The T&T Energy Conference 2024 is right around the corner (January 22 to 24, 2024). This year, its theme is “Accelerating Action”. We took the opportunity to discuss with the Head of our Energy Department, Mr. Jon Paul Mouttet, various industry insights and challenges faced by the T&T upstream oil and gas sector.
1: In your view, what are the major challenges affecting the upstream oil and gas industry in Trinidad and Tobago?
T&T is undoubtedly a mature oil and gas jurisdiction, having been engaged in the industry for over 100 years. This obviously brings with it a number of positives, but also a number of challenges.
Sustaining our level of reserves requires continuous initial exploration investment. Similarly, sustained production of those reserves requires continuous development investment. This is where the primary challenge lies.
T&T must remain visible and relevant as an investment destination both in terms of exploration investment and development investment, particularly in the face of emerging and competing major oil producing nations, such as our neighbour, Guyana.
There are a number of factors that make a country attractive as an investment destination, many of which are outside of our control. Our focus, therefore, needs to be on those factors which we can control. Among the most critical is creating a destination where it is easy to invest and develop our resources in the shortest possible timeframe, with an attractive return on investment. This means assessing both the competitiveness of our fiscal regime and promoting the ease of doing business.
T&T’s fiscal regime should be one that is simple, easy to administer and materially improves the economics of investment in comparison to its global competitors. In terms of the ease of doing business, investors currently face a complex regulatory approval regime (with diverse regulators) and unfortunately, a level of bureaucracy and bottle-necking that considerably extends the timeline between initial exploration investment and getting the product to market. Time, after all, is money. The T&T Energy Chamber has sounded the alarm on this issue on multiple occasions, and indeed that is the very concept behind the 2024 Energy Conference which is themed “Accelerating Action”.
2: It is a fact that Trinidad and Tobago’s natural gas production is in decline. Are you optimistic that the Dragon Gas Field will remedy this situation, or do you view it as a short-term solution to a long-term problem?
Natural gas production has in recent times faced decline. Again, this is not necessarily a question of the reserves that exist, it is a question of promoting sustained investment to ensure regular discoveries and the development of both existing and new discoveries within T&T.
The December 2023 signing of the licence for the Dragon Gas field to NGC and Shell is undoubtedly a great opportunity for T&T to reap the rewards of potentially introducing into its domestic market large quantities of Venezuelan natural gas. The Dragon Field however lies to the North West of Trinidad and entirely within the region of Venezuela, so it does not assist with T&T’s own domestic natural gas production.
I am hopeful that this field will be successfully developed and exploited in the shortest possible timeframe and that the lifting of US sanctions (which previously brought its development to a halt) will continue.
While the Dragon Field is a welcome salve to the domestic gas supply situation, it will not address either of the pressing issues already discussed. T&T needs to be more competitive in terms of economic return and we need to create an environment that will facilitate quicker development and the bringing of gas to market.
3: Do you believe that the inclusion of new technologies, for example solar energy and other renewable sources, can augment the decline in oil and gas production?
New oil and gas production technologies can certainly help in alleviating production decline and they are particularly useful in a country with mature fields.
Solar energy and other renewable resources, in and of themselves, cannot directly augment the decline in oil and gas production. What they can do is reduce dependence on and consumption of fossil fuels in the production of energy. At present, T&T’s power production plants run on fossil fuels sold at a subsidized price. If electricity generation can be directed away from fossil fuels, this can clearly allow the country to achieve a more attractive return on these precious resources, while at the same time reducing our overall carbon footprint and diversifying our economy. While T&T, as a small nation, does not have a major carbon emission contribution on a global scale, we do make a considerable contribution when considered on a per capita basis.
As a mature oil and gas province, finding reliable and efficient alternative sources of energy must be a critical long-term goal worthy of governmental focus and investment. Apart from this motivator, the Government of T&T has now made a considerable undertaking, via the Paris Accords, to reduce cumulative greenhouse gas emissions by 15% from a business-as-usual baseline by 2030.
The Government has made significant planning strides for carbon reduction, with a roadmap strategy for reduction of carbon emissions being in place since 2015. This, in my view, is an excellent document and contains all the right ideas, but as expected, there have been challenges and struggles with implementation.
While there have been a number of small pilot solar power generation projects (for instance the Preysal Service Station and the Piarco solar farm), thus far there has been no major shift in the dependence on fossil fuels in power generation.
The seemingly greatest stride has been the utility scale solar projects spearheaded by bp/Shell at Brechin Castle and Orange Grove which are currently in development; but it is no secret that these projects have suffered significant delays. There have also been wind farm potential studies and announcements by the Government which suggest that further development in this area is to come.
It is clear that, as a country, we need to move faster if we are to comply with our undertakings under the Paris Accords and indeed, with the Government’s renewable objectives as stated in Vision 2030.
4: At the launch of the Re-Energise T&T program in November 2022, Minister of Energy and Energy Industries, Stuart Young, stated that Trinidad and Tobago will continue to produce oil and gas, with a focus on responsible, clean oil and gas production. What environmental, social and governance policies do you believe should be implemented to reduce our carbon footprint within the industry?
Government’s primary tools in the promotion of action by private investment are to (1) incentivize by way of grants and tax breaks; (2) ban and/or regulate through the establishment of mandatory standards; and (3) punish economically by way of taxation and other penalties for non-compliance.
Finding the right balance of these tools for a developing nation with an existing oil and gas industry (with in situ infrastructure of dated design) and which wants to remain attractive to new and continued foreign investment is not an easy task. Energy security also remains of paramount importance and despite the global movement towards renewables and other alternative sources of energy, the Government must keep this in the forefront of its mind.
Whatever actions are ultimately taken by the Government, they need to be preceded by careful consideration, the appropriate research and extensive consultation with all stakeholders.
We are in the nascent stages of the renewable conversion and the time is right to motivate action through incentivization, as opposed to harsh and unrealistic regulations, bans or penalties. At present, switching wherever possible to greener and renewable sources of energy and implementing strategies for carbon capture seem to be the prime opportunities in front of us and their pursuit needs to be encouraged.
Switching to carbon neutral technologies and implementing carbon capture is an expensive and often capital-intensive process. The Government should consider giving attractive tax concessions that will motivate the use of and conversion to such technologies while maintaining an acceptable return on investment. These could take the form of import and VAT concessions, accelerated capital allowances, tax rebates, credits and/or uplifts so as to reduce purchase and conversion costs.
The implementation of education and training programs to build technical expertise and to motivate local industry specializations in solar and other renewable/alternative energy projects would also be very helpful and can foster the development of a local service and/or supply industry.
In terms of power generation, the Government has acknowledged that it needs to revise the T&TEC and the Regulated Industries Commission Act, to be more facilitative of renewable power generation.
At the appropriate time, imposing mandatory regulation, economic sanctions and outright bans will also be the right move.
The upstream companies are well placed to lead the energy conversion and many of them are doing just that. The spearheading of the Brechin Castle and Orange Grove solar projects by bp and Shell provides a prime example. De Novo has also demonstrated that low carbon offshore operations in T&T are in fact viable by utilizing solar and renewable technologies on their platforms.
The drive for the shift is already there – all the Government needs to do at this point is implement strategies that will help it along.