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Regional News>Energy company preaches restraint on natural gas projects - Audit puts 12-year life on reservesLinda Hutchinson-Jafar, Business Writer |
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Chairman and chief executive officer of BP Trinidad and Tobago, Robert Riley, is pressing for restraint on new natural gas projects, saying the depleting reserves require the country to hold back on drilling plans.
"We have to exercise restraint, because we cannot allow growth to so drive us that we get so far ahead of exploration potential that we have projects but no gas," Riley said in Port-of-Spain.
Multinational energy companies and domestic gas users have a difference of opinion over gas pricing for local companies and how best to maximise revenues from the export of natural gas.
With production costs increasing due to inflation and more difficulty in finding gas, Riley said it was vital to realise the best possible price to get the natural gas to market, suggesting that Henry Hub should be the reference point.
Depleting Rapidly
A January 2007 audit from Houston-based Ryder Scott shows that the country's gas reserves are depleting rapidly and suggests more discoveries are needed quickly to sustain the expanded gas needs of the country.
"Trinidad has neither stranded gas nor low-priced gas anymore," said Riley. The Ryder Scott report indicated that natural gas reserves declined by more than 3 trillion cubic feet (tcf) over a two-year period, from 2005 to 2007.
Based on a production rate of 4.5 billion cubic feet per day, the gas will last only 12 more years unless new discoveries are made.
The country's '3P' or proved, possible and probable reserves were estimated at 31.04 tcf, down from the 34.87 tcf identified in 2005.
Proved reserves in 2007 totalled 17.05 tcf, possible was placed at another 6.23 tcf, and probable at 7.76 tcf.
Port-of-Spain has since reviewed proposed energy projects categorised under two listings to be shelved until the reserve ratio improves.
The A-list projects which represent combined investments running close to US$9 billion include the Alutrint Aluminum Smelter, Alcoa Smelter, Essar Steel and Westlake Ethylene Complex, and First UAN.
Government's own plans for an LNG Train X - separate from the mega Atlantic LNG line - are also in cold storage for the time being.
Trinidad currently has a daily gas production rate of 3.9 billion cubic feet, with 59 per cent being allocated to LNG production and 41 per cent to the domestic market, which is dominated by ammonia and methanol production.
Additional Sources Needed
By 2016, daily natural gas production is estimated to increase to 5.9 bcf, split 53 per cent LNG and 47 per cent to the domestic market.
To meet its own contractual obligations, BPTT's main challenge in the medium to long term is finding additional resources every year to sustain its 500,000 barrels of oil equivalent a day output.
"The challenge being to put one trillion cubic feet of gas behind the pipe every year going forward because that's what we have to replace as a business," said Riley.
BPTT can comfortably maintain the 500,000 barrels up to 2011 with its Mango and Cashima platforms delivering additional resources, said the CEO.
BPTT, a subsidiary of BP plc, has mapped out a plan to scoop additional resources from the mature Columbus basin, one of the most prospective regions of the country's acreage.
It has created what it calls a mega-merge, which has accumulated 40 years of data including chemical and seismic information to guide the recovery of resources in the Columbus basin.
"We believe we understand the extent of the basin; we have a fairly good idea of the size," said Riley, adding that BPTT was expecting no big hits.
"We will find gas, but we will not find anything in the sort of large numbers that we used to find in the last decade or so," he said.
"The conversation around exploration, therefore, changes, merely from exploring to exploring somewhat with a lot more appraisal to prove up and pull through the 'yet to find' - the possible and probable resources. We are, therefore, tending to what people call in the industry, the plateau phase of the growth life cycle, and the transition from growth to the sustained mode."
business@gleanerjm.com