Last week the National Gas Company (NGC) and energy giant BHP announced the completion of a gas sales agreement for the Ruby Field on the east coast. BHP is the operator in partnership with NGC through its subsidiary NGC E& P (Netherlands) BV, and Heritage Petroleum.
BHP owns 68.46 per cent of the block while Heritage Petroleum and NGC hold the remaining 20.13 per cent and 11.46 per cent interest, respectively. When producing, the field is expected to boost T&T’s daily energy output by approximately 16,000 barrels of oil (bpd), and 80 million standard cubic feet of natural gas per day (mmscfd).
The report indicated that the gas supply would be sufficient to supply a large-scale ammonia or methanol plant. Energy Minister Franklin Khan said that BHP would have spent at least US$0.5 billion (TT$3.5bn) on this project which is expected to be commissioned in the fourth quarter of 2021. This was “good news” especially as it came two weeks before a general election, evidence that the Energy Ministry has had some success.
However, current oil production levels are so low that a meagre 16,000 bpd amounts to 28 per cent of current output, presumably at a cost which makes the project economic.
Gas production of 80 million mmscfd merely adds 2.3 per cent to the average daily production and does not reverse the current decline in production. Given that eight petrochemical plants have been shut or idled, how will the new gas output be used? More importantly, the size of BHP’s investment of US$0.5 billion is noteworthy. But Mr. Khan simply mentioned this figure in passing and was noticeably silent on whether this investment would generate lasting jobs in T&T. What was its relevance therefore, unless it has some spin-off effect on the domestic economy?
Considerable sums would have been undertaken in the exploration and test drilling. But significant investment expenditure would have been spent in the design and construction of a new platform (jacket topsides et al) required to convert this well into a producer. How much of this initial investment expenditure will accrue to T&T?
Virtually zero. Any benefit will have to come from the net earnings when the output gets to market. As a percentage, what will T&T gain? Mr. Khan’s words were hollow.
These questions are critical as they point to the absence of any serious diversification policy, either by building import displacement capacity, or competitive export capacity.
Further what of the local content policy so heavily touted at that expensive public relations event called “The Spotlight on Energy”? Boasting of T&T’s 100-year long engagement in the energy sector is hollow when domestic capacity lies idle or is destroyed through inactivity. More than 14 platforms (topsides, jackets, and piles) have been built in T&T at TOFCO in La Brea, the heaviest of which was the 5,200 tons Juniper at pricing and quality levels which met international standards.
The BHP Ruby Topsides is 750 tons, the piles 900 tons and the jacket 1,100 tons all well within domestic fabrication capabilities. Why is this relatively small construction not to be built in T&T? Further, why has BHP never fabricated any meaningful part of its offshore kit in T&T?
Politicians of all persuasions were silent in the face OWTU’s contemptuous exhortation “take your rig and go”. Even worse it seems that the Energy Ministry does not monitor “local content” rules, or alternatively, has neither the interest, nor ability to enforce such rules. As a result, international operators have signalled their preference for awarding Engineering, Procurement, Construction, and Installation (EPCI) contracts) which exclude domestic operators unless, presumably, they can establish a joint venture with a major international contractor. However, any such joint venture would not have the required track record and would be excluded in the first stage of any competitive bid evaluation.
Since the Jupiter project, upstreamers have sourced all fabrication overseas, aided and abetted by the inactivity of the Energy Ministry, whilst local capacity lies idle at TOFCO, the region’s only offshore fabrication facility. Currently, investment in the energy sector is weak as projects are cancelled or postponed. Core skilled employees have been laid off virtually guaranteeing that Labidco cannot be a catalyst of economic development and that La Brea will remain depressed.
In this weak economic climate T&T must pursue all the growth and development possibilities where it has a comparative advantage. But before T&T can begin to service the developing energy requirements of Guyana, Suriname, or a Venezuela (Venezuela will have to be rebuilt before long) it must ensure that domestic capacity and skills remain intact. This requires action not words. Human capital does not rust; it emigrates.