EN­ER­GY CHAM­BER

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).

Crude

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.

For more in­for­ma­tion on the ar­ti­cle, con­tact Naz­era Ab­dul-Haqq at: re­searchof­fi­cer@en­er­gy.tt

or Sher­win Long at: sher­win@en­er­gy.tt

www.stowtt.en­er­gy.tt or call: 6-EN­ER­GY.