Following is an abridged version of the keynote address delivered by Prime Minister Dr Keith Rowley, titled “Shaping the Caribbean’s Energy Future”, at the opening of the 2020 Energy Conference, hosted by The Energy Chamber of Trinidad and Tobago:
In 2007, the Government of the Republic of Trinidad and Tobago and the government of the Bolivarian Republic of Venezuela executed a Framework Treaty relating to the unitisation of hydrocarbon reservoirs that extend across the delimitation line between the countries.
The treaty established the general framework under which any cross-border reservoir would be exploited. On August 16, 2010, the Government of the Republic of Trinidad and Tobago and the government of the Bolivarian Republic of Venezuela exchanged instruments of ratification in respect of the Framework Treaty which action officially brought the treaty into force. This facilitated the execution of the field specific Loran-Manatee Unitisation Agreement on August 16, 2010.
In accordance with the provisions of the treaty, a ministerial committee and a steering committee were established in order to facilitate the implementation and execution of the treaty and related agreements. Under the direction of the committees a Unitisation and Unit Operating Agreement was developed for the exploitation and development of the Loran-Manatee field.
Progress in the development of the unitised Loran-Manatee field has been impeded by the sanctions imposed by the US government, which inhibit US companies from doing business with Venezuelan oil company PDVSA. This impacts on the ability of US company Chevron, which has a 60 per cent interest in the Loran field, to participate in the development of the Loran-Manatee Field. As a consequence, the Government of the Republic of Trinidad and Tobago and the Bolivarian government of Venezuela have agreed to the independent development by each government of the field within the Loran-Manatee cross-border that falls within its marine area.
Pursuant to this decision, the Government of the Republic of Trinidad and Tobago and the Bolivarian Republic of Venezuela rescinded the Unitisation Agreement for the exploitation and development of hydrocarbon reservoirs of the Loran-Manatee Field that extends across the delimitation line between the countries dated August 16, 2010 and executed the Agreement for the independent development of the cross-border field, Loran-Manatee.
The Loran-Manatee has an estimated resource of 10.04 tcf, with 2.712 tcf within the Manatee field. Shell Trinidad and Tobago Limited holds 100 per cent interest in the Manatee field and has projected that gas production could start in the 2024/2025 period at rates ranging from 270 to 400 million standard cubic feet per day. Shell is in conversation with the Government and is working on various development scenarios to determine the best option. This major policy shift, which frees up investment and development of Manatee gas, also provides easy access to market for all gas from these fields if the circumstances permit and the owners so desire.
Loran-Manatee Field is a landmark decision in the countries’ cross-border relationship. This has implications for development for other cross-border fields such as the Manakin-Cocuina and the Kapok-Dorado which collectively have an estimated 850 billion cubic feet of natural gas within the Trinidad and Tobago maritime area. The achievement of this Agreement is a reflection of positive initiatives being undertaken by Government to meet domestic gas requirements for competitive energy and our retention of a place in the petrochemical and LNG business for some considerable time to come.
It is regrettable that we cannot move ahead with the Dragon Project which is on hold, at this time, due to US sanctions on Venezuela. At a moment’s notice, we are ready to move ahead with the project on the lifting of such restrictions since virtually all the preparatory work has been done. Notwithstanding, we are proceeding with the Manatee initiative which is the single most significant development in the energy sector in recent times.
The domestic energy sector is due for a further lift as oil production is set to rise. It is estimated that production will increase to in excess of 90,000 barrels a day by 2022. The production is driven by developmental drilling activity, work-overs and enhanced oil recovery projects undertaken by Heritage, its resumption of offshore exploration, new oil from Rio Claro and Ortoire Blocks and significantly BHP Ruby Delaware field in block 3a.
The turnaround in the domestic energy sector is no mean achievement. When this Government assumed office in 2016 there was an energy sector in which production of oil and gas was in decline, substantially reduced energy sector revenue and a State energy sector that was in urgent need of restructuring and resuscitation. As a responsible Government we took urgent and definitive steps to address these matters.
High on our agenda was the restructuring of Petrotrin. The once-profitable State company was on a severe downward spiral and, unless there was positive intervention, was heading to bankruptcy. The decision to restructure was difficult but unavoidable given the financial state and need for streamlining the operations of the company.
I am pleased to inform that the newly created Petrotrin subsidiary, operating companies, Heritage Petroleum Company Ltd and Paria Trading Company Ltd have been profitable.
The unaudited results show that for the first year of operations, ended September 30, 2019, Heritage Petroleum realised a profit, after tax, of $884 million. For the same period Paria Trading achieved a profit, after tax, of $172 million. That is a turnaround in the State oil business from a projected loss of $2 billion per year to a profit of just over a billion dollars in the first year of transition. Ladies and gentlemen, please do not express any surprise that such good results make some people very disappointed and uncomfortable but there exists in the region, especially in Trinidad and Tobago, a government which believes that the oil industry still has a major role to play in the economy of this nation and the region.
As regards the Guaracara Refining Company Ltd, negotiations are ongoing with the preferred bidder Patriotic Energies and Technologies Company Ltd and, subject to a satisfactory outcome, the refinery should be operational within 12 to 18 months.
A principal entity in the energy landscape is the National Gas Company Group of Companies comprising the parent, The National Gas Company of Trinidad and Tobago Ltd (NGC); its main operating companies, National Energy Corporation of Trinidad and Tobago Ltd, and Phoenix Park Gas Processors Ltd. The NGC Group of Companies contributes significantly to the Government’s income by means of taxes and dividends and is Trinidad and Tobago’s major avenue to lay claim to some of the wealth derived from the exploitation of our main natural, depleting resource.
For its part, NGC has been primarily a mid-stream operator with responsibility for transportation, distribution and aggregation. Given its role in the securing of the requisite gas supplies to meet the needs of the gas-based industry, NGC as an instrument of national policy has been mandated to align its core activities as aggregator with current upstream developments, including Venezuelan across border initiatives to enable the on-time delivery of gas from these sources.
With the support of Government, NGC has finalised gas supply agreements with all of the upstream gas suppliers. As a consequence, the company is in a position to offer term gas supply contracts to its downstream customers. To date gas supply contracts have been executed with Nutrien, N2000, CNC and interim agreements with MHTL, Methanex and Tringen. The international gas supply and markets have undergone and are undergoing revolutionary shifts requiring fair trading cooperation and frequent adjustments to keep pace and preserve our space in this billion-dollar maelstrom. To this end the Government of Trinidad and Tobago has for the last two years opened and encouraged discussions among all the stakeholders in the LNG business with the aim of protecting the future of the industry for all investors in it, not the least of whom are the people of Trinidad and Tobago.
Oil and gas production is now on the increase and is approaching levels experienced ten years ago. However, the key to sustainability is continued exploration by upstream companies. The major upstream companies have all committed to development and exploration programmes over the term of their licences or contracts. Government recently executed with Shell extensions to their existing East Coast and North Coast Marine Blocks and with BPTT with respect to its South East Galeota licence. Negotiations are also continuing with BPTT on extensions to its remaining licences. EOG has indicated that it would be seeking extensions to its licences. The request for extensions of licences and contracts is a further indication of the commitment of upstream companies to the development of resources within their licensed or contract acreages.
As regards revenue, we adopted the principle that the State must have a fair share of revenue earned from the exploitation of our non-renewable hydro-carbon resources. As a first step we introduced across the board a royalty rate of 12.5 per cent. This was followed by a loss relief restriction to 75 per cent of taxable income and a limit of capital allowances to 20 per cent per annum on a straight-line basis.
We entered into dialogue with the major upstream companies, BPTT and Shell Trinidad and Tobago Ltd particularly with what was considered our greatest revenue leakage, LNG. I am pleased to state that the companies have been receptive to our concerns.
On December 14, 2018 the Government executed with BPTT an Agreement for Phase 1a which dealt with certain legacy issues; extension to its South East Galeota and the ALNG Train 1 life extension, which provide for a superior LNG pricing arrangement than previously obtained. The ALNG Train 1 extension was put on hold pending the evaluation by the gas supplier, bpTT, of its gas portfolio. In the interim ALNG Train 1 has been operating and subject to a safety inspection in April 2020 will continue in operation until year end, at which time a decision will be made on the ALNG Train 1 Life Extension. Any such extension would make planned downtime on other trains to be carried out without much disruption in the overall sustained output.
Government also executed agreements with Shell on gas-related issues, commencing with a Heads of Agreement on May 29, 2019 and Definitive Agreements on August 19, 2019 which have provided improved economic and financial benefits to the country.
At present the Government is in active discussions with ALNG shareholders on an initiative that will revolutionise the LNG industry in Trinidad and Tobago. It is proposed to restructure Atlantic LNG by bringing the four LNG Trains under the umbrella of a unified entity. The proposed structure will be a more efficient arrangement for management and operations of the Trains. Government, through NGC, currently holds ten per cent equity in Train 1 and 11 per cent equity in Train 4 and is seeking to attain an increased shareholding across the proposed unitised facility.
In parallel with these discussions, the Ministry of Energy and Energy Industries is currently engaged in negotiations with BPTT on outstanding gas-related issues, inclusive of BPTT’s application for the extension of licences. It is anticipated that both sets of negotiations will be substantially completed by the end of the first quarter of this year.