Bookmark and Share

Why natural gas exploration matters

By Kevin Ramnarine

BETWEEN 2012 and 2014, BHP and its partners signed nine production sharing contracts (PSC's) with the Ministry of Energy for the rights to explore 3.1 million acres of this country's deepwater acreage. In 2014 the Ministry was also able to successfully conclude a land-based bid round that saw three land blocks awarded. These three land blocks represented 12.5 per cent of the Country's land mass. In stark contrast, in the last four years the Ministry of Energy has not contracted any deepwater acreage or for that matter any new acreage at all.

Arising out of its nine contracts, BHP commenced its exploration in March 2014 with a 3D seismic survey that lasted eleven months and was at the time the second largest in the history of the oil and gas industry. By mid-2016 BHP commenced drilling using a Transocean drillship, the Deepwater Invictus. The economic environment in mid-2014 to 2016 could not be worse. At the time BHP started drilling, oil prices had fallen badly and deepwater drilling programmes all over the world were being cancelled. However, in T&T, deepwater exploration continued thanks to the contracts and the commitment of BHP.

Since mid-2016, BHP has drilled eight exploration wells in T&T. Of these eight wells six were reported to have encountered natural gas. It is too early to have firm numbers for reserves, but we have been told that one discovery, Le Clerc, has four to five trillion cubic feet of natural gas. Le Clerc is located to the east of the Columbus Basin in water depths greater than 3,000 feet. The Le Clerc well was drilled to a depth of 22,876 feet. To put that into perspective, this would be the height of sixteen Empire State buildings.

To the north east of Tobago, BHP has also drilled exploration wells which includes the Bongos 2 discovery and the three wells drilled in Q1/Q2 2019, Bele, Tuk and Hi Hat. Earlier this month, it was announced that these three wells were successful and had encountered hydrocarbons. It is understood that the reserve potential (thus far) in the blocks to the North East of Tobago could be in the vicinity of around six trillion cubic feet of natural gas. That number could climb.

Deepwater province

BHP has now completed its minimum work obligations as per contracts. It is likely that the company would go beyond their contractual obligation and drill two more wells in T&T. This is indeed very positive news as it points to continued interest.

What does all this mean for the country?

It means that BHP and its partners are proving the presence of a new hydrocarbon province in T&T. If these discoveries are commercial it would mean the extension of the life of the T&T natural gas economy for decades to come.

The big question is the commerciality of these discoveries. Given their water depth (approximately 5,000 to 6,000 feet) the cost of development will be high.

Large natural gas discoveries, like those made in Egypt in 2015 and Mozambique in 2010, are preferred if companies are to get the economics to work for deepwater developments.

It is hoped, therefore, that further exploration drilling by BHP will discover more reserves which would aid in creating the economies of scale needed for commerciality.

A potential deepwater province in T&T together with an established deepwater province in Guyana and possibly Suriname and French Guiana sets the stage for a deepwater industry in the Southern Caribbean in the next decade and beyond. Our economic vision and planning need to be aligned to this reality.

Land-based oil Arising out of contracts signed for the 2014 land-based bid round, locally owned and operated company Lease Operators Ltd (LOL) has been conducting exploration drilling in the Rio Claro area in recent months. The understanding is the results for one exploration well are positive. This augurs well for land-based oil production and if successful will lead to an uptick in development drilling in the south east part of Trinidad. From the same group of 2014 contracts, there will soon be exploration drilling in the Ortoire area by Touchstone. Should LOL and Touchstone be successful in South East Trinidad, and I have every reason to believe they will be, they could add new oil production to the country's declining output.

Companies can only explore if they have been contracted or licensed acreage by the Ministry of Energy. A lot of the exploration in the period 2016 to the present is a result of competitive bid rounds held between 2011 and 2014 and fiscal incentives offered. If there is a slowdown in the award of acreage it will have negative consequences for the country down the road when exploration drilling dries up.

In 2006, this country had a failed deepwater bid round for which we paid a heavy price. Had that bid round been successful we might have been in a different place today. We must have continuous exploration for oil and natural gas in T&T. It is in the national interest that we create the environment to facilitate such continuity. In the energy sector and the wider economy, there are 'ease of doing business' issues that are suffocating investments. If we get it right, T&T's will have many more decades of oil and natural gas production.

Kevin Ramnarine served as one of the two ministers of energy in the previous People's Partnership administration. He is now an energy consultant and a lecturer.

The Point Lisas Industrial Estate in central Trinidad.

Bookmark and Share