Nadaleen Singh

Whether it was protests, suc­cess­ful bid rounds or a ma­jor gas dis­cov­ery, 2012 was a piv­otal year for the lo­cal en­er­gy sec­tor as it strug­gled to re­verse the sec­u­lar de­cline in pro­duc­tion of both oil and nat­ur­al gas.

The en­er­gy sec­tor con­tin­ues to be the main dri­ver of gov­ern­ment rev­enues and ex­ports with of­fi­cial es­ti­mates putting its con­tri­bu­tion at 45 per cent of GDP and 82 per cent of mer­chan­dise ex­ports in 2011.

In 2012, the Gov­ern­ment's fis­cal 2012 bud­get cal­cu­la­tion was based on an oil price of US$75 per bar­rel and a nat­ur­al gas price of US$2.75 per mil­lion met­ric British ther­mal units (mmB­tu)). This can be com­pared to gov­ern­ment's fis­cal 2011 bud­get cal­cu­la­tion, which was based on an oil price of US$65 per bar­rel and a nat­ur­al gas price of US$2.75 per mmb­tu.

There were many is­sues which the en­er­gy sec­tor faced in 2012, in­clud­ing gas cur­tail­ment. In an on­line ar­ti­cle on the ICIS News, not­ed for chem­i­cal in­dus­try news and mar­ket in­tel­li­gence, an of­fi­cial from the Na­tion­al Gas Com­pa­ny was quot­ed as say­ing in­creased gas cur­tail­ments were ex­pect­ed in 2012.

"Cur­tailed de­liv­er­ies of nat­ur­al gas to chem­i­cal pro­duc­ers in Trinidad will like­ly con­tin­ue, with re­duc­tions of ten to 20 per cent in 2012, an of­fi­cial with the NGC of T&T said.

"The nat­ur­al gas cur­tail­ments to chem­i­cal pro­duc­ers in the Point Lisas in­dus­tri­al com­plex will con­tin­ue for the fore­see­able fu­ture as BP con­tin­ues to sys­tem­at­i­cal­ly per­form safe­ty main­te­nance pro­ce­dures on its well plat­forms," said NGC vice pres­i­dent Wade Hamil­ton.

BP is the largest of four com­pa­nies that sup­ply nat­ur­al gas to Trinidad. Fol­low­ing the 2010 ac­ci­dent at BP's Ma­con­do well in the Gulf of Mex­i­co, BP has been per­form­ing safe­ty in­spec­tions and main­te­nance on its wells in the wa­ters around Trinidad," the ar­ti­cle stat­ed.

In Feb­ru­ary, Petrotrin was able to over­come a huge chal­lenge as work­ers threat­ened to strike on the Car­ni­val week­end. The work­ers sub­se­quent­ly end­ed the strike af­ter suc­cess­ful wage ne­go­ti­a­tions were reached be­tween Oil­field Work­ers' Trade union and Petrotrin man­age­ment. They agreed on a wage of­fer of nine per cent, which set the new bench­mark for wage set­tle­ments in the coun­try-up sig­nif­i­cant­ly from the 5 per cent ceil­ing that the Gov­ern­ment had at­tempt­ed to im­pose in 2011.

Al­so in Feb­ru­ary, NGC an­nounced it was seek­ing to in­vest a to­tal of $1.74 bil­lion on lo­cal ma­jor projects for 2012 and most of those projects were geared to­wards pipeline and in­fra­struc­ture projects to im­prove the oil and gas in­dus­try.

The US$5.3b Sabic deal

In Feb­ru­ary, Sau­di Ba­sic In­dus­tries Cor­po­ra­tion (Sabic) an­nounced plans to con­struct and op­er­ate a US$5.3 bil­lion methanol to petro­chem­i­cal com­plex and a plant that would con­vert methanol to olefins, a syn­thet­ic fi­bre used to make wall­pa­per, ropes, and ve­hi­cle in­te­ri­ors.

Lat­er in that same month, then Unit­ed States Am­bas­sador to T&T, Beat­rice Wilkin­son Wel­ters, wrote to the Gov­ern­ment rais­ing con­cerns about its pro­pos­al to award two projects worth US$5.3 bil­lion to a con­sor­tium led by Sabic. The am­bas­sador's let­ter fol­lowed ma­jor ob­jec­tions raised by US in­ter­ests that they had been un­fair­ly by­passed in favour of the Saud­is.

The Ju­bilee dis­cov­ery

In March, NGC an­nounced it need­ed to re­con­sid­er its role in the trad­ing of nat­ur­al gas, with the state-owned com­pa­ny de­cid­ing to as­sume re­spon­si­bil­i­ty for the mar­ket­ing of nat­ur­al gas equal to its 11.11 per cent stake in At­lantic LNG Train IV, which start­ed pro­duc­tion in De­cem­ber 2005.

The re­spon­si­bil­i­ty for mar­ket­ing NGC's eq­ui­ty gas had been con­trolled by BP be­tween 2006 and 2012, but with sharp dis­par­i­ties de­vel­op­ing be­tween nat­ur­al gas prices on the spot mar­ket com­pared with long-term con­tracts, NGC jumped at the op­por­tu­ni­ty to sell its nat­ur­al gas.

Lat­er in March, Petrotrin an­nounced the Ju­bilee oil dis­cov­ery off south­west Trinidad, es­ti­mat­ed by Prime Min­is­ter Kam­la Per­sad-Bisses­sar at 48 mil­lion bar­rels. The dis­cov­ery was named Ju­bilee in ho­n­our of T&T's 50th An­niver­sary of In­de­pen­dence.

Then Petrotrin pres­i­dent-des­ig­nate Khalid Has­sanali, in an­nounc­ing the find, said it was the first ma­jor oil dis­cov­ery in ten years and would be of ma­jor eco­nom­ic ben­e­fit. The last dis­cov­ery was in the mid-1980s, al­so off the south­west coast near Sol­da­do.

In April, Lar­ry Howai, then chair­man of the NGC, said he ex­pect­ed NGC and a con­sor­tium com­pris­ing, Sabic and Chi­na's Sinopec to reach a gas agree­ment with­in the three-month dead­line Cab­i­net gave to the two par­ties.

Howai re­port­ed­ly said: "We have an­oth­er round of dis­cus­sions com­ing up in a short while and Cab­i­net had giv­en us a three-month dead­line and, com­fort­ably, we should be in a po­si­tion to achieve that dead­line."

In ear­ly Ju­ly, NGC con­firmed it signed a gas sales con­tract with Methanol Hold­ings Trinidad Ltd for the AUM II com­plex lo­cat­ed at Point Lisas, Cou­va.

Com­pet­i­tive bid round

In Sep­tem­ber, En­er­gy Min­is­ter, Keven Ram­nar­ine cel­e­brat­ed 12 bids for five blocks. The ac­com­plish­ment was con­sid­ered the most suc­cess­ful bid round in more than a decade. There was re­al com­pe­ti­tion for blocks in the deep wa­ters off T&T.

Just be­fore the start of the con­fer­ence on the econ­o­my host­ed by the Uni­ver­si­ty of the West In­dies in Oc­to­ber, for­mer Cen­tral Bank Gov­er­nor Ewart Williams pre­dict­ed a gloomy pic­ture for the en­er­gy sec­tor for 2012. He ex­pressed con­cern there was lit­tle at­tempt to di­ver­si­fy the econ­o­my from oil and gas.

WGTL?law­suit set­tled

Hav­ing "in­her­it­ed" a se­ries of com­plex le­gal dis­putes, the Gov­ern­ment was suc­cess­ful in an ar­bi­tra­tion held in Toron­to, Cana­da. The ar­bi­tra­tion pro­ceed­ings were be­tween Petrotrin and World Gas-To-Liq­uid Inc plant and WGTL St Lu­cia over a con­tract to con­struct and op­er­ate a gas-to-liq­uid plant on Petrotrin's re­fin­ery com­pound at Pointe-a-Pierre.

Ac­cord­ing to a state­ment by At­tor­ney Gen­er­al Anand Ram­lo­gan, the tri­bunal is­sued and award de­clar­ing "WGTL Inc and WGTL St Lu­cia breached their oblig­a­tions un­der the guar­an­tee con­tri­bu­tion agree­ment by fail­ing to trans­fer shares of WGTL to Trinidad up­on the sec­ond an­niver­sary of the date on which each over-con­tri­bu­tion ad­vance was made, and fail­ing to take the steps re­quired to en­sure that such shares were is­sued."

The tri­bunal al­so "or­dered WGTL to trans­fer $9,398,211 com­mon shares of WGTL Trinidad to Petrotrin."

Al­ter­na­tive en­er­gy

"We have been seek­ing to op­ti­mise the ben­e­fits which ac­crue from our en­er­gy re­sources. To this end, we have been en­cour­ag­ing in­vest­ment in the pro­vi­sion of re­tail dis­pens­ing of com­pressed and liq­ue­fied nat­ur­al gas as the ba­sis for re­duc­ing the use of gaso­line fu­el and, by ex­ten­sion, fu­el sub­sidy pay­ments."

Some of these ben­e­fits in­clude:

• A tax al­lowance of 50 per cent of the ex­pen­di­ture in­curred in the pur­chase of re­tail dis­pens­ing of com­pressed and liq­ue­fied nat­ur­al gas up to a max­i­mum of $2 mil­lion per sta­tion, exlud­ing in­stal­la­tion costs.

• A re­duc­tion in im­port du­ty by 50 per cent on ve­hi­cles which are man­u­fac­tured to use nat­ur­al gas

• Wear and tear al­lowances ef­fec­tive Jan­u­ary 1, 2012

Val­ue added tax

The Board of In­land Rev­enue was giv­en the le­gal au­thor­i­ty to is­sue and utilise elec­tron­ic in­voic­ing.

"Giv­en ad­vances in the field of tech­nol­o­gy, the Board of In­land Rev­enue will be giv­en the le­gal au­thor­i­ty to is­sue and utilise elec­tron­ic in­voic­ing, sub­ject to the procla­ma­tion of the Elec­tron­ic Trans­ac­tions Act, 2010."

The 2011 bud­get state­ment: the en­er­gy sec­tor

In his 2011 bud­get state­ment, then Fi­nance Min­is­ter Win­ston Dook­er­an made the an­nounce­ment of a re­duced pe­tro­le­um prof­it tax from 50 per cent to 35 per cent.

"It was de­ter­mined that ef­fec­tive tax was too high and need­ed to be re­duced to pro­vide an in­cen­tive to com­pa­nies. Gov­ern­ment has agreed that a re­duced pe­tro­le­um prof­its tax rate of 35 per cent in re­spect of prof­its from deep­wa­ter blocks," the 2011 bud­get stat­ed.

Dook­er­an al­so sig­nalled in the 2011 bud­get state­ment "there is a great need to re­vi­talise ac­tiv­i­ty in the sec­tor. We will re­vise the sup­ple­men­tal pe­tro­le­um tax regime. Un­der the new sys­tem, base rates and a slid­ing scale mech­a­nism will be in­tro­duced for both markein and land op­er­a­tions."

Dook­er­an al­so an­nounced mea­sures to sup­port al­ter­na­tive en­er­gy use, such as ini­tia­tives to boost the use of com­pressed nat­ur­al gas and so­lar wa­ter heat­ing.

The 2012 bud­get state­ment

New pe­tro­le­um li­cences:

The li­cens­ing regime is the le­gal frame­work for ad­min­is­ter­ing and reg­u­lat­ing pe­tro­le­um pe­tro­le­um op­er­a­tions. The li­cences are is­sued un­der Reg­u­la­tion 3 of the Pe­tro­le­um Act, Chap­ter 62:01.

"Mr Speak­er, we shall raise from $4,000 to $40,000 the fees for the fol­low­ing se­ries of li­cences in or­der to re­flect a more rea­son­able cost of reg­u­lat­ing the in­dus­try. The eight li­cences are as fol­lows:

- an ex­plo­ration li­cence

- an ex­plo­ration and pro­duc­tion li­cence (pub­lic and pri­vate pe­tro­le­um rights li­cence)

- a re­fin­ing li­cence

- a liq­ue­fac­tion of nat­ur­al gas li­cence

- Trans­porta­tion li­cence

- Mar­ket­ing li­cence

- A petro­chem­i­cal li­cence