Mar­i­ano Browne

The key eco­nom­ic is­sues fac­ing Trinidad and To­ba­go are not new and are well known. Oil and nat­ur­al gas have been the dy­namo of the T&T econ­o­my. How­ev­er, they are non-re­new­able as­sets and pro­duc­tion has been de­clin­ing. Our cur­rent knowl­edge shows that we have more gas re­serves than oil, but not enough nat­ur­al gas to meet in­stalled plant ca­pac­i­ty. The on­ly way to main­tain or in­crease pro­duc­tion is to in­crease ex­plo­ration. Ex­plo­ration is de­pen­dent on a li­cens­ing regime based on com­pet­i­tive bid­ding, large­ly by multi­na­tion­al cor­po­ra­tions.

The busi­ness mod­el we de­vel­oped was based on a sim­ple prin­ci­ple. The val­ue added by nat­ur­al gas would be max­imised by con­vert­ing the gas to ex­port­ed in­ter­me­di­ate prod­ucts: methanol, am­mo­nia, urea. This pol­i­cy was changed in 1995, when the de­ci­sion was made to ex­port nat­ur­al gas in a liq­ue­fied form (LNG). GORTT has on­ly a 10% stake in At­lantic LNG.

In­creas­ing rev­enue from oth­er sec­tors (the di­ver­si­fi­ca­tion im­per­a­tive) is a long-term project that will take at least 25 years. All new or ex­ist­ing busi­ness­es must first suc­ceed in the lo­cal mar­ket be­fore they can ex­pand to new mar­kets. Then they must grow suf­fi­cient­ly large to re­place or at least dis­place the con­tri­bu­tion made by the ex­ist­ing petro­chem­i­cal com­pa­nies, which were built to ex­port. Per­haps some new busi­ness­es may be able to do the same.

A key point to note is that there are ap­prox­i­mate­ly eight up­stream de­vel­op­ments slat­ed to bring first gas on stream be­tween 2026 and 2028. Dri­ven by ma­jor en­er­gy op­er­a­tors like BP, Shell, and EOG Re­sources, these projects aim to coun­ter­act his­tor­i­cal pro­duc­tion de­clines and re­store full sup­ply to the coun­try’s LNG and down­stream in­dus­tries

bpTT’s in­ten­sive near-field in­fill drilling is ex­pect­ed to be­gin yield­ing an es­ti­mat­ed 19 mil­lion bar­rels of oil equiv­a­lent (mm­boe) in fresh gas ca­pac­i­ty start­ing in 2027. Its Gin­ger project is pro­ject­ed to pro­duce an av­er­age peak out­put of 62,000 bar­rels of oil equiv­a­lent per day (boe/d). The Men­to and Co­conut fields, both bp/EOG joint ven­tures, should come on stream in 2027. Shell’s Man­a­tee field is the largest gas project, and gas de­liv­ery is pro­ject­ed for late 2027, with full pro­duc­tion in 2028. Shell is fast-track­ing its Aphrodite field to sup­ply first gas by 2027.

Then there is cross-bor­der gas. This de­pends on the re­la­tion­ship/ne­go­ti­a­tions with Venezuela and the geopo­lit­i­cal sen­si­tiv­i­ties. The Cocuina/Man­akin Field op­er­at­ed by bp holds rough­ly 1 tril­lion cu­bic feet (tcf) of gas and has been grant­ed a green light to progress to­ward pro­duc­tion. There is the Drag­on gas project, which is es­ti­mat­ed to hold ap­prox­i­mate­ly 5 tcf of gas. Fi­nal­ly, the Lo­ran field, es­ti­mat­ed at 7.4 tcf, is be­ing ne­go­ti­at­ed by Shell with Venezuela, which has sev­er­al im­pli­ca­tions.

The fore­go­ing would sug­gest that T&T has noth­ing to wor­ry about and the fu­ture is se­cured. On this con­struc­tion, the clo­sure of Nu­trien, Methanex and oth­er plants is a short-term in­con­ve­nience that will soon be fixed. Un­for­tu­nate­ly, plant shut­downs have be­come the norm since 2019. Added to this, Exxon’s re­cent in­ter­est and its on­go­ing seis­mic sur­veys and ex­plo­ration sug­gest that the de­pres­sion of the last twelve years is over and a turn­around is im­mi­nent. That is the nar­ra­tive which ex­plains the Fi­nance Min­is­ter’s op­ti­mism, post­pon­ing pay­ment of pub­lic sec­tor unions’ back­pay et al to 2027 on the hope that all will be well by then.

The dif­fi­cul­ty is that ex­plo­ration and de­vel­op­ment of new fields must be con­tin­u­ous if one is to main­tain the re­quired pro­duc­tion vol­ume to keep both the AL­NG and the petro­chem­i­cal plants alive and avoid the fate of At­lantic’s Train 1. What about new plants, or new in­dus­tries, and enough gas sup­ply to guar­an­tee ad­e­quate pow­er gen­er­a­tion ca­pac­i­ty? No coun­try can de­vel­op new in­dus­tries with­out an ad­e­quate sup­ply of en­er­gy. This means that we must al­so look at the sup­ply of nat­ur­al gas for en­er­gy se­cu­ri­ty, not mere­ly for its ex­port po­ten­tial.

Why the need for con­tin­u­ous ex­plo­ration and in­vest­ment? Will the new fields/wells gen­er­ate the re­quired vol­umes of gas? Can this short­fall hap­pen again? Be­cause nat­ur­al gas is non-re­new­able, pro­duc­tion vol­umes from old­er wells de­cline. This re­quires a con­stant search for new wells to sup­ple­ment de­clin­ing pro­duc­tion from old­er wells. Fur­ther, it is not clear whether the gas from these new de­vel­op­ments will be suf­fi­cient to re­turn to gas pro­duc­tion vol­umes of 4 bcf a day.

The cen­tral chal­lenge con­found­ing pol­i­cy­mak­ers is “what to do” in the face of the cur­rent de­cline and any fu­ture short­fall that could re­cur. Re­peat­ing what was done in the past is sim­ply not suf­fi­cient. Sim­ply put, this is a busi­ness chal­lenge that every busi­ness faces when im­plic­it as­sump­tions about the ex­ist­ing en­vi­ron­ment change. Busi­ness­es must adapt and ad­just if they want to re­main rel­e­vant and suc­cess­ful.

Gas is no longer ei­ther cheap or plen­ti­ful, and en­er­gy costs are ris­ing. There­fore, whilst it is recog­nised that every mol­e­cule must be used in­tel­li­gent­ly and ef­fi­cient­ly, how does this trans­late in­to pol­i­cy? How should the reg­u­la­to­ry en­vi­ron­ment and tax­a­tion frame­work ad­just to pro­vide the na­tion with the best re­sult from its en­er­gy re­sources? Fur­ther­more, giv­en the de­clin­ing re­turns from the en­er­gy sec­tor, how should gov­ern­ment ex­pen­di­ture be tai­lored to achieve the best re­sult?

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.