New hydrocarbons discoveries boost Trinidad and Tobago's energy market

A number of recent oil and gas discoveries in Trinidad and Tobago bode well for the energy industry over the medium term, with the country well positioned to attract further investment from international operators. This comes at a time when energy multinationals are increasingly turning their interests to the Caribbean region, buoyed by an uptick in similar discoveries in neighbouring Guyana and Suriname.

Nevertheless, more remains to be done to attract international investment, particularly in the country’s upstream energy segment. “T&T is one of BP’s largest producers globally, but they are not being provided with sufficient incentives to expand extraction,” Douglas Boyce, a consultant at Trinidad-based upstream services provider Intecsea, told OBG. Addressing these issues will prove particularly vital given the increased regional competition and the expansion of US shale gas operations.

Recent Developments

After a period of decline following the 2015 drop in global gas prices, natural gas production recovered in 2018, rising to 3.6bn standard cu feet per day (scfd), up from 3.35bn scfd in 2017, according to the Ministry of Energy and Energy Industries (MEEI). In February 2019 operations began at the new Angelin gas platform, located 40 miles off the south-east coast of T&T.

This increase in activity appears to have sustained the recovery of output over the first seven months of 2019, according to the Central Bank of T&T. The project comprises four shallow-water gas wells and A number of recent oil and gas discoveries bode well for the energy industry, with the country well positioned to attract further investment from international operators a new platform with a depth of 66 metres, and is expected to produce around 60,000 barrels of oil equivalent per year. The project is 100% owned by BP T&T (BPTT), a joint venture that is 70% held by BP and 30% by the Spanish firm Repsol.

In November 2019, following in the wake of the country’s recent oil and gas discoveries, BPTT commissioned the US technology firm Honeywell to design and deliver an integrated control and safety system to support its Cassia Compression project. The facility – which is earmarked for completion in 2021 – will be the first of its kind in T&T and will enable the company to access and produce low-pressure gas reserves from currently operational fields. According to BPTT, the completed compression platform will be able to access 1trn cu feet of resources. In addition, the company announced in December 2019 that it had contracted Norway’s Aker Solutions to provide front-end engineering and design for what is expected to be the first of several new offshore platforms at BPTT’s Cypre project, scheduled to come on-line in 2021.

BPTT is also currently developing the Matapal project to harness the gas resources discovered by the company in 2017 at the Savannah exploration well. The facility is set to consist of a three-well subsea tie-back to the existing Juniper platform, where gas production began in August 2017. Upon completion, which is set to take place in 2022, the Matapal project is expected to produce 400m scfd.

New Players

Following major hydrocarbons discoveries by UK-based Tullow Oil and the multinational ExxonMobil in 2019, Guyana has steadily emerged as an important Caribbean oil exporter. Furthermore, in January 2020 the oil producers Total and Apache announced a significant new oil discovery at the Maka Central-1 well off the coast of neighbouring Suriname. These developments herald an increase in regional competition, that is already having ramifications for T&T. In August 2019 Tullow Oil announced that it would shift its operations from its base in T&T to Guyana in 2020.

Nevertheless, increased hydrocarbons activity in these countries are also set to create opportunities for T&T, particularly in terms of providing services to Guyana’s rapidly growing energy sector. “We have become an important regional supplier of services to the energy industry,” Thackwray Driver, CEO of the T&T Energy Chamber, told OBG. “Helping the services industry to diversify geographically to support the upstream segment in countries such as Guyana and Suriname is very high on the country’s agenda.”

Furthermore, an anticipated increase in demand for gas-fired power stations in the two South American nations could provide a boost for T&T’s downstream sector, with the country possessing a highly developed gas power industry. “The move towards introducing natural gas into the grid for electricity generation across the region also creates opportunities for T&T,” Driver told OBG.

Challenges Ahead

Despite T&T’s uptick in new hydrocarbons discoveries and emerging opportunities in neighbouring states boding well for the sector, T&T’s energy industry still faces a number of significant challenges. “We continue to struggle with increasing our gas production and the inability to attract new companies to take on acreage,” Driver told OBG. “Meanwhile, the gas industry is facing competition from increased US production, making accessing the US market difficult.”

In an effort to attract further investment, the government launched a shallow-water bidding round for six blocks in November 2018, its first since 2010. However, at the closing of the auction in May 2019 bids had only been received for three of the blocks, all from the consortium made up of the international hydrocarbons operators BP and Shell. Both these companies are firmly established in the T&T energy market. Shell has had active operations in the country since 1913 and currently has a presence in seven offshore and onshore blocks in the country, in addition to operating pipelines and holding an equity stake in the Atlantic liquefied national gas facility at Point Fortin. The government stated at the outset of the auction that the winning bidders would be announced six months after the closing date, but no verdict had been issued as of January 2020. The failure of the auction to attract more bidders may suggest that there is lower appetite among investors for the county’s shallow water blocks offering. A new deepwater bidding round is expected to take place in 2020 and attract greater attention from hydrocarbons operators; however, as of January 2020 precise details of the auction had yet to be publicly announced.

New Activity

While the country has struggled to attract new investors to take on acreage and undertake new exploration drives, there has been an increase in activity in terms of both mergers and acquisitions, and the petroleum services sector. In November 2018 the Canadian oilfield services provider Ensign Energy Services undertook a takeover of Trinidad Drilling International, acquiring a 89.3% share in the company, the largest acquisition in the history of Ensign Energy Services. Furthermore, T&T’s ongoing oil and gas production is proving to be attractive to other oilfield services companies. For example, the Norway-based company DOF Subsea was awarded a contract in November 2019 for inspection, maintenance, repair and light construction works for a currently undisclosed major operation. In addition, in January 2019 BPTT announced that it had awarded the US energy services company McDermott International for the procurement, engineering and construction contract on its Cassia Compression project. This will include a bridge linking Cassia C with the existing Cassia B platform.