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TT Economy in 2020 Part 2: No Spark in Exploration Drilling

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By Kevin Ramnarine

The following is the second of a three-part series on the economic outlook of Trinidad and Tobago’s economy by the former minister of energy Kevin Ramnarine.

If the energy sector is the engine of the Trinidad and Tobago economy, then exploration drilling is the spark plugs.

In 2019, 11 exploration wells were drilled in TT making it the busiest year for exploration drilling in over a decade. Eight of these eleven exploration wells come out of acreage contractually awarded from 2012 to 2014. Of the 11 exploration wells drilled in 2019 eight were successful and one is still being drilled.

The salient point is awarding acreage for exploration matter very much. In that regard there is a worrying observation about the last four years.

From 2011 to 2015, the Ministry of Energy awarded 1.418 million hectares of acreage of which the majority (87%) was deepwater acreage. This compares to 0.041 million hectares for the period 2016 to 2019 which includes no deepwater acreage.

This massive decline in the award of acreage sets up the country for a period of little or no exploration activity in the middle of this new decade. If you think this is no big deal – think again!

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The inability of the Ministry of Energy to hold and successfully manage bid rounds in the last four years is a most worrying development. The one bid round that has been held has had a lukewarm response from the industry and to date no production sharing contracts have been signed from that bid round. When (or if) they are signed in 2020 it will be a case of too little too late.

Of the 11 exploration wells drilled in 2019, five were drilled by BHP in the deepwater. In November 2019, BHP announced that its exploration efforts in the northern catchment of blocks had yielded a 3.5 trillion cubic feet of natural gas (gross) with potential further upside.

This is great news that seems to have bypassed many in TT. This number is conservative and does not include the outcome of the successful Boom 1 exploration well.

However, it is best advised to use conservative assumptions at this stage. BHP expects to make a final investment decision on the northern cluster of blocks in 2022 for the earliest. If that happens, we could see first gas from deepwater by 2026 at a rate of 1.5 billion cubic feet per day. This is 42% of what we current produce. The challenge is the cost of development of this natural gas.

BHP’s exploration in TT since 2014 has led to this country emerging in a very strong position within the overall BHP petroleum portfolio.

If we consider the net BHP “Petroleum Reserves and Contingent Resources” as of June 30, 2019, BHP would have a combined Proven, Probable and Contingent Resource position of 582 million barrels of oil equivalent. This makes TT the third largest region for BHP after the United States Gulf of Mexico and Offshore Australia.

Before this statement creates any expectation, readers should note that these hydrocarbons are in deepwater and need to be commercially produced which will necessitate the investment of billions of US dollars.

What does 2020 hold for exploration?

In 2020, BHP continues its exploration of the deepwater. This time the focus is on the southern cluster of blocks located to the east of the Columbus Basin.

Since 2016, BHP has drilled ten exploration wells in four phases in TT’s deepwater of which three have been reported to be dry. This drilling campaign was preceded by a massive 3D seismic survey in 2014/2015.

Readers should note that BHP is now drilling deepwater exploration wells in TT beyond its minimum contractual obligation which was eight wells. This is a positive sign and says the company views TT’s deepwater potential positively.

In South Eastern Trinidad (on land) in the Rio Claro and Ortoire Blocks held by Lease Operators Limited (LOL) and Touchstone Exploration respectively, there have now been three discoveries of oil or natural gas in 2019.

In fact, between these companies there have been four back to back land-based exploration wells which resulted from the 2014 land bid round. This is a major exploratory effort not seen on land for several decades – and there is more to come in 2020.

The successful wells so far are LOL’s Barakat Well and two drilled by Touchstone namely Coho 1 and Cascadura 1ST1. Reserve numbers and production rates are not yet available and will only be determined by well testing.

However, Touchstone has indicated that the Coho-1 well could produce at a rate of 12 million cubic feet per day. These are significant developments and confirms that the structures that produce oil in places like Penal and Barrackpore extend eastwards.

These exploration wells are proving up a new and potentially very sizable field in east Trinidad which can resuscitate land-based oil production.

In 2020, Touchstone Exploration will continue its exploration of the Ortoire Block with its Chinook and Royston exploration wells.

The exploration campaigns of recent years have demonstrated that TT’s oil and natural gas sector has a long life ahead of it, but exploration drilling must be sustained and there should be no drop off.

Unfortunately, this is exactly where we are headed given the fact that almost no acreage has been awarded in the last four years.

 

TT Economy in 2020 Part 1: Oil Production Back to Colonial Days

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