En­er­gy Cham­ber

In 2012, con­tin­ued glob­al eco­nom­ic un­cer­tain­ty, price swings in ma­jor en­er­gy com­mod­i­ty ex­ports, mod­est growth pro­jec­tions for Latin Amer­i­can and Caribbean coun­tries as well as en­dur­ing risk aver­sion by in­vestors have all weighed on T&T's en­er­gy sec­tor. In some cas­es, these phe­nom­e­na-ei­ther pos­i­tive­ly or neg­a­tive­ly-af­fect­ed the coun­try's en­er­gy sec­tor. In the first half of 2012, T&T's en­er­gy sec­tor per­for­mance was char­ac­terised by a mi­nor re­cov­ery in down­stream petro­chem­i­cal pro­duc­tion, more vig­or­ous ex­plorato­ry drilling, a con­tin­ued de­lay/lag in the start-up of new down­stream project con­struc­tion and wan­ing en­er­gy ser­vices sec­tor op­ti­mism.

Here are a few of the en­er­gy sec­tor high­lights for the first half of 2012:

Up­stream ac­tiv­i­ty: ex­plorato­ry drilling and rig rates soar

The lead­ing in­di­ca­tors of buoy­an­cy in the up­stream sec­tor are drilling ac­tiv­i­ty and rig mo­bil­i­sa­tion rates. In 2012, drilling ac­tiv­i­ty and rig rates con­tin­ued to be at their high­est lev­els since 2008. De­vel­op­ment drilling in 2012 has been mod­est com­pared to 2011, with just over 160,000 feet drilled. In con­trast, ex­plo­ration drilling has sky­rock­et­ed. In fact, ex­plorato­ry drilling for the first six months of 2012 was 34,155 feet drilled while for all of 2011 the to­tal was 36,334 feet drilled. With six more months to go in the year, ex­plorato­ry drilling is an­tic­i­pat­ed to be at its high­est lev­el in four years (See Chart 1). How­ev­er, de­spite these fig­ures, a sig­nif­i­cant ta­per­ing off of to­tal drilling ac­tiv­i­ty be­tween Feb­ru­ary 2012 and May 2012. For the month of Feb­ru­ary 2012, there was a to­tal depth drilled of just over 45,000 feet; the high­est month­ly drilling fig­ure in two years (See Chart 2). Rig ac­tiv­i­ty was al­so strong in the first half of 2012 as, up to June there were four off­shore rigs op­er­at­ing and three on land (See Chart 3). Rigs mo­bil­i­sa­tion rates are now near to pre-2008 lev­els. While these in­di­ca­tors send pos­i­tive sig­nals, they have not trans­lat­ed to a sig­nif­i­cant in­crease in oil pro­duc­tion. Up to June, crude oil pro­duc­tion has av­er­aged 82,885 bar­rels of oil per day and con­den­sate pro­duc­tion has av­er­aged 14,337 bar­rrels per day, a 20 per cent pro­duc­tion de­cline when com­pared to 2010. In keep­ing with the Gov­ern­ment's man­date to in­crease oil pro­duc­tion, En­er­gy Min­is­ter Kevin Ram­nar­ine an­nounced that there will be a new bid round for land ex­plo­ration in Q4 2012. This bid round cou­pled with the 2012 deep wa­ter com­pet­i­tive bid round will hope­ful­ly re­sult in greater drilling and rig ac­tiv­i­ty and high­er lev­els of crude oil pro­duc­tion over the next 6 to 10 years.

Mid­stream/ down­stream per­for­mance

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 Chart 4). The first five months of 2012 (Jan­u­ary to May) saw a marked im­prove­ment in the pro­duc­tion of our ma­jor petro­chem­i­cals, when com­pared to the last five months of 2011 (Au­gust to De­cem­ber). The pro­duc­tion of am­mo­nia and urea im­proved by ap­prox­i­mate­ly 3.0 per cent and 4.0 per cent re­spec­tive­ly, where methanol record­ed the high­est in­crease in pro­duc­tion of 10 per cent . BGTT and bpTT were able to com­plete a part of their main­te­nance work in Q1 2012, and were able to flow gas nor­mal­ly for some time dur­ing this pe­ri­od. How­ev­er, there is ad­di­tion­al main­te­nance work to be per­formed on off­shore sup­ply sys­tems which will re­quire oth­er parts of the sys­tem to be shut down. This will cause oth­er gas sup­ply is­sues lat­er this year, es­pe­cial­ly dur­ing Sep­tem­ber 2012.

NGC: project de­vel­op­ments

At a re­cent En­er­gy Cham­ber lun­cheon, the new­ly ap­point­ed Na­tion­al Gas Com­pa­ny Pres­i­dent In­dar Ma­haraj an­nounced the re­open­ing of a $24 mil­lion fund es­tab­lished to as­sist man­u­fac­tur­ers im­prove their en­er­gy ef­fi­cien­cy. The fund will be open to lo­cal and re­gion­al in­vestors for en­er­gy ef­fi­cien­cy ini­tia­tives as well as com­pa­nies in­vest­ing in melamine-de­riv­a­tive man­u­fac­tur­ing. Ma­haraj said the fu­ture di­rec­tion of the com­pa­ny al­so cen­tered on in­creas­ing rev­enue streams from do­mes­tic mar­kets and al­so sup­port­ing na­tion­al busi­ness de­vel­op­ment. He al­so added that NGC will al­so now be mar­ket­ing and sell­ing its share of LNG from At­lantic to in­ter­na­tion­al mar­kets where it is ex­pect­ed to get high­er prices. Ma­haraj pri­or­i­tized for­eign mar­kets such as Tan­za­nia, Nige­ria, Mozam­bique and Ghana and the re­cent­ly signed a tech­ni­cal ser­vices agree­ment with the Tan­za­nia Pe­tro­le­um De­vel­op­ment Cor­po­ra­tion.

Ser­vices sec­tor op­ti­mism wanes

Based on the en­er­gy ser­vices sec­tor sur­vey, for the past two quar­ters (Q1 and Q2, 2012) op­ti­mism con­tin­u­ous­ly de­clined. This drop in the lev­el of op­ti­mism could be at­trib­uted to the fact that many of the projects that were ex­pect­ed in the down­stream sec­tor have not yet ma­te­ri­alised, a mar­gin­al drop in the rig rate in Q2 and gen­er­al con­cerns about the state of the glob­al and lo­cal econ­o­my. In terms of the val­ue and vol­ume of busi­ness, most re­spon­dents in­di­cat­ed that their val­ue and vol­ume of busi­ness was down the past three months. Al­so, most sur­vey re­spon­dents do not ex­pect an in­crease in the val­ue or vol­ume of busi­ness in the next quar­ter (Q3 2012). In fact, more than half of the re­spon­dents hold this view. The rest of 2012 will be char­ac­terised by con­tin­ued in­vest­ments and ac­tiv­i­ty in the up­stream sec­tor with ques­tions still hang­ing over planned down­stream projects. This will con­tin­ue to af­fect lev­els of op­ti­mism in the en­er­gy ser­vices sec­tor. The bot­tom line here is that the en­er­gy ser­vices sec­tor grows best when there is a con­stant stream of projects such as drilling for oil and gas and con­struc­tion of new petro­chem­i­cal plants. When­ev­er there is a hia­tus in the pipeline of en­er­gy projects, the en­er­gy ser­vices sec­tor ei­ther base­lines or shrinks.

Con­clu­sion

In the sec­ond half of 2012, there are sev­er­al im­por­tant en­er­gy sec­tor de­vel­op­ments to look for­ward to. These in­clude: the re­lease of the lat­est Ry­der Scott au­dit re­sults, the un­veil­ing of the coun­try's na­tion­al en­er­gy pol­i­cy and en­er­gy ef­fi­cien­cy pol­i­cy, the re­sults of this year's deep wa­ter bid round as well as any new de­vel­op­ments sur­round­ing the start of con­struc­tion at the MHTL AUM 2 site and the Carisal cal­ci­um chlo­ride plant site. As al­ways, the En­er­gy Cham­ber will keep an eye on these de­vel­op­ments and their ram­i­fi­ca­tions on the sus­tain­able de­vel­op­ment of the coun­try's en­er­gy sec­tor.

For more in­for­ma­tion on the ar­ti­cle con­tact Sher­win Long at sher­win@en­er­gy.tt, Naz­era Ab­dul-Haqq at re­searchof­fi­cer@en­er­gy.tt or Priya Mara­jh at priya@en­er­gy.tt or vis­it www.en­er­gy.tt