while continuing to encourage dialogue around energy sector issues.
What is meant by the energy sector?
In the first instance, any discussion about the energy sector must begin with an understanding of the term. Simply put, the energy sector is a broad term used to summarise all of the industries involved in the production and sale of energy (oil and gas) including exploration, extraction, refining, manufacturing, marketing and distribution. It also includes the processing and utilisation of natural gas as fuel feedstock, power generation and all other ancillary services. The sector is divided into the three parts, namely, upstream (exploration and production), midstream (transmission) and downstream (manufacturing, processing, retail) sector. Thus, the relationship among these sub-sectors is referred to as the energy/oil and gas value chain. The country’s major exports are liquefied natural gas (LNG), crude oil, ammonia, methanol, and urea. The T&T oil and gas industry supplies the local economy as well as regional, extra regional and foreign markets with these and other energy commodities. The Point Lisas Industrial Estate is the downstream hub of the T&T energy sector and houses world class companies involved in a range of petrochemical production activities. By itself, the sector represents about 45.3 per cent of the total value of goods and services produced in T&T (gross domestic product or GDP), 82.3 per cent of total merchandise exports and contributes more than 50 per cent of government revenue.
The upstream sector (E&P)
The upstream sector is characterised by oil and gas exploration and production. The majority of the major players in the upstream energy sector are foreign owned companies (eg, BG T&T, bpTT, Centrica, and Repsol). However, local companies also engage in exploration and production activities, such as Petrotrin and Ten Degrees North Energy Ltd. Drilling and rig activity are good indicators of upstream performance. Recently, there has been significant growth in development drilling activity and the presence of new exploration activity for the first time in several years. Over the past 18 months, both rig rates and the total feet drilled have shown very positive growth (See Figures 1 and 2). In fact, the total depth drilled increased significantly between 2009 and 2011 (an increase of more than 100 per cent). Also, overall rig activity has been improving since January 2012, the month in which the highest number of rigs was recorded since June 2008 (13 rigs). There were 12 rigs (six marine and six land) operating in April 2012. The jump in rig activity over the period was as a consequence of new rigs being deployed by Bayfield, Petrotrin and Primera Oil and Gas Ltd (a wholly-owned subsidiary of Touchstone Exploration Inc).
As it relates to production, the production of total crude oil is made up of both crude oil and condensate production. ondensates are valuable liquids (produced along with natural gas) which form a significant part of T&T’s overall crude oil production. The level of total crude production has been on a downward trajectory since 2010 - the first year since 1958, in which production fell below 100,000 barrels of oil per day (bopd). Moreover, between January 2010 and April 2012, the overall level of crude oil and condensate production continued on its downward path—a 22 per cent decline (See Figure 3). Although the level of crude oil production has increased marginally between April 2011 and April 2012, the significant decline (a 57 per cent decline) in condensate production over the last two years has negatively impacted on the level total crude oil production. While onshore production has been relatively steady between 2008 and 2011, there was a 21 per cent slip in offshore production. In April 2012, the production of oil from the onshore sector averaged 23,036 bopd while offshore production averaged 59,340 bopd.
Natural gas production
The production of natural gas is dominated by large multinational companies, namely, bpTT, EOG Resources and BG T&T. The structure of the natural gas industry is such that about 60 per cent is liquefied for export (LNG), while the remainder is used for the domestic petrochemical industry and power generation. Atlantic—formerly known as Atlantic LNG—is responsible for the production of LNG for export, via its four production Trains (See Figure 3). NGC has a ten per cent stake in Train 1 and 11.1 per cent of Train 4.
The midstream sector
The refining of crude oil and the transportation, distribution, marketing of natural gas or crude oil are referred to as midstream activities. The process of refining involves those activities involved in transferring the primary product from the upstream sector for use by end-markets. Locally, the National Gas Company is responsible for the sale, distribution, and transmission of natural gas to the downstream petrochemical plants on the Point Lisas Estate and to power generators (T&TEC and Powergen). The National Energy Corporation—a subsidiary of NGC—links the energy sector to manufacturing and seeks to attract investment lower down the value chain. The latter includes attracting investment for the manufacture of adhesives, plastics, polymers (paint), and Tupperware.
The downstream energy sector
In T&T, the production of petrochemicals is the major activity involved in the downstream energy sector. Petrochemicals are derived from natural gas and they make up the building blocks of other chemical materials such as plastics, resins, lubricants, and gels. The three main petrochemicals produced in T&T are ammonia, methanol and urea, where Trinidad is the world’s leading producer of ammonia and methanol. Since mid-2011, there have been significant production constraints in the upstream gas sector, which were especially pronounced in October and November 2011. This decline in production was as a result of maintenance work and safety upgrades of natural gas production platforms, which resulted in cutbacks in natural gas supply—feedstock for these products. However, the shortfall in petrochemical production has continued (to a lesser degree) through the first four months of 2012 (See Figure 4)
In the coming weeks, the Energy Chamber will continue to share crucial information on the energy sector as this sector drives our economy as is critical to the country’s short-, medium- and long-term development.