A note from Dax Driver, CEO of the Energy Chamber:
30th December 2014
The current low oil price environment and low refining margins, coupled with the regular media reports on oil spills, fears about possible labour unrest and concerns around significant project overruns have led many commentators to ask questions about the viability of Petrotrin, Trinidad & Tobago’s state oil company.
Amidst all of this discussion one very salient point seems to have been ignored; namely that production from Petrotrin’s onshore acreage has actually increased by about ten percent over the past three years. This increase in production marks a significant turnaround to the previous situation of falling production. Between 2005 and 2011 onshore oil production fell by 18%.
However, all of the increase in production on Petrotrin’s acreage has come from lease-out or farm-out operators or from Incremental Production Sharing Contracts (LO/FO/IPSC). Production from onshore wells or fields that are directly managed by the state-owned company has continued to decline, by 5% since 2011 and a total of 31% since 2005. During this same period production from the Petrotrin wells and fields operated by the LO/FO/IPSC companies has increased by 69%.
As a proportion of total onshore production the LO/FO/IPSC sector has increased from 21% in 2005 to 40% in 2014.
If production from the state company operated wells and fields had increased at the same rate as the LO/FO/IPSC sector the country would now be producing over 40,000 barrels per day onshore.
The increase in production in the LO/FO/IPSC sector has been driven by greater levels of investment into these assets, compared to the assets directly managed by Petrotrin. The LO/FO/IPSC sector has consistently out-performed Petrotrin in terms of both feet drilled and rig days over the period 2005 – 2014.
Over the period 2005 – 2014, the LO/FO/IPSC sector has clocked up more than double the number of feet drilled onshore compared to Petrotrin and an additional 2,695 rig days.
The greater levels of investment and activity from the LO/FO/IPSC sector accounts for the greater levels of production from these assets.
Petrotrin land production and the T&T Energy Conference
The available data clearly shows that the key to further increasing crude oil production from Petrotrin’s onshore assets is to develop the right contractual relationships to allow smaller, nimble independent oil companies to operate the assets. This mechanisms will give Petrotrin far better returns on these assets and access to the domestic crude oil it requires to improve its refinery margins.
The original LO/FO programme was developed in the late 1980s at a time of national crisis and low oil prices. The proposals for the development of the programme came directly out of the first two Petroleum Congresses in 1988 and 1989 – the annual conference now renamed the Trinidad & Tobago Energy Conference.
During this current period of uncertainty over oil prices, perhaps the 2015 Energy Conference (taking place on the 26 – 28 January at the Hyatt Hotel) will mark the beginning of a new direction for onshore oil production from Petrotrin’s acreage, in which all the day-to-day operations are all undertaken by independent producers. The data suggest that this policy will allow the state-owned company and ultimately the people of Trinidad & Tobago to receive the best possible returns on their assets. The future of the state oil company will certainly be one of the hot topic discussion points at the Energy Conference.
Further information on the conference is available at www.ttenergyconference.org .
All data from Ministry of Energy Monthly Bulletins (2005 – 2014)
2014 data is for January – October.