Exploration holds the key

By Energy Correspondent
The Trinidad Express
Port Spain
Petroleumworld.com 02 05 06

For the past five years, as natural gas demand increased markedly from year to year, the nagging question of the adequacy of the country's natural gas reserves has remained sharply in focus. Many experts, from Government and major suppliers alike, seem to have taken comfort with the notion that Trinidad and Tobago's Columbus basin is a world-class hydrocarbon province and that supply would readily respond to satisfy demand.

And that perception seems to have goaded the Government along its bold industrialisation drive towards pursuing some major downstream projects.

The true picture, however, is becoming clearer. News surfaced last week that several of these projects may be delayed or cancelled because a long-term gas supply cannot be assured. Unless reserves are replenished continually through persistent and successful exploration acute depletion could result.

From 1999, with the start-up of LNG production, total natural gas utilisation has jumped precipitously from approximately 1,350 million cubic feet per day (1350 MMcf/d) to almost 3,000 MMcf/d for 2005, a 40 per cent annual increase. Undeniably, 2005 can safely be classified as the year of the "largest". We saw the completion of the Western Hemisphere's largest gas pipeline, NGC's 56-inch line from Beachfield to Point Fortin; the commissioning of the world's largest methanol plant, Methanol Holdings' 5000 tonne capacity plant with a gas requirement of 175 MMcfd; and the start up of the world's largest LNG train, ALNG Train 4 with an optimum requirement of 800 MMcfd. Last year set the pace for the voracious consumption of natural gas in the future.

On the other hand, the support and foundation for this consumption is becoming increasingly insecure as the country's cushion of proved natural gas reserves have decreased from 19.8 trillion cubic feet (Tcf) in 1999 to 18.8 Tcf in 2005.

What these facts highlight is the gradual depletion of the country's reserves as sporadic reserve additions-which are occasionally trumpeted in the media as major gas finds- have been inadequate to reverse the decline trend propelled by the higher demand. Consequently, the Reserves to Production ratio, RTP, has more than halved from 40 years in 1999 to less than 18 years currently.

The Government, however, seemingly faithful to its demand pull conviction, keeps pressing on with rapid gas based industrialisation with the hope that natural gas from our own sparse resources or perhaps from Venezuela would fill the 56-inch pipeline. Prime land, priceless vegetation and natural habitats are being bulldozed in a frenzy to make way for massive industrial sites to house the incoming mega projects.

The major projects that are contemplated include the manufacture of the following products: Urea ammonia nitrate, melamine, ammonia, urea, iron and steel, aluminium, polypropylene, and perhaps ethylene. Total gas demand is projected to surpass 5,000 MMcf/d by 2011. And this does not include Train X and future LNG trains.

At that level of consumption and assuming optimistically that the 18.8 tcf reserve cushion is maintained through successful exploration, the RTP would fall to below ten years. To maintain the current RTP ratio would require finding some 10-12 tcf over the next five years, and maintaining a discovery rate of about 2 tcf/year. Successful exploration is therefore the key, particularly if we assume that no agreement is reached with Venezuela.

Exploration in 2005 was disappointing in terms of new finds and the level of expected activity. Industry sources indicate that Chevron/Texaco's, Manatee 1, in Block 6d bordering Venezuela's Plataforma Deltana was the only successful exploratory well in 2005. The other wells drilled-bpTT's Coconut1, BHP Billiton's Gypsy 1, and EOG Resources' LRL 2 and 3-were all deemed uncommercial.

This year therefore could prove to be a watershed year for the country's energy future. Exploration activity should eventually pick up as work obligations from the 2003/2004 Bid Round awards are being pursued.

Several new players are now involved: Canadian Superior Energy Inc. is awaiting an appropriate rig to spud its first well in Block 5c. in 232 feet of water of the East Coast. Petro-Canada is acquiring 3D seismic in Blocks 1a, 1b and 22 to determine its most likely locations. Kerr Mc Gee is preparing for effecting 3D seismic surveys in Block 3b. Of the traditional suppliers only EOG Resources was offered a Production Sharing Contract. The company is currently exploring the 4a Block with two wells. Sources indicate that results from the first well are encouraging and might suggest a commercial discovery.

Notwithstanding Government's good intentions for rapid industrialisation, inadequate reserves can severely hinder the future growth of the industry. Common sense should dictate that we must plan wisely based on reality and not edify our vision based on perceptions. Until persistent exploration provides a sustainable reserve cushion beyond our long-term projections, Government would be well advised to heed the current warning signals and slow down until exploration successes provides a green light to move full speed ahead.

 

The Trinidad Express
Wednesday, February 1st 2006



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