Trinidad and Tobago's energy sector is set to reach previous production levels through new technologies and contracts

Over the last two decades Trinidad and Tobago’s natural gas boom has overshadowed crude oil output, which has been slowly declining. Gas production is now leading the race. In terms of energy equivalency, for every unit of oil currently produced there are eight units of gas extracted. However, the government and a number of independent oil companies are confident that output is now set to increase.

Regaining Ground

While gas production surged ahead, crude oil output began to decline after 2006, and by 2010 it had dipped under 100,000 barrels per day (bpd), reflecting the gradual exhaustion of mature oilfields. By 2014 production had contracted further to 81,100 bpd, showing virtually no change on the 81,144 bpd registered in 2013, according to Kevin Ramnarine, the minister of energy and energy affairs. He has consistently said that the target is to get production back above the 100,000-bpd mark.

The energy minister told the press in November 2014 that an increase in production can be expected in 2015, after approving three new exploration licences, which cover 12.5% of T&T’s landmass. Ramnarine said, “We believe that once we have production coming from these three blocks, oil production in T&T can go back to over 100,000 bpd, which is where we would all like to see oil production, heading back to six figures, which is where we were some five years ago.”

Data from the ministry shows that in the fourth quarter of 2014, production of crude and condensates was up by 2.5% year-on-year (y-o-y). In the first quarter of 2015, output averaged around 83,000 bpd, for a y-oy increase of about 4.4%, according to the Ministry of Energy and Energy Affairs (MEEA). Significantly, the ministry also said that despite the slump in international hydrocarbons prices, oil producers in T&T have not cut back on their activity levels.

Enough for Everyone

The authorities believe there is still plenty of oil to be extracted. In a report to parliament in April 2015, Ramnarine acknowledged that 3P (proved, probable and possible) reserve of oil and condensate had fallen by 11.9% from 572.4m barrels in 2007 to 508.42m barrels in 2011, according to the latest audit carried out by Dallas-based consultancy Netherland, Sewell & Associates. At current rates of production that is equivalent to 17 years’ worth of supply. However, the minister also said, “There is significant remaining potential for new oil production.” He stressed that in 2011 there was an additional 924.5m barrels of estimated resources not yet discovered.

That number did not include deepwater blocks that at the end of 2011 had not yet been licensed. They could add 2.2bn-8.2bn barrels of oil. Ramnarine also said there were other routes to increasing output, such as deepwater development, further work onshore, boosting production of heavy oil deposits and further investment in enhanced oil recovery (EOR) techniques to extract more oil from existing mature fields.

Niche Roles for Independents

Almost three-quarters of production in 2014 came from offshore fields. The biggest single producer was state-owned Petrotrin, operating directly through its subsidiary Trinmar as well as through a series of partnerships and farm-outs with private companies.

Other important producers in the country include BP T&T (BPTT), Spain’s Repsol and BHP Billiton of Australia. While these are all big names, a significant part of the revival in oil production is expected to come from smaller independents, including companies like LGO Energy, Touchstone Exploration, Trinity Exploration & Production and Range Resources. The MEEA has noted that companies boosting production during 2014 included LGO, Repsol and BPTT.

Boosting indigenous crude oil output could be particularly important to Petrotrin, which apart from being an upstream producer in its own right, also operates a 168,000-bpd refinery at Pointe-à-Pierre, which is supplied by a mix of indigenous and imported crude. The degree to which pressure on refinery operating margins can be eased will depend on the extent to which the quantity of indigenous crude can be increased.

Tackling the Goudron Field

London-based LGO Energy has four main assets in Trinidad. One of these, the Goudron Field, is an interesting example of how production can be turned around. Originally discovered in 1927, the field was developed by Texaco over three decades and then acquired by Petrotrin in 1986. Because of its geological complexity – a syncline with multiple faulting – capturing its full potential has been elusive. In 2009 Petrotrin signed a reactivation agreement for the field, known as an incremental production service contract, and LGO bought the contract rights in 2012.

Since then LGO has boosted production from 40 bpd to 300 bpd. While this is still a very small amount, the company believes there is unexploited oil in the 11. 4-sq-km block and that the use of EOR techniques, including water-flooding, could take output up to somewhere close to 4000 bpd. LGO executives said the onshore oilfields of southern Trinidad are a perfect fit for its strategy of redeveloping blocks that have substantial reserves. The company noted that Petrotrin had kept a fairly tight hold on these onshore oilfields until the current government came to power and encouraged the state-owned company to boost production through partnerships. A reduction in royalty rates was also helpful in attracting private sector interest.

Touchstone & Ortoire

Touchstone Exploration, listed on the Toronto Stock Exchange, has over 17 properties in T&T. During the 2013/14 licensing round, the company acquired an 80% interest in the 180-sq-km Ortoire block, with Petrotrin holding 20%. Paul Baay, president and CEO of Touchstone Exploration, called the block “the best of the lot”. Under the contract, 21% of output will go to Petrotrin. The exploration contract is set for six years, but if oil is discovered in commercial quantities, it can be extended to 25 years.

The Ortoire block is now seen as a major exploration play, and Baay outlined a programme of exploration and seismic work, leading up to exploratory drilling in years three and four. He said that the company has been in the country for four years and has drilled upwards of 40 wells in that time. The company's plans are to continue with the drilling program, with well counts dependent on oil price recoveries. “Now we are into execution – getting costs down, initial rates up, keeping wells on production for longer periods of time – that’s our goal for 2014-15,” Baay said. He also highlighted “a huge unexplored heavy oil opportunity in Trinidad”.

Another important independent is London-listed Trinity Exploration and Production, which, apart from offshore gas interests, has oil production in areas such as the Galeota offshore block in the south-east.

Within this environment smaller private sector oil companies have an important niche role to play, as they can access more advanced EOR technology and focus on fields that the larger oil players would consider too small. What has helped them come to the fore are improved tax terms. Not only were royalty rates reduced, but under the terms of the Petroleum Tax Reform firms can fully write off exploration costs incurred between 2014 and 2017. There are also provisions for workover, maintenance and repair costs.