Aleem Khan

Al­though it's pro­duc­tion has been falling, T&T's largest hy­dro­car­bons pro­duc­er bpTT has dou­bled its acreage over the last year and plans to in­vest a fresh US$5 bil­lion ($32 bil­lion) over the next five years.

"Should con­di­tions re­main favourable, we plan to in­vest US$5 bil­lion in T&T over the next five years. These in­vest­ments are not guar­an­teed. As stat­ed in my pre­sen­ta­tion at the En­er­gy Cham­ber con­fer­ence in Jan­u­ary, these in­vest­ments will be var­ied and are de­pen­dent on above-the-ground fac­tors re­main­ing fa­vor­able," Nor­man Christie, bpTT re­gion­al pres­i­dent said in an e-mail re­ply to Busi­ness Guardian queries on Tues­day.

BPTT was asked to con­firm in­for­ma­tion in a re­port by the British re­search and con­sult­ing firm, Wood Macken­zie, and fi­nan­cial ser­vices com­pa­ny, Mor­gan Stan­ley. A ta­ble in the re­port said the par­ent com­pa­ny, BP, will in­vest US$5 bil­lion in cap­i­tal ex­pen­di­ture (capex) in T&T in a shal­low wa­ter brown­field (ex­ist­ing, on­stream field). Over the full field life, the es­ti­mate is that BPTT will have an in­ter­nal rate of re­turn of 16.7 per cent.

The re­searchers es­ti­mat­ed the brown­field to hold 64 mil­lion bar­rels of liq­uids (mmb­bl) and 6.386 tril­lion cu­bic feet (tcf) of gas. This US$5 bil­lion would make the bpTT as­sets re­cip­i­ent of the fourth largest capex BP is ex­pect­ed to spend world­wide. T&T is be­hind Iraq (US$10.5 bil­lion), Azer­bai­jan (US$6 bil­lion) and the Unit­ed States' deep­wa­ter Gulf of Mex­i­co (US$6 bil­lion).

Asked to con­firm the re­serve es­ti­mate, Christie said: "We do not com­ment on re­serves oth­er than that what is re­port­ed in the BP an­nu­al re­port. The on­go­ing ques­tion is whether ac­cess­ing what is out there will be eco­nom­ic."

He pref­aced his re­ply say­ing: "BP op­er­ates 13 off­shore plat­forms and two on­shore fa­cil­i­ties in T&T."

He said "the be­low-the-ground fac­tors are sol­id," and "we con­tin­ue to in­vest in ex­plo­ration and ap­praisals be­cause we, and oth­er com­pa­nies like our­selves, are con­fi­dent that there are re­sources of oil and gas out there. We have a healthy re­serve re­place­ment."

Christie said: "With the mat­u­ra­tion of our in­dus­try, there are some im­por­tant is­sues to re­solve to en­sure long-term sus­tain­abil­i­ty. Up un­til now, the nat­ur­al gas mod­el we have used has been pred­i­cat­ed on rel­a­tive­ly low costs, high vol­umes and low mar­gins for up­stream gas play­ers and re­sul­tant low in­put costs for mid-stream and down­stream play­ers.

In­dus­try mat­u­ra­tion

Re­it­er­at­ing an ex­cerpt from his speech at the 2013 En­er­gy Con­fer­ence in Jan­u­ary in Port-of- Spain, Christie said: "With the mat­u­ra­tion of our in­dus­try, there are some im­por­tant is­sues to re­solve to en­sure long-term sus­tain­abil­i­ty. Up un­til now, the nat­ur­al gas mod­el we have used has been pred­i­cat­ed on rel­a­tive­ly low costs, high vol­umes and low mar­gins for up­stream gas play­ers and re­sul­tant low in­put costs for mid-stream and down­stream play­ers.

Christie said among bpTT's con­firmed 2013 plans are "con­tin­u­ing our two rig drilling pro­gramme in the Colum­bus Basin; drilling two ad­di­tion­al wells on Savonette due to the one tcf find from this ex­ist­ing field an­nounced in 2012; pro­gress­ing seis­mic in our ex­ist­ing acreage; and con­tin­u­ing our in­tegri­ty up­grade pro­gramme which is an in­vest­ment in our cur­rent fields."

"We are now see­ing an es­ca­la­tion in costs, in­creased glob­al com­pe­ti­tion and sig­nif­i­cant changes in the risk re­ward dis­tri­b­u­tion across the gas val­ue chain. Ef­fec­tive­ly re­spond­ing to these changes will re­sult in a re­dis­tri­b­u­tion of the slices of the pie in nat­ur­al gas val­ue chains, but I be­lieve it will al­so in­crease the size of the pie be­cause in­vest­ments will in­crease."

Pro­duc­tion falling

In the BP an­nu­al re­port that Christie ref­er­enced, in­vestors were told bpTT's pro­duc­tion has been falling, but a high­light of the re­port was that its acreage has al­most dou­bled. Re­leased at the com­pa­ny's 104th an­nu­al gen­er­al meet­ing at the Ex­Cel Ex­hi­bi­tion and Con­ven­tion Cen­tre in Lon­don on April 11, the re­port said: "In T&T, BP al­most dou­bled its ex­plo­ration and pro­duc­tion li­cences acreage dur­ing 2012, and now holds li­cences cov­er­ing 1,806,000 acres off­shore of the east coast. Fa­cil­i­ties in­clude 13 off­shore plat­forms and one on­shore pro­cess­ing fa­cil­i­ty. Pro­duc­tion is com­prised of oil, gas and nat­ur­al gas liq­uids."

On May 14, 2012, BP an­nounced it had signed two pro­duc­tion shar­ing con­tracts with the Gov­ern­ment of T&T for the two deep­wa­ter ex­plo­ration and pro­duc­tion blocks award­ed in 2011. BP has a 100 per cent in­ter­est in both blocks.

Mean­while, the com­pa­ny's pro­duc­tion has been in steady de­cline over the last three years. Ac­cord­ing to the re­port, bpTT's net pro­duc­tion of liq­uids out of T&T fell from 36,000 bar­rels per day (bbl) in 2010 to 31,000 bbl in 2011 to 21,000 bbl in 2012. Its net pro­duc­tion of nat­ur­al gas out of T&T fell from 2.473 tril­lion cu­bic feet (tcf) of nat­ur­al gas per day in 2010 to 2.193 tcf in 2011 to 2.097 tcf in 2012.

"Our to­tal hy­dro­car­bon pro­duc­tion dur­ing 2012 av­er­aged 2,319 thou­sand bar­rels of oil equiv­a­lent per day (mboe/d). This com­prised 1,963 mboe/d for sub­sidiaries and 355 mboe/d for eq­ui­ty-ac­count­ed en­ti­ties, a de­crease of six per cent (de­creas­es of ten per cent for liq­uids and three per cent for gas) and a de­crease of three per cent (de­crease of three per cent for liq­uids and no change for gas) re­spec­tive­ly com­pared with 2011. For sub­sidiaries, 34 per cent of our pro­duc­tion was in the US, 19 per cent in Trinidad and eight per cent in the UK," the re­port said.

Share­hold­ers were al­so told about bpTT's two ma­jor projects in T&T go­ing for­ward are Ju­niper and Man­akin. When asked about Ju­niper, how­ev­er, bpTT cor­po­rate com­mu­ni­ca­tions man­ag­er Danielle Jones said: "BP is still in the ear­ly stages of con­sid­er­ing op­tions for var­i­ous fu­ture projects in T&T. At this time, nei­ther a for­mal plan nor con­tract has been award­ed for the Ju­niper field, which is one of var­i­ous projects un­der con­sid­er­a­tion by BP in T&T that are be­ing dis­cussed with po­ten­tial ser­vice providers."

bpTT's fields

Ju­niper is a project to de­vel­op BPTT's Coral­li­ta and Lan­tana (CL) fields, ac­cord­ing to BP's Web site. CL is lo­cat­ed about 50 miles south­east of Ga­le­o­ta Point in about 360 feet wa­ter depth. The Web site says: "BPTT has se­lect­ed a sub­sea con­cept for Ju­niper. The project will tar­get five sub­sea wells: three at Coral­li­ta and two at Lan­tana drilled from a moored se­mi-sub­mersible rig. The pro­duc­tion will be tied in­to the ex­ist­ing Ma­hogany B pro­cess­ing fa­cil­i­ties. To en­able this tie-in the project is car­ry­ing out con­cept de­f­i­n­i­tion en­gi­neer­ing for: sub­sea ar­chi­tec­ture (sub­sea well heads, trees, man­i­folds, flow lines, ris­ers, con­trols, um­bil­i­cals); and a new Ma­hogany C sub­sea sup­port plat­form."

Ac­cord­ing to the an­nu­al re­port, the Man­akin gas field, dis­cov­ered in 2000, is al­so in bpTT's acreage.

Un­der "Oth­er en­vi­ron­men­tal ex­pen­di­ture" in BP's an­nu­al re­port, the com­pa­ny said, "we make pro­vi­sions on in­stal­la­tion of our oil- and gas- pro­duc­ing as­sets and re­lat­ed pipelines to meet the cost of even­tu­al de­com­mis­sion­ing."

The lev­el of in­crease in the de­com­mis­sion­ing pro­vi­sion varies with the num­ber of new fields com­ing on­stream in a par­tic­u­lar year and the out­come of the pe­ri­od­ic re­views, the com­pa­ny said. "The sig­nif­i­cant in­creas­es in 2010 and 2011 were dri­ven by changes in es­ti­ma­tion and de­tailed re­views of ex­pect­ed fu­ture costs. The ma­jor­i­ty of these in­creas­es re­lat­ed to our sites in Trinidad, the Gulf of Mex­i­co and the North Sea," the re­port said.

Pay­ments to Gov­ern­ment

BPTT may al­so be­gin re­port­ing pub­licly on pay­ments to the T&T gov­ern­ment, if read­ers are to be guid­ed by BP's an­nu­al re­port. It quot­ed T&T as an ex­am­ple of a coun­try where BP is sup­port­ing full trans­paren­cy.

"As a mem­ber of the Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive (EITI), we work with gov­ern­ments, non-gov­ern­men­tal or­gan­i­sa­tions and in­ter­na­tion­al agen­cies to im­prove trans­paren­cy on rev­enue dis­clo­sures. In sev­er­al coun­tries that are in the process of be­com­ing EITI com­pli­ant, BP is sup­port­ing the process. For ex­am­ple, BP is an ac­tive mem­ber of the T&T EITI steer­ing com­mit­tee. In coun­tries that have achieved EITI com­pli­ance, in­clud­ing Azer­bai­jan and Nor­way, BP sub­mits an an­nu­al re­port on pay­ments to their gov­ern­ments," the re­port said.

The com­pa­ny al­so said in its an­nu­al re­port that in Trinidad, "BPs net share of the ca­pac­i­ty of At­lantic Trains 1, 2, 3 and 4 is 6 mil­lion tonnes of LNG per year. All of the LNG from At­lantic Train 1 and most of the LNG from Trains 2 and 3 is sold to third par­ties in the US and Spain un­der long-term con­tracts. All of BP's LNG en­ti­tle­ment from At­lantic Train 4 and some of its en­ti­tle­ment from Trains 2 and 3 is mar­ket­ed via BP's LNG mar­ket­ing and trad­ing busi­ness to a va­ri­ety of mar­kets, in­clud­ing the Do­mini­can Re­pub­lic, In­dia, Japan, South Ko­rea, Spain, the UK and the US."

BP said its es­ti­mat­ed net proved re­serves of nat­ur­al gas (net of roy­al­ties) in T&T at the end of 2012 was 2,890 bil­lion cu­bic feet of nat­ur­al gas, up from 2,759 bil­lion cu­bic feet at the end of 2011, but down from and 2,921 bil­lion cu­bic feet at the end of 2010. As for oil, the com­pa­ny said it had 14 mil­lion bar­rels of crude oil in es­ti­mat­ed net proved re­serves as at De­cem­ber 31, 2012.

Ac­cord­ing to the an­nu­al re­port, bpTT is a sub­sidiary of BP in­cor­po­rat­ed in the Unit­ed States.

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