by Linda Hutchinson-Jafar Special Correspondent Thursday, December 25 2008

Trinidad and Tobago has been offered equity in a proposed LNG terminus in New York/New Jersey by Canadian Superior. Mike Coolen, president and chief operating officer (COO), Canadian Superior, said TT “is open to additional discussions” on it.

The government of Prime Minister Patrick Manning has indicated its intention to become involved in value-added segments of the LNG operations that net-back directly to the local economy.

Last May, Excalibur Energy (USA) Inc, a 50/50 joint venture company between Canadian Superior Energy and Global LNG Inc, a New York-based privately held company announced the launch of its US$550 million Liberty Natural Gas Transmission Project as a new source of natural gas to meet the growing energy demands of the US Northeast region.

Liberty Natural Gas will be a deepwater pipeline system, built in 100 feet of water, and receiving its supply of LNG from Trinidad in tankers that will connect to permanently-anchored turrets or connectors on the seafloor.

According to Coolen, the LNG will be re-gasified onboard the ships and pumped through the turrets into the pipeline. The project will require fifty miles of 36” offshore pipeline and eleven miles of onshore pipeline and subject to regulatory approvals by the US Government, is expected to begin to deliver up to 2.4 billion cubic feet per day of natural gas by 2012.

TT is already the No 1 supplier of LNG to the US, accounting for over 65 percent of its imports.

Earlier this year, Canadian Superior announced a 1.1 tcf discovery in Block 5 (c), off Trinidad’s east coast. Later in August, the company announced that the results from the “Bounty” well and interpretations of extensive 3-D seismic data and other data indicate a natural gas resource potential of up to 2.6 tcf of natural gas from the tested structure in Block 5c. The third discovery in Trinidad and Tobago during 2008 was made by Petro Canada when it announced a 1.6 tcf discovery in its Block 22.

During last week’s IBC Caribbean Energy conference, Energy Minister Conrad Enill said the Government plans to sustain the exploration thrust in 2009 by offering several shallow marine and deep Atlantic acreage for competitive bidding.

The five shallow marine acreages are located on the East Coast and the North Coast of Trinidad and Tobago. “Our evaluation indicates that the blocks are likely to be gas prone and offers great potential for enhancing our gas reserves,” Enill said. The deep Atlantic blocks are northerly located. Enill added that according to available data, exploration activities have only covered one- third of the country’s potential hydrocarbon resources.

“Our new initiatives will target resources that are located primarily in the Deep Atlantic, our new frontier,” he asserted. The Southerly part of this acreage was offered in 2006 and attracted one bid from Norway’s Statoil. Since the poor response to the 2006 offers, government re-evaluated the area and plans to acquire new data which will form the basis for the determination of location of potential blocks.

Gas volumes

Wayne Bertrand, distinguished fellow in petroleum studies at the UW I, noted the economic impact on Trinidad and Tobago which is largely dependent on oil and gas prices can be severe if the crisis is long. “One analyst estimates annual loss to the government of Trinidad and Tobago of US$25 to US$30 million for every one dollar drop in oil price and US$60 to US$75 million for every ten cents drop in gas price,” said Bertrand, formerly the president of operations at state-owned Petrotrin.

The Trinidad and Tobago government recently estimated close to a US$1 billion shortfall in its 2009 budget for a US$15 drop in oil price and a 50 cent drop in gas price. Bertrand, chairman of the first day’s proceedings of the conference, added that commodity prices for ammonia, urea, methanol have “dropped to floor prices” leading to plant shut-ins for turnaround in Trinidad. “Revenue loss is therefore due to both low product prices and less gas volumes at floor prices,” he noted. The downturn in the energy sector, he said, was taking place at a time when Trinidad and Tobago needs to renew its exploration effort for both oil and gas reserve replacement and growth.

“Government will have to take decisions on encouraging exploration during the downturn and provide incentives for deep water exploration, heavy oil development, enhanced oil recovery and marginal field development.

“Solutions to the many challenges of the current environment,” he said, will require inter-disciplinary and tripartite consultation leading to often difficult decisions on issues such as plant cost overruns, under-performing assets, reduction in the country’s oil and gas reserves, procurement and remuneration policies, alternative energy resources and economic diversification among others.”

Decline in services

Given the dominance of the energy sector in economic activity in Trinidad and Tobago, Enill said his Government is aware that a continued decline in energy prices, especially against the backdrop of falling domestic oil production, maturing oil fields and limited new gas and oil discoveries, is likely to have direct implications for government earnings from the energy sector. In addition, the declining demand for energy in global markets seems to have impacted the operations of service companies in the energy sector which have already begun to report falling demand for their services, he told the conference.

Regarding the mid-stream operations, Government is presently reviewing proposals for the establishment of a new refinery which Enill said will re-vitalise and revolutionise the refining business in the country and lead to the introduction of new technology, creation of new jobs and increases in Government revenue through taxes on the earnings of the plant.

Downstream

One of the key projects for the Government is the development of a 125,000 tonne per annum (tpa) aluminium smelter and related downstream facilities. Another major project involves the establishment of an integrated polypropylene complex with an annual production of 490,000 tonnes of polyolefins based on three world-scale plants, including a methanol plant and a methanol to propylene (MTP) plant. Enill said the polyolefins industry is one of the downstream sectors identified for development as it is viewed as a building block for expansion of the local plastics converting sector and which can position TT as a major supplier of varied plastic products to the Caribbean and Latin America markets.