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 The Future of T&T’s Economy with Natural Gas

An offshore platform

The Future of T&T’s Economy with Natural Gas

 

‘Given its abundance in the United States, it is not inconceivable that at some point in the future, we could be importing LNG to sustain Point Lisas and thousands of jobs’

 

By Kevin Ramnarine

IN 2022, Trinidad and Tobago’s natural gas production averaged around 2.7 billion cubic feet per day which while 3% better than the previous year was 29% less than the 2015 figure and 37% less than the 2010 figure.

The fall in natural gas production was especially acute in 2020 and 2021. The consequences of that decline are obvious. They include the closure of Atlantic Train 1, closed plants at Point Lisas and ongoing curtailments.

Will the trend continue?

The reality is the Columbus Basin from where the majority of our natural gas is produced is a mature province that is now into its 51st year of production. This maturity however does not preclude the possibility of new gas discoveries in the Columbus Basin, but it is likely that the larger reservoirs have already been discovered.

As for oil production, its decline has been more consistent. Oil production in 2022 was 24% less than the 2015 figure and 40% less than what it was in 2010.

There is nothing on the horizon that one can point to that gives any hope that the downward slide in oil production would be reversed.


‘While we have a shortage of natural gas, we have no shortage of talk and misplaced optimism’

The replacement of Petrotrin with Heritage has not impacted on the production numbers. In fact, Heritage’s production is lower than that of its predecessor. The recently announced efforts of Heritage will only slow the decline of oil production. The issue is not a lack of oil but an outmoded fiscal regime and the domination of acreage by Heritage. The changes to the Supplemental Petroleum Tax regime in the last budget also don’t go far enough and won’t excite investment. Indeed, our oil and natural gas production are in secular decline and the ultimate proof is in the production numbers. But for this commentary, this decline is not spoken about publicly, but it affects the economic present and future of T&T in a profound way.

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From my analysis of all the available data, it seems unlikely (even with the Shell Manatee project producing by 2027) that natural gas production will push above 3.0 billion cubic feet per day again unless we get deepwater natural gas into production. As for the “great Venezuelan hope”, getting natural gas from our South American neighbour is a low-probability scenario. Even if the US sanctions on Venezuela were to be removed tomorrow, it will be years before wells can be drilled and pipelines constructed.

It is possible to sustain oil and gas production at current levels for a while, at least, but changing their descending trajectory requires big game changers like deepwater gas production which is expensive and infrastructurally challenging. Given its abundance in the United States, it is not inconceivable that at some point in the future, we could be importing LNG to sustain Point Lisas and thousands of jobs. This is an idea which, while sounding sacrilegious, should at least be studied by the NGC. There is also the renewable energy option, and we look forward to the long-awaited BP Lighsource solar farms.

While we have a shortage of natural gas, we have no shortage of talk and misplaced optimism. However, in a more realistic and foreboding tone, last year when the prime minister returned from Switzerland, he spoke of far-reaching consequences for Government revenues and the quality of life of all the people of Trinidad and Tobago if new investments were not made now.

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Given that the production of natural gas and oil are the mainstays of our economy as measured in GDP at constant prices, and 2015 represented our highest-ever real GDP, then can it be concluded that we will not get back to 2015’s level of wealth?

We have a few options. Either we continue pursuing the current model of hydrocarbon extraction and monetisation and hope for a reversal in production trends or we get into new things that can, with the passage of time, replace the dwindling oil and gas industry.

The problem is we ought to have been doing this decades ago and we are now out of time. Dr Eric Williams had lamented the monoculture economy as far back as 1955 in a speech titled The Economic Problems of Trinidad and Tobago. In the debate in the UK House of Commons in July 1962, on the T&T Independence Bill, the Under Secretary of State for the Colonies, Hugh Fraser noted the dangers of reliance on the oil industry and the need for economic diversification in the soon to be independent T&T.

Diversification may well be the biggest challenge of our country since Independence, but it is a challenge that we must accept and one we must deliver on fast. The greatest opportunity for diversification lies in the maritime sector with the inherent advantages of deepwater harbours in the Gulf of Paria.

Building out our maritime sector, strengthening domestic food production, tourism (linked to the maritime services sector) and widening our services and manufacturing bases should be national imperatives but they would be lost if we don’t address the obstacles to competitiveness.

What is needed is a radical phase change in our approach to the economy. What is not needed is incrementalism and doing the same thing we’ve done since Independence. This does not mean parking oil and gas in a corner rather it means lengthening the life of these industries while working with our private sector to create other economic pillars that can earn the levels of foreign exchange needed. Both strategies require courageous, robust, and energetic leadership that mobilizes the private sector and the people of T&T.

Kevin Ramnarine is a senior energy consultant and former energy minister of Trinidad and Tobago.

2 Comments

  • I now eagerly await MOF’s address to participants at the Energy Conference.

  • A former Energy Minister who did nothing for diversification during his 5 years in power and who told us 7 years ago that we have nothing to worry about for the next 15 years ago. Its easy to be a critic now isnt it. But when you had the chance you were as guilty as those youre writing about now. Yes, your points are good ones in the article, but your big headedness in not seeing you are part of the reason we in this problem is pretty remarkable

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