The energy sector is the largest contributor to Trinidad and Tobago’s GDP, with oil and gas alone contributing approximately 40 percent to the twin-island nation's economy over the past four decades. Exploration and production constitutes the largest share of this amount at 25 percent, followed by refining and petrochemicals at 10 and 5 percent, respectively.
Trinidad and Tobago is the world’s 8th largest LNG producer and the largest importer of LNG to the US. However, over the last decade, the share of US imports has fallen from 70 percent to a meagre 16 percent. By contrast, Latin America (Argentina, Chile, etc.) account for more than half of Trinidad’s LNG exports.
Both oil and gas reserves are falling. Oil was the mainstay of the national economy well into the 1990s, when it was surpassed by growing natural gas production. Crude oil production reached a peak of 177,000 barrels per day (bpd) in 2006, after which production has been declining an average of roughly 5 percent per annum to 96,000 bpd. Natural Gas is also falling, but more gradually, at a rate of 1.8 percent per annum. Current production is at 34.5 billion cubic meters (1.2 trillion cubic feet) per annum. To add insult to injury the country is currently undergoing serious National Gas Company (NGC) contracts shortfalls, creating shortages for key industries like the petrochemical sector.
The sustained fall in oil prices from late 2014 on has had a strong effect on the national economy. This includes decreased revenues for local and foreign companies as well as for the government in the form of tax incomes, increased capital outflows and a shortage of foreign exchange in Trinidad and Tobago, as well as general growth in the sovereign risk of the country, making investment in Trinidad and Tobago less attractive. Most companies in the market had made arrangements for a fast price recovery, essentially limiting their strategy to cost reduction. However, with lower prices appearing to stay for the time being, a change of strategy on behalf of private and public players will become inevitable.
Concurrent with this, however, is the government's push toward compressed natural gas (CNG) as a vehicle fuel to replace super gasoline and diesel. Beginning in May 2014 with a phased five-year investment plan of US$300 million, the National Gas Company's CNG Company Limited (NGC CNG) signed on to construct 22 new or repurposed CNG-only fuelling stations and convert 17,500 vehicles to be able to take on the fuel. Not only would this switch to CNG help reduce capital outflows, but it would also reduce harmful exhaust emissions by a third in comparison to super gasoline/diesel. And even in a low oil price environment, the price differential for consumers is also significant, with CNG costing a third less than super gasoline. This factor is expected to increase to 50 percent in the coming years as Trinidad cuts back on its generous fuel subsidy programme, which has given it the 14th cheapest domestic fuel prices in the world, according to a 2016 IMF report.
In order to counter the effects of the new energy environment, the Rowley administration promised tax code amendments to make laws more accommodating for local and foreign hydrocarbon companies. Minister of Finance Dr. Colm Imbert also pledged to create an investor friendly fiscal regime. Case in point is the Supplemental Petroleum Tax (SPT), which is hurting investment. The tax was initially created with a barrel price of over US $50 in mind. The SPT is levied on revenue rather than profit and at current oil prices it makes it almost impossible for most players to operate without incurring serious losses. Furthermore, the current investment structure encourages companies to develop their largest fields first, taking a longer time before any oil or gas is extracted to enter the market. Experts have suggested it may be necessary to change existing contracts to incentivise production from smaller fields so as to help ease the fall in exports and the natural gas shortfalls in the economy.
Additionally, the government has committed itself to a National Climate Change Policy in line with the now in-limbo 2015 COP21 Paris agreement, which addresses emission reductions through the wider adoption of CNG-fuelled vehicles, the lowering or even removal of fuel subsidies for super gasoline and diesel, and establishment of a feed-in-tariff for energy generated from renewable sources and put into the national grid.
To this end in October 2015, a 10 percent renewable power generation target was put forth by the Ministry of Finance to be met in 2021. However, with the twin-island republic currently consuming 150 GW of power every year, going from near-zero to 150 MW in “green energy” will be no mean feat. Not only is the country routinely at the top of the list when it comes to greenhouse gas emissions per capita, but 80 percent of these emissions come from downstream operations in power generation and petrochemical production alone. According to the BP Statistical Review of World Energy, 93 percent of T&T power production comes from natural gas, with petroleum products making up the remaining seven percent.
As of 2017, Trinidad has six power stations spread among three independent producers (Power Generation Company of Trinidad and Tobago or POWERGEN, Trinidad Generation Unlimited and Trinity Power) and the public entity known as Trinidad and Tobago Electricity Commission (T&TEC) with a total generation capacity of approximately 2,000 MW, all of which is transmitted and distributed by T&TEC. Critically, only two of T&T's six power stations (POWERGEN's Penal and Trinidad Generation Unlimited's Union Estate) are of the more energy efficient combined cycle variety, which recycle heat produced from the first cycle as steam to power a second cycle.
Simply by converting their remaining single-cycle diesel and natural gas facilities to combined cycle, the country could reduce its emissions without even having to move away from hydrocarbons. However, due to the increased capital costs, the country would have to rely on public-private partnerships and build-operate-transfer agreements to fund the endeavours. Complicating both newer hydrocarbon projects and renewable energy though are the most generous electricity subsidies in the region at US$0.03-0.06 per KWh. Reducing subsidies, or at least charging market prices to the biggest consumers and those utilising electricity at peak hours, should incentivise more cap-ex investment into higher efficiency and "greener" power projects.
In terms of more upstream and midstream projects, the last few years have been relatively slow. However, 2016 saw the promise of four exciting projects: BPTT’s Juniper project and its onshore compression development known as Trinidad Regional Onshore Compression (TROC), EOG Resources’ Sercan field and Phase 3 of BHP’s Angostura project.
By far the most important initiative is the Juniper field spearheaded by BP Trinidad and Tobago. Juniper, expected to go online later in 2017, will count on five subsea wells in the Corallita and Lantana fields. Given the scale of the resources, authorities count on the project to help alleviate gas supply shortages. In January 2017, the Juniper offshore platform began its journey towards the southeast coast of Trinidad where it was installed as BPTT’s 14th offshore installation.
As it happens, BPTT also announced large gas discoveries just to the east of Juniper field and south of Cashima field at their Savannah and Macadamia wells, respectively, in June 2017. Coming in at 56.6 billion cubic metres (2 trillion cubic feet) of gas, this new development will further stem the tide of declining domestic gas production and will be complemented by a 15th offshore installation at Angelin, due to be completed by Q3 2018.
Trinidadian authorities have also signed bilateral agreements with Venezuela for the development of the shared Loran-Manatee field – which is estimated to contain 10.25 trillion cubic feet of gas and begin production in 2022 – along with supply of gas from Venezulea's Dragón field and construction of necessary infrastructure to facilitate it in March 2017.