At least for the next decade, there is no doubt that the energy sector will remain this country's most important contributor to economic growth, foreign exchange earnings and the primary source of government revenues. The energy sector, it is estimated, generates about 36 per cent of T&T's GDP.
But there is also little doubt that T&T's oil and natural gas reserves, and its production of oil, have been in decline for a number of years.
The Central Bank's January 2011 Economic Bulletin, citing information from the Ministry of Energy, indicated that the country's oil production, which comes mostly from mature fields, declined to under 100,000 barrels of oil per day in the fourth quarter of 2010. According to the Central Bank report, this isthe first time in more than 50 years that T&T's oil production slumped to below 100,000 per day and it meant that oil production was down eight per cent in the July to November, 2010, period compared with the same period in 2009. Natural gas production, meanwhile, increased by about 13 per cent between the first quarter of 2009 and the fourth quarter of 2010.
The irony here is that T&T's oil production is declining at a time when global oil prices are high and its natural gas production is increasing at a time when global prices for that commodity are low. For T&T to experience higher oil and natural gas production into the future, there must be an aggressive programme of exploration, discovery and monetisation of our energy resources. Such a programme of increasing T&T's proven reserves of oil and natural gas is important as it is the only way that the country will be able to continue to finance the type of lifestyles to which the population has become accustomed as well as finance the important drive of the diversification of the economy away from its current dependence on energy-sector revenues.
Given the maturity of T&T's onshore and near-shore oil and gas fields, experts have opined for years that the future of T&T's upstream sector lies in exploration and exploitation of its deep-water blocks.
In a sense, therefore, the country's medium-term ability to finance diversification as well as public sector wage increases, subsidies on inter-island transport, gasoline, housing, education, pharmaceuticals, healthcare, as well as infrastructural upgrades, depends on the success of the search for new sources of oil and natural gas. There was an interesting barometer of possible success on Friday when the Ministry of Energy revealed the number of bids that it had received for deepwater blocks.
By most objective yardsticks, the bid process was not the success that Minister of Energy Carolyn Seepersad-Bachan has tried to make it out to be. Of the 11 deepwater blocks that were put up for bid, there were no proposals received for eight blocks. In other words, there was no interest by international energy companies in 72 per cent of the deepwater blocks that T&T was seeking to develop. Secondly, two of the three blocks that attracted bids received only one bid, which means that there were competitive bids on only one of the 11 blocks available. Block 23(b) received one bid from a consortium of BHP and Repsol and Block TTDAA14 received one bid from BP. One field, Block 23(a), received three bids from BP, Niko and a consortium of Repsol, BHP and Total. While the bidding process was not the disaster of 2006 when one bid was received for one block, can the fact that the Ministry of Energy received five bids on three blocks be described as a success?
If so, it could be that T&T's measurement of success has been lowered in the last five years-despite the significant incentives for deepwater exploration contained in the new fiscal regime and the amount of time and money spent on putting the bid process together. Now, it may be that the ministry would prefer to have a few high-quality bids on three blocks than many lower-quality bids on all 11. If that is the case, the question that must be asked is why is T&T not attracting a larger number of high-quality players in the global energy firmament to its shores. The question is especially relevant in light of yesterday's announcement that BP, the parent company of bpTT, was prepared to pay US$7.2 billion for, among other things, a 30 per cent stake in 23 deepwater oil and gas blocks in India. The country expects answers from the minister in the near future.