In an exclusive interview, Energy and Mineral Resources Minister Finbar Ganga outlines the government's plans to expand the vital energy sector

What are the mainstays of the energy sector?

Crude oil and natural gas are the major natural resources from which the energy sector of Trinidad and Tobago derives its importance. Proven reserves of crude oil at the end of 1995 reached 530 MMBO. With an average production rate in that year of 131,811 bopd the reserve life is estimated to be 11 years. On average about 50 per cent of the crude oil produced is exported and the remainder is utilised as throughput in the local refining sector. At present the refinery at Point-à-Pierre is being upgraded to yield higher-quality products. In recent years crude oil production has been on the decline, but steps are being taken to encourage further exploration activity.

In contrast to the declining fortunes in crude oil, the natural gas subsector has been gaining in prominence in the economy. This is a direct result of the growth of the petrochemical sector based on the use of natural gas both as fuel and feedstock. The output of the petrochemical sector is primarily for export. Total proven and probable reserves of natural gas at the end of 1995 were 10,600 bcf, while average production was 652 MMcfd, giving a reserve life of 38 years.

Natural gas consumption in 1995 averaged 593 MMcfd which represents an increase of 3 per cent from 1994. It is projected to increase by 21.9 per cent in 1996 to 723 MMcfd. The greatest increase in demand in 1996 is expected to come from the country's third methanol plant which came on stream in November 1995. Current projections indicate natural gas demand will double by the year 2000. This increase is premised on the development of additional petrochemical plants and the establishment of a 425 MMcfd LNG facility.

How has the sector fared in the past 12 months?

In 1995 the energy sector of Trinidad and Tobago experienced a fairly stable economic performance and continued to play a major role in the economy. Crude oil and natural gas production averaged 131,811 bopd and 752 MMcfd respectively, which represent increases of 0.2 per cent and 0.9 per cent from the production rates of 1994.

With respect to the production and export performance of petrochemicals, ammonia production increased 2.3 per cent to 2,056,193 tonnes in 1995, while exports rose 5.6 per cent on 1994 and exports increased 15.4 per cent and 12.6 per cent to 573,629 tonnes and 513,381 tonnes respectively in 1995; methanol production and exports registered a slight decrease from 1994 of 5.5 per cent and 7.9 per cent and 963,102 tonnes and 940,530 tonnes respectively. Production from our natural gas liquids recovery plant, Phoenix Park Gas Processors Limited, increased 7.8 per cent from 3,477,099 barrels in 1994 to 3,747,402 barrels in 1995. Exports from the plant increased from 2,775,843 barrels in 1994 to 3,588,226 barrels in 1995 or by 29.3 per cent.

How important is the energy sector to the economy as a whole?

The energy sector is the largest and most important contributor to the national economy. In 1995 the sector (excluding petrochemicals) contributed 21.8 per cent to government revenue; 68 per cent to foreign exchange and 28 per cent to GDP. It is expected that the sector will continue to be instrumental in promoting and achieving sustainable growth and development in the medium to long term.

How successful have you been in attracting foreign investment into the energy sector?

The government has been utilising appropriate mechanisms to promote and attract foreign private sector investment to the sector either independently or in joint venture partnerships. In this regard the government's efforts have been very successful to date.

In the area of exploration and production there has been involvement by several international petroleum companies including Amoco, Enron, Exxon, Total, Chevron and Unocal over the last few years. At present Shell BV and Anderman Smith are international partners in a consortium with the state oil company and a local company, Krishna Persad and Associates, to conduct exploration in the under-explored northern half of the island of Trinidad. In addition, several foreign companies have shown interest in acreage offered under a competitive bidding exercise which commenced in early 1995. Contracts are soon to be awarded to Enron and BHP/Elf with respect to Phase I of the bid rounds while bids were received for Phase II from BHP Petroleum (T'dad) Inc, Talisman Energy Inc, Elf Aquitaine, Amoco, Repsol Exploration SA, Conoco and Exploration and Production BV.

A number of international companies are also involved in the production of petrochemicals and other downstream activity. The major companies which are already involved are: Arcadian (US) and Norsk Hydro (Norway) in the production of ammonia; Ferrostaal/Helm (Germany) and Methanex (Canada) in methanol, Arcadian in urea production; Ispat (India) in iron and steel production; Nucor (US) in iron carbide; Southern Electrical International (US) and Amoco in electricity generation and Conoco and Pan West in the liquids recovery plant. In addition a Project Agreement has been signed with Farmland Industries Inc and Mississippi Chemicals Corporation for the establishment of a new ammonia plant and a sod turning ceremony took place in April this year. Arcadian is also expected to start construction in 1996 of another ammonia plant at Point Lisas. Furthermore, a number of foreign companies are currently negotiating the final details of an omnibus agreement for the start of an LNG facility. The companies involved in this venture are Amoco, British Gas, Repsol Sa and Cabot and the National Gas Company of Trinidad and Tobago.

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What specific measures do you plan to increase foreign participation in the energy sector?

In recognition of the important contribution foreign investments will continue to play in the development of the energy sector the government of Trinidad and Tobago plans to undertake a number of measures to maintain a healthy investment climate in the country. In this regard there are plans to review the natural gas pricing structure in order to make it more transparent and therefore easier for the prospective investor to relate to.

In addition, to foster downstream activity in the petrochemical sector the government proposed to devise a support policy for the development of downstream industries in the sector. It is hoped to implement this policy through a co-ordinating agency engaging in market intelligence, engineering and financial analysis and the development of an appropriate fiscal incentive package with the objective of fostering investment whether it be in MTBE, plastic resins, polyester fibres, acrylic, PVC or any other products.

In the area of marketing of petroleum and petroleum products measures will be taken to foster the growth of a healthy and competitive marketplace. A proposal to demonopolise the local retail petroleum market is currently under consideration.

What does Trinidad and Tobago offer as an investment destination that other countries in the region, for example, Venezuela, do not?

As an investment destination Trinidad and Tobago offers several incentives to the prospective investor. First and foremost there exists in this country a stable political climate which is rooted in a commitment and tradition of this people in the rule of law. In addition, there are provisions in our Fiscal Incentives Act which present opportunities to negotiate reasonable fiscal terms and conditions. The country also offers very competitive natural gas prices and a highly skilled labour force. Finally, there are highly developed infrastructural facilities, excellent telecommunication services and a liberal financial sector which facilitates the repatriation of profits.

What exploration activities are currently under way?

The government of Trinidad and Tobago has embarked on an extensive exploration programme in an effort to increase crude oil and natural gas reserves.

In early 1995 the government commenced a programme of Competitive Bidding, the overall objective of which is the award of additional acreage offshore under terms and conditions which will encourage new exploration activity and hopefully result in new fields being brought into production.

The programme is being undertaken in three phases involving several blocks in the south and east coast marine areas. Negotiations with respect to Phase 1 are nearing completion and production sharing contracts are expected to be signed with Enron and BHP/Elf Aquitaine for Blocks Modified U(a) and 2(c) respectively.

Bids were received for five blocks in Phase 2 of the bid round and have already been evaluated. BHP/Talisman and Amoco/Repsol were successful bidders for two of the offshore blocks. Phase 3 involving exploration in deeper horizons offshore is expected to commence later this year.

Exploration activity is also continuing in the northern basin of Trinidad through the Northern Basin Consortium, a joint venture comprising Andersen Smith, Shell BV, a local private sector firm, Krishna Persad and Associates, and Petrotrin. A seismic survey in the area is due to commence later this year.

Amoco is also continuing a comprehensive seven-well exploration/appraisal programme which commenced in late 1995. In addition, Premier Oil BV has recently signed a Deed of Assignment of a Licence with the government to conduct petroleum exploration operations in the Gulf of Paria.

Are you confident that there are further oil and gas reserves to be found?

The ongoing programmes aimed at increasing crude oil and natural gas reserves have been very successful to date and based on the findings further increases in reserves can be expected in the future. The areas which hold greatest promise and on which future exploration efforts will focus primarily are the deeper waters off the east coast and in the North Coast Marine Area of Trinidad. A recent noteworthy occurrence has been an oil find in deep waters off the east coast of Trinidad in an essentially gas-producing region. This discovery is expected to foster greater exploration activity in the area. Another reason for optimism is the increasing level of interest displayed by several international oil and gas companies to explore for hydrocarbons while new techniques such as horizontal drilling are being employed to enhance exploration capabilities.

Are you optimistic for the future of the energy sector of Trinidad and Tobago?

As already pointed out, the energy sector will continue to play a major role in the development of Trinidad and Tobago. The government through its plans and programme is therefore committed to the development of the sector. Based on the level of commitment being expressed, the performance of the sector to date and the favourable findings with respect to potential oil and gas reserves, there is much room for optimism. The government is also aware that crude oil and natural gas are non-renewable resources and has been taking appropriate steps to develop alternative forms of energy.

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©Kensington Publications 1996