Prime Minister Dr Keith Rowley recently articulated a vision for the natural gas sector in which he posited that T&T should seek to become the gas processing hub of the Americas.
Speaking at a ceremony to mark the signing of a gas sales agreement between Nutrien and the National Gas Company Ltd, the Prime Minister noted that T&T has significant natural gas infrastructure which it should leverage going forward.
He pointed out that the country is one of the largest exporters of methanol and ammonia in the world and also exports urea, LNG and melamine.
But how is this going to work when for the last eight years the country has suffered a prolonged gas curtailment and, even today, with the improved numbers from bpTT the country’s downstream companies are getting on average between 10 and 15 per cent short on natural gas.
Dr Rowley countered this by saying that the country has had recent natural gas success in deep water and along with gas from Eastern Venezuela and possibly Grenada there may be in the not too distant future opportunities to “expand our downstream production utilising natural gas from our own resources and those from our neighbouring friends which can be easily integrated into our systems and then have value added for our partners and for T&T.”
Business & Money exclusively reported that BHP Billiton found hydrocarbons in four of the five wells it drilled in the deep water, with an estimated 5tcf in the Le Clerc well in addition to a major discovery in its Bongos well north of Tobago.
Any plans for expansion of the downstream sector will be welcomed as existing producers will be expecting that some of the additional gas will be provided to them and bring to an end significant losses of potential revenue they suffered because of the natural gas curtailment. It may also provide an opportunity for them to consider further expansion providing they can get the required quantities at competitive prices.
Energy consultant Helena Innis, who was once responsible for management of the country’s resources, thinks there is need for downstream expansion.
“Think about BHP. Should what they have discovered be about 5tcf of gas, would it be expected that they would sit on it and lay eggs?
“Companies invest a lot of capital in drilling and time value of money is very important, therefore a company cannot be expected to drill now and keep the gas in the ground.
“We have to use it or lose it. The world is not waiting on us and there are all kinds of projects to move away from the use of hydrocarbons.”
Innis said bringing additional gas to market can be a complex problem since it involves—if the gas is not going directly to LNG—negotiation of a gas supply contract with NGC.
She explained: “BHP was able to do it quite easily because the platform already existed and the gas was gravy, so they could have afforded to supply 200mmscfd of gas for the last five years.
“A new entrant into the market with the major capital expenditure and the product being only gas needs to have a substantial project to invest in the installation of a platform and drill wells for a cost of a few hundred million dollars. We may need to take some drastic measures and ensure that gas accumulations close to existing infrastructure are developed and allowed access to production facilities that currently exist. This should keep costs down and therefore allow companies to produce profitably at fairly low rates.
“Laws exist for common carrier pipelines and it could be amended to allow for other facilities to be utilised by others, rather than just the nominal owner. Understand that costs of facilities are ether cost recovered or capital costs are set off against taxes so the defacto owner of the facilities is the State.”
The reality is that in the last decade T&T has only been able to approve one additional downstream project. This lack of growth in the sector is a major reason why the country’s GDP has returned to the 2008 levels.
The Prime Minister’s vision comes more than three years into office and less than two years from a general elections.
Given the usual gestation period for projects in the energy sector, it is perhaps accurate to say this vision will not be realised unless his party is returned to power.