Ladies and gentlemen, as a young student at University, I remember reading, at the back of a business magazine, that “this many experts in one room is bound to produce at least one good idea.”
But I feel sure we’ll have more than just one good idea emerging today and in the course of this World Congress…
Let me say how delighted I am to be with you at this World National Oil Companies Congress which is themed, quite appropriately I must say, “Opportunity and Strategy for NOCs and their partners”.
I consider this theme very apt for us in the Republic of Trinidad and Tobago, as in the past year, we have undergone a process of transformation of policy and a realignment of our priorities to strengthen and revolutionize our evolving petroleum sector.
A new Government of Trinidad and Tobago was elected in May of last year and since then, a great deal has happened. Progressive developments have provided a needed stimulus; spurring exciting opportunities that I am certain will capture the interest of this Congress.
Faced with a number of complex challenges in the Energy Sector on taking office, the People’s Partnership Government of Trinidad and Tobago considered, tested on the international front, and implemented a new set of strategies that represent the new direction of Energy in our country.
Before discussing the new direction, let me first place Trinidad and Tobago and its positioning in the global environment in context.
Trinidad and Tobago records an annual GDP of US$27.1 billion. With net foreign reserves of approximately US$9.66 billion, annual EXPORTS amount to US$12.06 billion and IMPORTS, US$8.23 billion.
The Energy Sector share of GDP as at 2010 stands at 35.7%.
The Energy Sector share of Government revenues stands at 52.3%.
And total energy revenues stands at TT$22,597.4 million, or, seeing as this conference is taking place in London, approximately £2.1 billion.
The Trinidad and Tobago Energy value chain calls together and enjoys loyal and beneficial partnerships with some of the world’s most influential players in energy today, as you are seeing.
Our energy infrastructure (supporting our oil and gas production of 100,000 bpd and 4.3bcfd, respectively) is also rather substantial and includes:
• 1 Crude Oil Refinery (throughput - 160,000 BOPD), and
• 4 Liquefied Natural Gas Plants (18.6 MTPA).
These four LNG plants consume approximately 58% of our natural gas production. Our 11 Ammonia plants and 7 Methanol Plants utilise 15% and 14% respectively of our natural gas production. Our Steel plants use approximately 3-4% of our natural gas production and Power generation consumes approximately 7%.
Of particular significance, Trinidad and Tobago is the world’s largest exporter of ammonia from a single site, and the number one exporter to the United States.
We are also the world’s largest exporter of methanol from a single site and the number one exporter in the world, to the United States. We are also a significant exporter to the European Market.
Through Phoenix Park Gas Processors Limited, or PPGPL, which is a majority owned subsidiary of the National Gas Company Limited, Trinidad and Tobago has also become a world leader in the processing of natural gas.
Processing involves the removal of natural gas liquids, and fractionation into NGL products such as propane, butane and natural gasoline for export.
Our export markets include North America, South America, Central America and the Caribbean. And out of this 20 year experience of progress, innovation and growth, NGC and PPGPL are now ready and capable of moving beyond our shores.
Following the global financial crisis in 2008, many nations were forced to face up to inherent institutional weaknesses which required urgent action. In Trinidad and Tobago, the new Government appreciated the fact that the Energy Sector was in need of a deliberate, value-driven strategy.
In developing this new strategic direction, our focus was to restore and enhance the confidence of global markets and also develop a much more diversified downstream sector. The policies which we immediately sought to implement were focused on delivering on these demands.
In addition, we appreciated that in order for Trinidad and Tobago’s Energy Sector to regain leadership on the global platform, transparency, determinism and clarity were imperative.
Ladies and gentlemen, I am pleased to tell you that in one year of aggressive realignment and implementation:
1. We have modernized and enhanced our fiscal and policy structures to sharpen our competitive edge and motivate deep water exploration for the first time, enhanced oil recovery processes and renewable energy
2. We have seen a veritable re-birth in our Upstream Sector, calling back to our shores some of the world’s largest energy majors to once again explore;
3. We have seen Energy Services re-invigorated by an upswing in exploration activity, coupled with a Mid-Stream sector that has been pushed forward with new potential across our borders;
4. We have seen a Downstream Sector leap towards sustainable growth and expansion with the successful linking of the Energy Sector to Manufacturing;
5. We have targeted new Downstream projects including petrochemicals, plastics, biochemical products and inorganic chemicals;
6. And we have engineered an increase in development activity in our thrust towards building a sustainable Renewable Energy Sector.
Through these initiatives and inter-linked strategies, the Energy Sector of Trinidad and Tobago has now turned to a growth path, is open and accommodating to partnerships and is poised for further, sustained growth, a fact which is corroborated by Trinidad and Tobago’s Central Bank.
Ladies and gentlemen, the Government of Trinidad and Tobago has made a commitment to a continuous programme of exploration. This applies to both the Shallow and Average Water Depths, as well as the new frontier, Deep Water.
In April of this year, the Government signed off on four Production Sharing Contracts for the Shallow and in the Deep Water Bid Round, attracted five bids on three blocks. In fact, you will be pleased to know that later this year, in September, we will launch another Deep Water bid round to capitalise on the momentum we intend to maintain.
This continuous exploration campaign is backed up by a recent analysis which provided us with essential information, not to mention, corroboration. This analysis confirmed that the transformed Fiscal Regime was welcomed as a positive step and investors were delighted with the fact that it reduced the commercial risks. The analysis also revealed a high level of interest in data which images the source rock.
This is why in the September Deep Water Bid Round, we will place 36 blocks through a nomination process which will allow companies to identify and nominate the blocks they believe to be most prospective. Following this nomination process, the Government will select blocks for the competitive bidding process based on the level of interest expressed.
And ladies and gentlemen, the increase in exploration activity and projected increase for further activity has meant a significant boost to the Energy Services Sector. With the Deep being frontier territory, and being an entirely new ball-game for Energy Services, it also presents valuable, new opportunities for partnerships, new specialist skills and enhanced technological capabilities.
Further, incentives embodied in the Government’s bold new strategic policy framework will also see a boost in oil producers operating in marginal and mature provinces. The fiscal incentives aim to boost activity and reduce costs, thereby improving production economics.
At the Trinidad and Tobago national oil company, Petrotrin, the company is now embarking on the implementation process for a number of strategies which will see a boost in oil production, modernisation of its infrastructure, a return to some of its dormant land-based fields and upgrades which will see enhanced output.
The company will also be making major investments in upgrading the marine infrastructure, both to maintain base crude production as well as to support new oil from the oil-winning projects.
In addition, ladies and gentlemen, with Petrotrin already having a number of valuable joint venture arrangements, the company will move to build further JV partnerships, particularly in its marginal and mature acreage.
Ladies and gentlemen in a further move to boost oil production in Trinidad and Tobago, we have been looking at the tone, tenor and form of the old Exploration and Production licenses.
Where E&P licenses have expired for blocks deemed not attractive for new players, the Government will approve a new E&P licenses for existing licensees.
In this regard, we took the opportunity to introduce a re-formed E&P license which is a look-alike of certain terms of the Production Sharing Contract, with similar provisions, following consultation and agreement with our upstream operators. Therefore the new licenses will allow for negotiation of:
1. New work programmes
2. Signature bonus
3. Technical and other bonuses
4. Scholarships and training
5. Abandonment provisions
6. A term of six years should there be no commercial activity
And recently, Cabinet approved new E&P licenses in this form to SOOGL/Primera/Petrotrin for the East Brighton Area (90sq km); to 10° North for the Pt Ligoure Area (17 sq km) and to 10° North for the Brighton Marine Area (35 sq km) and Guapo Offshore Area (24 sq km). The E&P License for these blocks had expired in 2010.
At Trinmar, which is a fully owned subsidiary of Petrotrin, future plans include additional fields in which appraisal wells are scheduled to be drilled in the current one-year field development plan (FDP).
Part of its strategy involves one of its three fields in the Soldado area, the South West Soldado field, where Petrotrin will be investing in a permanent production handling and processing facility to service this field, which is planned as a Build, Own, Operate, Transfer (BOOT) type of arrangement.
And with Trinmar’s E&P license coming up for review and renewal in 2012, we will take the opportunity to use the reformed E&P license and following this, joint venture opportunities will come into focus.
In addition, the Ministry of Energy and Energy Affairs encouraged and facilitated a collaborative partnership with private sector interests that enabled a sharing arrangement for the Gorilla II Rig with between Bayfield, NIKO Resources, SOOGL and Centrica. By way of this initiative 11 to 18 exploration wells will be drilled within the next year.
In addition, in February 2011, Bayfield Energy conducted a peer review of the conceptual well design for its upcoming exploration programme. In addition to inviting its joint venture partner (Petrotrin), the Ministry of Energy, and service companies, other Energy Companies operating in the area were also invited.
Participants of this open forum were encouraged to share their experiences and ideas for a fit for purpose design. This proved to be of tremendous value to not only Bayfield but all the participants present.
This is the kind of innovative thinking, strategic partnering and cooperation that we have fostered in our Energy Sector as a means of it becoming more robust and resilient to the challenges which now exist and which may come later.
This approach underlines part of our strategy to build collaboration as well as reduce operating costs for upstream operators, foster better relationships and allow for shared experience to further enhance the sector.
Indeed, some areas of collaboration will require amendments to Production Sharing Contracts which we will pursue through consultation and agreement with all upstream operators.
Ladies and gentlemen, partnership is important to the Government of Trinidad and Tobago. This is why we also moved quickly to further discussions with the Bolivarian Republic of Venezuela and last August finalized a unitization agreement for the Loran/Manatee Cross border gas field.
This agreement represented a big step towards strengthening cross-border relations with an energy partner by harmoniously agreeing on the sharing of resources. This agreement also opened up opportunities for both countries to deepen energy cooperation and also opened the door to further cooperation.
In moving forward, we will in due course move toward forming unitization agreements for the Mannakin/Coquina and the Kapok/Dorado fields which are just further up the delimitation line.
Of great importance to initiatives geared towards revolutionising the Energy Sector of Trinidad and Tobago, the Government has also moved to open access to historical seismic data on Trinidad and Tobago’s peculiar geology.
Discussions have been held with companies that will be affected and they have agreed, in accordance with the sanctity of contracts, to have their licenses amended to reflect this.
This undertaking means that data will now have the benefit of a diverse set of expert interpretations which, as you would expect, would mean a significant increase in opportunities for leaner and more aggressive operators in work-overs and new drilling.
It is important to note that intellectual property rights will be fully respected and it is not the interpreted data that will become available, just the raw data.
As you will no doubt agree ladies and gentlemen, the Upstream Sector of Trinidad and Tobago is now in an advanced activity state and is teeming with opportunities.
Trinidad and Tobago’s Midstream Energy Sector has also seen heightened activity through the National Gas Company Limited (NGC).
The National Gas Company holds the distinction of having constructed a 56-inch pipeline which is the largest operating gas pipeline in the western hemisphere today.
In May 2011, the NGC commissioned a 36-inch pipeline through which we will deliver natural gas from a new Gas Export Platform off our North Eastern Coast.
The commissioning of this US$450m pipeline project comes on the heels of a series of successful projects pursued and delivered by the NGC.
Looking ahead, between 2011 and 2013, a number of large scale projects are already on the cards and will keep the Midstream Sector and its partners very busy, and indeed, open to partnership and investment.
The changing global LNG trade in today’s markets has created significant opportunities for LNG from Trinidad, especially to higher priced markets.
In LNG, it is recognized that the fundamental basis of this industry has changed with the emergence of Shale gas in the LNG importing countries.
An analysis of the netback prices to the upstream and the Government showed the sharing in the destination premium, where cargoes have been diverted has been limited.
The netback formulae assume the export of LNG to the North American market. But the reality is that the US market is oversupplied with LNG and cargoes are being diverted to Europe and Asia.
The Ministry of Energy and Energy Affairs has looked closely at this development and Government will consider re-examining the sharing of revenues generated through the diversion of cargoes of Trinidad and Tobago’s LNG to premium destinations.
Again, this will be pursued in the spirit of collaboration and negotiation with a view to arriving at a consensus.
And we project that new opportunities would arise for Trinidad cargoes. In Europe, new regasification terminals are being commissioned and under construction. It is noteworthy that Netherlands will receive its first shipment of LNG from a Trinidad cargo, during this month.
Ladies and gentlemen I mentioned earlier that we have through a strategic realignment of our Energy priorities, been able to link our Energy Sector to our Manufacturing Sector.
Our first undertaking involved the use of Melamine, a tertiary derivative product of our natural gas, and creating the enabling environment to pull it further along the Downstream value chain. This project comes following the commissioning of the MHTL AUM I project from which the Government negotiated an unlimited supply of Melamine for use by our local manufacturers.
In doing so, we put Melamine in the hands of our own Manufacturers, delivered technical and market information, partnered with financial institutions for capital access and implemented the policy framework to absorb some of the risk as this new Energy-linked Manufacturing Sector gets off the ground.
Early in our term, we designed and approved the Evaluation Framework for the selection of gas-based projects. As part of our strategic plan, this new Framework will achieve greater local content, deeper local value added, support for academic institutions and wider participation of local financial institutions. Additional points are awarded for Carbon reduction and re-use strategies and environmental impact.
This Framework has been rigorously tested in its evaluation of responses to our RFP for Ammonia and Downstream derivatives projects which resulted in the selection of the Methanol Holdings Trinidad Limited (MHTL) AUM II project.
I am also delighted to inform this Congress that the Evaluation Framework will be busy in the coming months with two new projects.
In accordance with the new strategic direction of linking Energy to Manufacturing, the Ministry of Energy and Energy Affairs has recently invited proposals for two gas-based projects:
A Methanol to Petrochemicals plant which could see the rise of the Pharmaceutical and Textile Industries. This RFP has received 14 expressions of interest from international investors and closes in the first week of July 2011.
A Methanol to Olefins plant, which would generate a plastics industry. Based on requests from prospective investors the Ministry has agreed to extend the closing date for submissions to the first week in August of 2011. To date, 13 expressions of interest have been received.
And this Congress will be pleased to note that within the next three months, the Ministry will be engaging in the process of inviting expressions of interest for the development of a world class, integrated complex for the manufacture of glass and PV cells.
This, I trust, will illustrate how we have approached our priority realignment. While some may consider projects purely on the basis of gas reserves, we have taken the position of assessing projects on the basis of reserves, as well as gaining maximum value from production and all the way through the downstream value chain.
Ladies and gentlemen in the alternative Energy sector, the new Government has provided the much needed stimulus for development of alternative fuels through a package of fiscal incentives implemented by the Ministry last year.
By pursuing the expansion of CNG as an alternative to liquid fuels, some of the incentives implemented include import duties exemptions, accelerated depreciation, tax allowances, tax credits and wear and tear allowances.
This initiative has already gotten off to a good start, as I only recently, in May of this year, turned the sod for the construction of our country’s first fast-fill CNG mega-station.
In constructing a participatory and sustainable Renewable Energy Sector, we intend to increase the use and penetration of solar thermal and solar PV systems and encourage the use of these technologies for the manufacture of solar water heaters.
And with the Request for Proposals which will go out in three months, we are extremely confident in the additional investment and development benefits which an integrated complex will deliver at all strata of investments.
With aggressive development and continued Government support, we also expect an increase in R&D opportunities.
Ladies and gentlemen, I have discussed issues of policy transformation in Trinidad and Tobago and I want to tell you that while the Government welcomes Foreign Direct Investment and we have created an extremely favourable environment, we do have our preferences.
In our more than a century in the petroleum business, we have learnt that investors with long term intentions, tend to have a much greater stake in the social side of development as well.
These are the investors that care about the communities they operate in; that invest in the wellbeing and personal growth of employees; that guard their environment as the sustaining force of their investment. This is the type of investor in which we are most interested.
Trinidad and Tobago is a stable democracy with a strategic location. We have the highest respect for the Rule of Law, the principle of natural justice and the values of ethical business practices, corporate social responsibility and respect for employees.
Our gas price is competitive, matched by an attractive framework of fiscal incentives, transparent decision-making processes and a strong, liberalized currency.
We believe in the sanctity of contracts, property rights and Judicial independence. And as a Government, we recognise that even as we implement new policy and measure a good deal of success, we must remain aware of the global environment and as such, ensure our policies are adaptable, investor friendly and partnership oriented.
Ladies and gentlemen, I am confident that all at this Congress will agree that Trinidad and Tobago’s Energy Sector has been strengthened and has re-established its leadership on the global markets.
And as you will have note, we have done so by underlining our progress and success with a participatory, consultative approach with our stakeholders.
Our Energy Sector has once again risen to its feet, stands tall, stable and secure. Ours is a sector that is once again energised by international confidence and now, is driven by abundant opportunity.
As I conclude, let me encourage you all to take a closer look at Trinidad and Tobago. We have the opportunities, we have the enabling environment, we have a competitive package of fiscal support policies and measures and we are open for business.
Ladies and gentlemen, I wish you all a successful conference. I thank you.