Government efforts to improve transparency in Trinidad and Tobago’s energy sector are expected to help attract investors at a time when new reserves are being discovered.
At the end of October Nicole Olivierre, then-minister of energy and energy industries, launched the fourth Extractive Industries Transparency Initiative (EITI) report, highlighting the government’s commitment to improving transparency in the oil and gas sector during financial years 2013/14 and 2014/15.
The EITI report shows that the government reported receiving TT$26.6bn ($3.9bn) in 2014 and TT$20.9bn ($3.1bn) in 2015 from major hydrocarbons companies operating in the country.
While the report found that there was a difference in company receipts of TT$147.3m ($21.9m) in 2014 and TT$13.8m ($2m) in 2015, this discrepancy could be explained by foreign exchange differences, timing of when the government receives and reports payments, as well as local insurance premiums on foreign policies.
T&T has made efforts to push for transparency to attract both existing stakeholders and potential investors by providing financial information for two fiscal years, a first since the country began publishing EITI reports in 2011. Last year T&T was also elevated from a candidate country to full membership status as an EITI-compliant country.
These moves are a welcome sign to those eyeing the country as an investment destination, with exploration companies continuing to identify new finds that could greatly extend the lifespan of T&T’s upstream segment.
In August, for example, Anglo-Australian petroleum company BHP Billiton (BHPB) reported that its initial deepwater LeClerc well, located in a basin 215 km offshore Trinidad’s eastern coast, had “encountered gas in multiple zones”.
While the company had been focused on identifying commercial oil deposits – with BHPB announcing in January that T&T’s deepwater offshore could hold at least 5bn barrels of oil – the gas finds were encouraging, according to Steve Pastor, president of petroleum at BHPB.
“The results will help BHPB’s plans to further appraise the basin, as part of our extensive T&T exploration programme,” he said in August.
The initial well is the first of three deepwater wells, each with an estimated cost of between $100m and $200m, and is part of the company’s larger exploratory campaign that will see a total of eight offshore wells developed.
In its annual report, BHPB said it would be accelerating spending on its counter-cyclical exploratory programme to $800m in 2017, with the deepwater project in T&T being one of three focal points, along with projects in the Gulf of Mexico and Western Australia.
“BHPB has major positions in deepwater exploration globally, so for it to rank Trinidad’s deepwater prospects among its top locations in the world is pretty encouraging, even in this low-price environment,” Thackwray Driver, CEO of the Energy Chamber of Trinidad and Tobago, told OBG in August. “Should they discover significant deposits, deepwater could be a game-changer and the country’s new frontier.”
BHPB’s announcement comes as production levels in T&T’s energy sector have tailed off sharply, with earnings further depressed due to low global commodity prices.
Natural gas and crude oil production showed year-on-year decreases of just over 10% in the first seven months of the year, partly due to maintenance and upgrade works conducted by energy firms, according to the Central Bank of T&T’s monetary policy statement released in late September.
A number of T&T’s oilfields are also maturing, necessitating the deployment of enhanced oil recovery (EOR) technology when typical extraction methods can no longer maintain production. While EOR is less expensive than conducting exploratory work to identify new deposits, it can be used only for the lifetime of operational fields.
While the central bank predicts a gradual revival of economic growth in 2017 as energy production and global gas and oil prices rebound, it could be some time before the losses due to lower output and weaker prices are recouped.
Gas production levels, however, could see an uptick as early as the end of this year and into 2017 as the Sercan, Juniper and Trinidad Onshore Compression projects come on-line.
T&T has also seen a sharp drop in foreign direct investment (FDI) in the sector.
Last year FDI in T&T’s energy sector fell 24%, a trend that Olivierre said in August had not reversed in 2016. The decline in energy investments was a major contributor to the 33% dip in capital inflows experienced in 2015 and slowed growth across the economy.
The prospect of long-term gas supplies – should the LeClerc field and other deepwater deposits prove commercially viable – along with increased transparency could help reverse the downward trend in FDI and see expanded interest in the twin island country from oil majors.
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