Trinidad and Tobago will need to greatly streamline processes if it is to capitalise on E&P opportunities

In more than a century of exploration and production (E&P), Trinidad and Tobago’s oil and gas has come from both onshore and offshore shallow water wells. Now, there are new frontiers to consider: deepwater ( usually defined as depths of at least 1000 metres) and ultra deepwater (3000 metres or more). In the past decade exploration has begun to focus on potential in deep-water deposits beyond the continental shelf east of Trinidad. The eight wells drilled to date confirm the presence of a working hydrocarbons system, but so far have found no commercial quantities of oil and gas.

Many are convinced it is only a matter of time. According to Effuah Alleyne, senior analyst at GlobalData, the oil and gas industry is planning $6.2bn in investments in T&T in the next two years. Alleyne told the press, “As deep and ultra deepwater is yet to be fully explored … these areas could represent vast potential, especially as there are over 15 open blocks. These lie in the Columbus basin, an extension of the prolific Eastern Venezuela basin, where one of the world’s largest reserves of 1trn barrels of heavy oil in place is located.”

Mixed Bag

The bidding response for deepwater licences has so far been mixed, but the first discoveries may change this. When eight offshore deepwater blocks were offered under the taxable production-sharing contract (PSC) model in 2007, only one bid was received, and it was later withdrawn. A new PSC model was introduced in 2010, with the terms more closely resembling those used in the 1995/96 round. In 2011 the 11 blocks on offer received three bids, in 2012 the six blocks offered received 12 bids, and in 2013 the six blocks offered received two, though the 2013 results were nonetheless considered very promising.

In January 2014 the Ministry of Energy and Energy Affairs (MEEA) said the winner was a consortium of BHP Billiton and BG Group, two companies with a history of successful operations in T&T and internationally. The consortium signed PSCs for T&T Deep Atlantic Areas (TTDAAs) 3 and 7, with a nine-year phased exploration period that can be extended up to 30 years in each area where a commercial discovery is made. The consortium plans to invest $250m to develop the blocks, including acquiring 2400 sq km of 3D seismic data and carrying out further geological studies. Covering 1097 and 997 sq km, respectively, the MEEA estimates that TTDAAs 3 and 7 have potential resources of 2trn-7trn cu feet (tcf) of gas and 500m-2bn barrels of crude oil. PSCs were signed for the blocks in December 2014, bringing the number of active deepwater PSCs to nine.

Leading the Way

BHP, which already operates the shallow water Greater Angostura field off the eastern coast, looks particularly upbeat about deepwater prospects. In June 2014 it acquired a 70% stake in two further deepwater blocks, TTDAA 14 and TTDAA 23(a), which had been won in an earlier round by BP T&T (BPTT). BPTT confirmed that as part of the transaction it was reducing its stake in the licences to 30%, noting that it remained committed to Trinidad, where it has a growing portfolio of assets in the Columbus basin “identified through the interpretation of recently acquired ocean-bottom cable 3D seismic data”. BPTT has an estimated 13 tcf of gas in the Columbus basin, and there have been recent suggestions that its Angelin field may hold more than the original estimate of 1.5 tcf of gas.

Bob Dudley, BP’s group chief executive, said in mid-2014, “Final interpretation of the seismic survey data will take time, but the early results have given us confidence that there is still a lot of untapped potential in the basin.” Apart from the four blocks mentioned so far, TTDAA 3, 7, 14 and 23(a), BHP Billiton has PSCs for blocks TTDAA 5, 6, 28 and 29 and is also the operator for block 23(b), with Repsol as the block partner. Given the high cost of developing deepwater deposits, holding a stake in a large number of blocks helps spread risks and capture economies of scale.

Deepsea Solutions

Many in the industry view finding and exploiting deepwater deposits as crucial to T&T’s future. Deepwater gas in particular is touted as the long-term solution to the problem of gas curtailments – shortfalls on gas supplies to the downstream processing industry. Jerome Dookie, chief executive of the Caribbean Nitrogen Company, which operates two ammonia plants at the Point Lisas Industrial Estate, told the press, “Point Lisas needs a supply of natural gas that is adequate, reliable and consistent, at a price that allows the downstream to be competitive in the global market.” He expects it will take 7-10 years for significant increases in gas production to feed through, and that would be dependent on new developments.

Many large projects are continuing, noted Thackwray Driver, president and CEO of the Energy Chamber of T&T, even as the fall in oil prices in late 2014 and early 2015 prompted many global oil firms to curb their capital spending programmes. “So far we have not had any news of big cuts to capital projects. The BHP deep-water exploration, the BP Juniper project – those sorts of things have not been cut, and I do not expect them to be because the economics gets worked out on the long term,” he told OBG. Service contractors seem to agree. As Frank Teelucksingh, managing director of marine solutions provider Coastal Dynamics, told OBG, “Although upstream companies are expected to seize more cost-saving opportunities through adoption of increasingly high-tech solutions, investment is expected to remain stable, at least in production.” In January 2015 Norman Christie, BPTT regional president, told an energy conference, “Despite the current supply-demand imbalance, we remain confident in the subsurface… Early results of the ocean bottom cable seismic survey recently completed by BPTT have given us confidence that there are a lot more resources to go after in T&T.”

Regional Deepwater

There are also big opportunities for T&T as a potential regional deepwater player. Currently, there are only three mature deepwater E&P basins worldwide: the US segment of the Gulf of Mexico, West Africa and Brazil. Industry specialists note that conditions vary across the three basins, with the Gulf of Mexico characterised by ultra deepwater, high-pressure deposits and difficult weather conditions. West Africa’s holdings are plentiful but compartmentalised, while Brazilian deepwater is characterised by significant salt and pre-salt layers. Specialists also think the north of South America could prove to be another important deepwater E&P province, with several seismic surveys and some exploratory wells being drilled off the coast of Guyana, Suriname and French Guiana. This is another frontier, and the prospects and operational challenges are still under investigation. While the region lies south of the hurricane belt, it has extremely strong maritime loop currents. As Guyana, Suriname and French Guiana lack the necessary infrastructure to support deepwater E&P, there is a strong case to be made for T&T as the regional base for their, as well as its own, deepwater operations.

The country’s conventional offshore facilities and services are well-developed. “We have a long tradition of competent energy engineers and service companies. In addition to the domestic market, T&T is already serving as a hub to provide services to countries with smaller but growing offshore activities,” Shazan Ali, CEO of TOSL Engineering, told OBG. As tie-back lines can now reach up to 145 km for gas and 48 km long for crude, it is possible to envisage output being piped or shipped back to Trinidad for export or processing.

To seize the day, however, T&T will need to improve and strengthen its infrastructure, skills and general operating environment. Richard Fritz, international business development manager at Intercontinental Shipping, noted that apart from seismic surveys, T&T has yet to experience the full cycle of a deep-sea project of its own. It therefore needs to move rapidly up the learning curve. He described the deepwater challenge facing the country as a “potential game changer”, demanding that it develop enhanced infrastructure, ports, roads, utilities and deepwater facilities. Chris García, deepwater adviser for Latin America at Schlumberger Oilfield Services, agreed, noting that deepwater exploration off north South America can cost $1.5m a day and semi-submersible rigs burn up to 660 barrels of diesel a day, with Trinidad being four days of sailing away. In these circumstances, turnaround times and logistics need to be as streamlined as possible.