Trinidad & Tobago’s hydrocarbon resource and, in particular, its natural gas have enabled it to become the most industrialised Caribbean nation. Foreign investment in the Energy Sector accounts for over 90% of the country's export earnings.
The country is well experienced in exploration, production, refining and other process plant type operations, for example, petrochemicals. Gas is used for electricity production, petrochemical, liquefied natural gas, metals, heavy industrial and light industrial use. Projects, such as additional steel and ethylene plants have been discussed, but do not now appear to be on the "front burner" as a result of the 2008 recession. Trinidad and Tobago is the world's largest exporter of ammonia and methanol.
In this Chapter, Grantley L. Wiltshire and Gregory Pantin, Partners in the firm’s Energy Practice Group, and Dispute & Risk Management Practice Group respectively, provide investors with an overview of the Trinidad & Tobago Energy Sector.
The Role of the Energy Sector in the Economy
The Energy Sector has long been important to the economy. It accounts for approximately 50% of the country’s gross domestic product, and represents over 90% of the country’s export earnings.
The first oil deposits were discovered in 1866 and serious drilling first undertaken in 1907. Crude oil production commenced in 1908 and the first oil refinery was established in 1912. Exploration for offshore oil commenced in 1954. Production of natural gas has been increasing rapidly since the mid seventies. Gas is now more important to the economy than oil. The gas is used primarily for electricity generation, petrochemical manufacture, LNG production, steel and metal production, cement manufacture and light industry.
The focus of the Ministry of Energy and Energy Affairs over the last two (2) years has been on arresting the decline in, and increasing crude oil production. In fact, for this year, there has been a marginal increase.
As at December 2013, the country's non-associated natural gas reserves were stated by Ryder Scott as:
Proved reserves - 12.24 tcf
Probable reserves - 5.53 tcf
Possible reserves - 6.12 tcf
Further, there are potential new discoveries that are termed "unfinished exploratory resources" of 31.6 tcf. Natural gas from most fields in Trinidad & Tobago is primarily "sweet" gas (0.1%-0.35% carbon dioxide and negligible sulphur).
Oil reserves as at December 31, 2011 were as follows:
Proven - 199.54 million barrels
Probable - 85.46 mb
Possible - 124.77 mb
Condensate reserves (associated with natural gas production) were as follows:
Proven - 43.45 million barrels
Probable - 24.39 mb
Possible - 30.83 mb
Moreover, there are estimates of considerable heavy oil reserves and oil sands acreage which have not previously been considered economically recoverable or exploitable under then market conditions, although recent technological advances and current market conditions may suggest otherwise.
Identification and exploitation of reserves are by means of Exploration and Production (E&P) licences or Production Sharing Contracts. These are issued by, or executed with, the State, usually based on competitive bidding rounds.
Given the maturity of the energy sector in Trinidad & Tobago, its natural resources are supported by a large number of skilled and well trained people. Oil refining operations commenced in Trinidad & Tobago in 1912 and petrochemical production in 1959; thus large numbers of people have been trained in process plant type operations, as well as in oil and natural gas production.
There are large numbers of service companies which provide support services to the major producers. In addition, many experienced qualified individuals, firms and companies provide services in fields such as architecture, engineering (civil, mechanical, electrical, petroleum) geology, and contracting (all types). In fact, all major projects have been constructed with the significant involvement of local contracting companies, including high pressure pipeline construction, steel fabrication and erection and civil works. In recent years, the construction of off-shore platforms has been taking place.
The importance of natural gas to the economy has increased rapidly over the last 25 plus years. It has attracted by far the most significant amount of foreign investment during this period.
Natural gas production during 2015 averaged approximately 3,864 billion cubic feet per day (up to August 2015). All of the natural gas used in Trinidad & Tobago with the exception of “own use” gas (i.e., gas used by producers for their own purposes) and gas for LNG production is presently purchased from producers (primarily BP, EOG, British Gas/Chevron) by the National Gas Company of Trinidad & Tobago Limited (NGC). It is transported by NGC and resold to consumers. However, gas used by the LNG plants is sold directly by offshore producers to the LNG facility or to others to be tolled through the facility.
Natural gas is used in the production of LNG, petrochemicals (ammonia, methanol and urea), iron and steel, electricity, natural gas liquids (propane, butane and natural gasoline), cement, scrap iron substitutes and for a host of light industrial manufacturing purposes. An ethylene plant remains an item for consideration as does the possibility of an additional LNG train ("Train X"). This will be dependent, however, on the proving up of additional reserves or the settlement of unitization issues to allow the exploitation of cross-border reserves.
Gas utilisation by sector during 2015 (up to August 2015) averaged as follows in millions of standard cubic feet per day (mmscf/d):
- Power Generation - 293
- Ammonia manufacture - 552
- Methanol manufacture - 532
- Refinery - 75
- Iron & Steel manufacturer - 88
- Cement manufature - 13
- Gas Processing - 26
- Light Industrial ("Small consumer") - 9
- LNG - 2033
Commencing in 1988, NGC moved rapidly to a system of indexed gas pricing, particularly in the petrochemical sector. With the price of gas, a main cost component, tied to product price, producers are better able to ride out periods of unfavorable market conditions.
Oil production peaked at 230,000 barrels per day (bpd) in 1978 and declined in 2001. As a result of discoveries, production increased to approximately 145,000 bpd in April 2007. However, since then, production has declined rapidly, and total daily oil and condensate production during 2015 averaged 80,000 bpd.
Should substantial reserves of heavy crude and the recovery of hydrocarbons from oil sands be demonstrated to be economically recoverable, then the reserves to production ratio will further improve. In addition, the State is inviting bids for the exploration of large offshore areas including deep water blocks off the South Coast of Trinidad and the resultant activity should translate into increased reserves and ultimately enhanced production levels.
The current players in ammonia are:
- Yara Trinidad Ltd. with one (1) plant;
- Trinidad Nitrogen Co. Ltd. (a joint venture between the State and Yara), with two (2) plants;
- Potash Corporation of Saskatchewan (P.C.S.), with four (4) plants;
- Point Lisas Nitrogen Ltd (formerly Farmland MissChem Limited), a joint venture between Koch Nitrogen and CFI with one (1) plant.
- Caribbean Nitrogen Co. Ltd., (“CNC”, a joint venture company with one (1) plant.
- N2000 Ltd with one (1) plant (associated with CNC).
- Methanol Holdings Ltd. with one (1)plant (as part of an AUM complex).
At present, methanol plants are operated by:
Methanol Holdings Trinidad Limited with five (5) plants;
Methanex Trinidad (Titan) Unlimited with one (1) plant;
Atlas Methanol Company Unlimited (owned by Methanex and BP) with one (1) plant.
P.C.S. owns one (1) Urea plant (previously State owned).
Arcelor Mittal owns three (3) facilities for the production of direct reduced iron, steel billets and wire rods and a new world scale HBI/DRI Plant. Another project for the production of reduced iron briquettes by a Lurgi process which was owned by Cliffs and Associates Ltd. and which was in a "cold idle" mode for some time, was purchased by ISG and put back into operation for a while but is once more closed down. ISG was subsequently acquired by Arcellor Mittal.
Natural Gas Liquids (NGLs)
An NGL Plant for the processing of natural gas, and fractionating the liquids into propane, butane and natural gasoline streams is owned and operated by Phoenix Park Gas Processors Limited. The Plant also fractionates NGLs extracted from natural gas by the LNG trains. The Plant is capable of extension into Ethane extraction. The Plant has gone through several expansions. With the expected significant increase in natural gas utilization over the next few years, there will be opportunity to deepen the value added to these products by going into downstream development.
Liquefied Natural Gas (LNG)
Arcellor Atlantic LNG's Train One achieved full production in 1999. Train Two started up in 2002; Train Three in the first half of 2003 and Train Four in 2006. At full production, these plants have a total gas demand of approximately 2.3 billion cubic feet per day.
The Role of the Government
In the 1970's, Government stimulated development of the energy sector by participating as an equity investor on its own or on a joint venture basis. In recent years, the State has divested itself of its interests except where these interests are seen as being of strategic importance.
Companies involved in the business of petroleum production and refining pay taxes on profits from the business under the Petroleum Taxes Act (Petroleum Profits Tax). There is also a Supplemental Petroleum Tax at scales based on oil prices.
Marketing business which was previously charged to tax under the Petroleum Taxes Act has, with effect from 1st January, 1997 been taxed under the Corporation Taxes Act.
Most other Companies in the sector, (Petrochemicals, metals etc.,) will be liable to taxation under the Corporation Taxes Act. For further information, please see the section on Taxation.
Certain reliefs from taxes may be applicable for new projects under various facilities and incentives provided by law. See the section: Incentives to Invest for more information.
Further information on the Trinidad & Tobago energy sector is available at www.energy.gov.tt and www.stcic.org