New offshore gas discoveries and plans to increase upstream investment should boost confidence in Trinidad and Tobago’s energy sector, which has been impacted in recent years by falling prices and concerns over dwindling reserves.
Early last month BP and its Spanish partner Repsol announced that their joint venture, BP Trinidad and Tobago (BPTT), had made significant gas finds in fields off the coast of Trinidad.
According to statements issued by both companies, BPTT’s Savannah and Macadamia exploration wells had identified approximately 2trn cu feet of gas reserves, which would underpin new development and exploitation operations in the blocs.
The initial strikes at the Macadamia and Savannah wells are only the beginning of a more extensive round of testing and development of new fields, according to Norman Christie, regional president for BPTT.
“This is exciting news for both BPTT and the industry, as these discoveries are the start of a rejuvenated exploration programme on the Trinidad shelf,” Christie said when announcing the finds. “This is a testament to BPTT’s ongoing commitment to the development of our Trinidad and Tobago operations and the wider industry, and we look forward to the future portfolio drill-out.”
The Macadamia field should have an operational platform around 2020, while the Savannah field will be linked into the nearby Juniper platform when it comes on-line later this year, according to BPTT.
Currently, BPTT has 14 offshore platforms and two onshore processing facilities, with leases covering 366,000 ha off the east coast of Trinidad.
Steady platform for growth
The number of BPTT’s offshore installations is also set to rise soon, with the company announcing that it had approved the construction and subsequent deployment of a 15th platform to bring its Angelin offshore gas project on-line.
Located 60 km off Trinidad’s south-east coast, the Angelin field will be tapped by four wells and produce up to 600m standard cu feet per day, with production expected to begin in the first quarter of 2019.
Balancing the books
A decline in energy earnings – a result of both lower prices and waning output – has been a major contributor to lower state revenues in recent years. State income dropped by 35% to TT$37bn ($5.5bn) between 2014 and 2016, according to the government’s 2017 budget statement.
This fall in energy earnings has also seen T&T’s net international reserves drop, from $10.4bn as of May 2014 to $9.1bn at the end of April 2017, thereby reducing export coverage from 12 months to 10.
Furthermore, officials also partly blamed reduced spending by oil and gas companies for a failure to meet first-half projections of value-added tax (VAT) revenue. Income from VAT fell short by around TT$669m ($1bn), according to the Ministry of Finance (MoF), with the projected full-year figure for FY 2016/17 at TT$7.8bn.
Nonetheless, with new projects in the pipeline, lower spending and its negative impact on VAT could be reversed. Steadily rising gas prices could feed into this turnaround, with the Henry Hub Natural Gas Spot Price having risen from a more than a 10-year low of $1.75 per million British thermal units in March last year to $2.98 last month.
Both higher gas prices and increased production will be the main growth drivers this year, according to the MoF’s mid-year budget review, and moving forward these factors could help pull the economy out of the recession it slipped into in 2015.
While the newly identified deposits will take time to commence operations, they do represent a degree of security for the energy sector and the government, providing a depth of reserves for exploitation and extended long-term revenue flow.