Trinidad and Tobago should take no comfort from the fact that its oil is benchmarked against Brent and not West Texas Intermediate which crashed to below zero dollars for a barrel of oil according to Energy Consultant Anthony E. Paul.
According to Paul the price of Brent crude will also be negatively impacted as storage capacity begins to run out for global producers.
Speaking yesterday on CNC3’s the Morning Brew, Paul said: “I suspect that there will be some fallout with Brent as well, as storage gets to be low and it is quite low right now.”
The energy consultant also remarked that T&T benchmarks its gas against Brent as well, which means that the country will face challenges in the foreseeable future as it pertains to energy prices.
Paul commented: “So as this drags out, things will start to get a little tricky in terms of price, demand will stay down for some time, yet we don’t know how long.”
As that occurs, Paul added that a lot of producers would be shaken out, as people would halt their investments in the sector. Paul noted that US Shale producers and their banks are also in trouble, and wonders what the ripple effect of that might be.
With regard to Heritage Petroleum, Paul revealed that the enterprise has two main difficulties. He said: “Not only have they not gotten markets to put their products into, they also have real challenges with storage.”
Paul recalled that Petrotrin also struggled before with accessing proper storage. While, T&T has a lot of facilities that can provide storage - at Point Fortin for instance, Paul said that the country did not maintain the assets.
He continued: “We did not prepare for this kind of situation with shortage of storage globally.”
In a recent interview with Guardian Media, Energy Minister Franklin Khan said that Heritage already exported its shipment for April and Heritage will be looking at the market to determine what it should do.
He explained: “Luckily they (Heritage) have storage capacity for about three months and they keep monitoring the market on a daily basis as to when to make their next shipment.”
Meanwhile, when asked if T&T has the ability to store Paul said: “We have some, the challenge is how much do we have, because we all know the condition of those tank farms that Petrotrin used to manage and the quality of the tanks and the fact that many of them are in disrepair.”
Paul added that at the moment, there is no reason to store refined product, except for the imported product. He expressed that the issue is produced oil, noting that the produced oil levels are high.
He articulated that there are field storage tanks that have to be emptied and moved into a refinery area where bonds and big storage products are. Paul argued that this raises a question of the quality of those storage tanks because the tanks at Point Fortin have not been used for years and he is unaware of their condition.
In a press release on Monday, Heritage noted that it plans to sell scrap iron to generate revenue while cutting its expenditures. The company also revealed that it has capacity to hold three and a half million barrels of oil.