Opinion | Prof. Sterling Frost
Opinion | Conrad Enill
The frog and the caterpillar
Becoming skilful sailors
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A publication of the Energy Chamber of Trinidad and Tobago Issue 31 • May 2020 • Free Copy
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The perfect storm
Work continues in Guyana but pending government approvals The global oil, gas and petrochemical industry is facing a perfect storm of low commodity prices and disruptions for 3rd FPSO will delay caused by the fight against the coronavirus. Within the Caribbean, these two factors have been intensified by the Payara development political uncertainty in the region’s newest and biggest oil producer, Guyana. Page 3
According to a release by ExxonMobil, it is reducing its 2020 global capital spending by 30% and lowering cash operating expenses by 15% in response to low commodity prices resulting from oversupply and demand weakness from the COVID-19 pandemic.
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Necessity and invention I have been working from home since March 17th, 2020 as part of the Energy Chamber of Trinidad and Tobago’s (Energy Chamber) response to the COVID-19 crisis. My wife and two daughters have also been working from home. It has been an interesting challenge and I have learnt some unexpected lessons from the experience.
Page 11 Rowan EXL II at the Angelin Platform off the east coast of Trinidad
OIL PRICES CRASH U.S. ON TRACK TO BE LARGEST LNG EXPORTER BY 2025 RYSTAD ENERGY: COVID-19 AND LOW OIL PRICE PUTS OVER 1M ENERGY SERVICE JOBS ON THE LINE LOCAL CONTENT POLICY: A GUYANESE PERSPECTIVE NEWS
OPINION
EFFICIENCY
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ENERGY DATA page 19
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INTERNATIONAL NEWS page 23
Shell part of consortium that aims to build the largest Green Hydrogen project in Europe Hydrogen is one of the most abundant elements in the universe and according to major energy players, it could play a significant role in the transition to a clean and low-carbon energy system.
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POSTPONEMENT OF COLLECTION
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In order to provide cash-flow relief to our members who need it most, the Energy Chamber will temporarily defer collection on all payments due to us by financial members on any currently outstanding invoices. This will be implemented immediately and will remain in effect until June 1st 2020 or until further advised.
ADVOCATING FOR SUPPORT TO OUR MEMBERS
2 As we depend on our members, we also want our members to know that they can depend on us.
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ways in which we are helping our members through this crisis:
The Energy Chamber has been advocating on behalf of its members with the Government of Trinidad & Tobago for important fiscal support during this period. We have been in dialogue with the government over the issues of VAT repayments and especially over the payment of long outstanding debts from state-enterprises. Working with the other major business support organisations, we have proposed that the government introduce payroll tax credits and deferments in tax and other payments to government. Our advocacy work on behalf of members has continued through-out this period, as we seek to ensure that we all survive and emerge stronger from the current crisis.
MEMBERS HELPING MEMBERS
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The Energy Chamber has also advocated for support for our service companies and contractor members with our major operator members. We have been in dialogue with operators about the need for them to, as far as possible, provide liquidity to their service providers during the current crisis. All operators have responded positively to this request and have undertaken to monitor their payment cycles and ensure that all payments due are settled promptly. Some operators have reduced their payment terms.
SUPPORT TO YOU AND YOUR EMPLOYEES
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The Energy Chamber is working with employee assistance programme (EAP) providers to put together support for our smaller member companies who do not have dedicated existing EAPs in place for their staff. Employees of these member companies will be able to access counselling and advisory services from the selected provider. Further details will be provided directly to members once finalized. While the COVID 19 crisis will inevitably lead to job losses, there are still companies who are hiring during this period. The Energy Chamber’s job board is an important virtual platform where you can both post openings and direct persons who seek employment. Please check www.energy.tt for details.
SAFE TO WORK CERTIFICATION
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Companies whose STOW certification expires between 1st March – June 30th 2020 will have their certification automatically extended for three months. Please check our STOW website at www.stowtt.info for further updates.
Member companies applying for STOW certification for the first time or reapplying after allowing their certification to lapse, will only be invoiced for two-days of assessor fees and assessors will conduct a review of company documentation and provide an interim opinion on the documentation to the STOW Board. Site visits and interviews will be conducted only when the pandemic situation allows these to safely completed.
FREE ON-LINE RESOURCES AND WEBINARS
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The Energy Chamber has made the template of a pandemic management plan available for members on our website at www.energy.tt
We are offering regular free webinars to members on managing through the current crisis. Information on upcoming webinars will be advertised via our regular e-newsletters and on the website.
KEEPING THE LIGHTS ON
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Our member companies are playing a vital role in keeping the lights on during this crisis. We are highlighting the work that our members do through our communications. We have provided advice and assistance to the Ministry of National Security on who is providing essential services in the energy sector. Our staff are working from home (or on paid leave) and the Energy Chamber remains open and is more active than ever. Please keep in touch and let us know how we can continue to support you and your business during these difficult times.
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| May 2020
news
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The perfect storm THE global response to slow the spread of COVID-19, including lockdowns and the banning of most international air travel, has led to a massive decline in demand for energy products, in particular the petroleum products that dominate in the transport sector. This unprecedented fall-off in demand coincided with moves in March 2020 by some of the major oil and gas producers to increase supply in order to maintain market share. This perfect storm led to commodity prices hitting an 18-year low during March 2020. The subsequent agreement by the Organization of the Petroleum Exporting Countries (OPEC) members and other major oil producers, in particular Russia, in April 2020 to remove almost 10 million barrels of oil production from the market is unlikely to bolster prices, given the unprecedented fall in demand. Most analysts predict commodity prices will remain low for at least the next few months and probably longer. For the Caribbean energy sector, this perfect storm has had a major impact on companies across the industry, both large and small. In Trinidad and Tobago, the region’s major hydrocarbon producer, natural gas is now much more important than oil production. Gas prices within Trinidad and Tobago are typically linked to the final commodity prices for petrochemicals as Mark Loquan, President of The National Gas Company of Trinidad and Tobago explained: ‘While we have seen global oil prices plummet over the past months, in Trinidad, gas prices remain consistent with our long-term contractual arrangements. Those contracts which are linked to petrochemical commodity prices will therefore fluctuate with the movement of those commodities’. While global petrochemical prices do not necessarily always simply mirror oil prices, they do tend to be closely correlated and have fallen significantly in the past few months. While the published contract prices for methanol did not show the same decreases as oil prices, industry sources say that spot prices are very significantly down. The published benchmark price for naphtha (a feedstock for downstream petrochemicals that often competes with methanol) has seen an almost
(continued) 70% decline since the start of the year (see page 10 for further details on petrochemical prices). Claire Fitzpatrick, Regional President of BPTT (the biggest hydrocarbon producer in the region), told EnergyNow that ‘in response [to the current situation], upstream operators are adjusting capital and operating expenditure budgets’. To date, there have been no announcements of cancellations of major upstream capital projects within the Caribbean, though Exxon has announced that its final investment decision on Payara project, the third phase of the massive Stabroek block development in Guyana, would be delayed, and this could lead to an overall 12-month delay in project delivery. While there have not yet been major cancellations of upstream development projects and operators have continued to produce oil, gas and petrochemicals as part of the essential services in the region, companies have been significantly cutting back on activities in keeping with governments’ COVID-19 response plans and multinational companies’ global policies. Fitzpatrick explained: ‘For BPTT, our priority remains the safety of our people and our operations and we will continue to take all necessary measures to do our part to manage the spread of the virus. A key part of our response has been to limit operational and project activity in keeping with the guidelines issued by BP Group and the government. This has meant the reprioritisation of activity. In the first quarter, there were no production impacts as a result of our response to the COVID-19 virus and we will continue to monitor and adjust our operations to maintain operational stability’. The response to the COVID-19 crisis has seen major scheduled maintenance projects being postponed until later in the year in order to minimise the risk of transmission of the virus on worksites. Within Trinidad, four major scheduled plant turnarounds have been postponed. This steep decline in activity has been a major strain on the energy service companies, contractors who support the industry and thousands of individual workers who are typically recruited to work on these projects. Many energy service companies have barely recovered from the previous oil price crisis in 2014/15 when they saw their operating
margins significantly cut. The offer by Trinidad and Tobago-based banks to defer loan repayments and restructure debt has offered some respite to some local service companies but they still face a difficult situation. Liquidity is a major issue for many of the companies in the service sector as they seek to preserve jobs while their revenue has plummeted. Measures introduced by some of the operators to significantly reduce payment terms have been welcomed by the service industry, for example, the commitment by BHP to reduce payment terms to seven days for small suppliers. The commitment by the government of Trinidad and Tobago to settle long outstanding debts and to make VAT refund payments to local companies is also welcomed, but these liquidity related measures are unlikely to be enough to fully preserve employment through the downturn. To compound matters for the Trinidad and Tobago energy services sector, their access to regional export markets such as Guyana, Barbados or Suriname is now shut off, due to travel restrictions and closed borders. Energy service companies typically export services by assigning staff to work on projects in other countries, so travel restrictions make it impossible to work internationally. Within countries, COVID-19 restrictions have also often introduced additional costs on operations for energy service companies and productivity for manual workers has been lowered due to the challenges of maintaining social distancing and increased workplace hygiene. Despite the perfect storm and the huge challenges being faced by the industry, leaders in the sector remain confident that we can overcome the challenges. ‘While the current environment is extremely challenging for all of us, we remain confident that we have worked through similar market conditions in the past. We know this calls for tough decisions, but we are committed to working with all our stakeholders so that we can get through this together’, Fitzpatrick told EnergyNow.
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Oil prices crash Staff Writer | Energy Chamber APRIL 2020 saw unprecedented movement of oil prices, with the benchmark US WTI futures price in particular entering uncharted territory when it went into negative territory on the eve of the close of the May delivery contracts. The unprecedented collapse in oil prices was caused primarily by a huge drop in demand for petroleum products, with the implementation of lock-down measures across major markets and the collapse of global air travel. The brief oil price war, primarily between Saudi Arabia and Russia, launched in March 2020 and brought to an
end in April 2020, exacerbated this situation. The demand destruction has been unprecedented. Energy research firm, Rystad Energy suggested in its latest COVID-19 impact on the energy sector report, that global oil demand in 2020 may contract by 6.4% from 2019 and global oil demand may contract by over 22 million bpd in April. The company said that ‘We now estimate 2.5 billion barrels lower oil demand in 2020 due to the virus outbreak, with the average daily demand of 93.5 million bpd for the year, i.e., a 6.4% contraction vs the 2019 level of 100 million bpd’. Rystad however sees a more prolonged impact through the year with an average demand of only 91.4
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million bpd. A large part of the global population is currently working from home, drastically reducing fuel demand for road transport. Jet fuel use is also dropping sharply as 80% of international long-haul flights are cancelled. WTI prices in April were driven primarily by massive declines in US demand for gasoline, with few people driving due to stay at home orders. This has led to storage levels nearing capacity and nobody wanting to take physical delivery of oil, hence the negative futures contracts. Brent oil prices, that are more reflective of most internationally trade crudes, have also shown
huge declines in prices in April though not entering the same negative territory. Trinidad crudes are typically linked to Brent prices, the Paria traded Molo crude (primarily produced by Heritage) usually trading below Brent while the other Trinidad crudes, Galeota and Calypso, typically trade at par or slightly over Brent. With the massive declines in Brent prices, Heritage has announced that it will store its production over the next couple of months and look to sell once prices have recovered.
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| May 2020 energy.tt • @ttenergychamber
U.S. on track to be largest LNG exporter by 2025 Staff Writer | Energy Chamber IN 2005, the U.S. outlook for energy was vastly different from what it is now according to Shawn Bennett, Deputy Assistant Secretary for Oil and Natural Gas, Department of Energy (DOE), United States of America. Bennett was speaking at the 2020 Trinidad and Tobago Energy Conference. He said that at the time, the U.S. was evaluating liquefied natural gas (LNG) import terminals because they thought they were at a moment of scarcity where there was not enough production to meet domestic markets.. This, however, was before the shale revolution, and then everything changed. Now the U.S. is the global leader in crude oil and natural gas production in the world. Production has increased by 70% and continues to rise.
U.S. natural gas production is now about 92bcf/d. For comparison, Trinidad produces approximately 3.6 bcf/d. He said that the U.S. is positioning itself to be able to provide global energy security. He added that, "According to the International Energy Agency (IEA), global gas consumption is expected to reach about four billion cubic metres by 2023, adding about 376 billion cubic metres. The markets will be the Asia and Pacific regions which will account for over half of the consumption of the growth from 2023 and much of this natural gas growth demand will be met with LNG." At present, it is projected that production of natural gas in the U.S. will continue to grow and exceed domestic consumption by more than 20bcf/d up to 2050. Bennett said that the emergence of the U.S. as a
global exporter, challenges some of the norms in LNG trade. He said that it challenges features of supply contracts. Exports from the U.S. include flexible destination clauses and gas-indexed pricing, and provides different models from the standard fixed delivery to oil-indexed supply agreements. When LNG is on the water, it has no final destination clause so purchasers of LNG may sell and deliver to any entity unless it is a country with a sanction attached to it, but this enables U.S. LNG to be the most flexible LNG on the market. He also said that the U.S. conducted several studies to ensure that exporting LNG does not jeopardise the country’s ability to access natural gas at a low price. He indicated that three studies have been done since 2012 to analyse various scenarios and volumes being exported. He added that there are seven projects currently
in operation with current export capacity of around eight billion cubic feet a day or about 80 billion cubic metres per year. This, as the U.S. hopes to have other projects online by 2022 through 2025. When these are complete, the U.S. will be in a position to export 15bcf/d Bennett said. He added that this will position them as the top exporter of LNG in the world. According to Bennett, the U.S. is also encouraging small-scale LNG. He said that in 2017, the DOE announced a proposed rule that will provide for faster approval of small-scale exports from the U.S. The rule became effective in 2018 and first approvals were made in 2019. This includes LNG exports to the region, including the Caribbean.
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Aneesh Chopra, Former Chief Technical Officer, USA at the T&T Energy Conference 2020
Chopra: Handshakes and handoffs Staff Writer | Energy Chamber HOW do we build skills for the new energy sector and the energy transition? According to Aneesh Chopra it needs handshakes and handoffs. As the keynote speaker at the Trinidad and Tobago Energy Conference 2020, Chopra gave some stellar advice to stakeholders on how to prepare for what’s next in the energy sector. Chopra, former Chief Technology Officer of the United States under President Barack Obama, showcased how skills were developed during the financial crisis of 2008/2009. He said that during the crisis, there was an obvious bipartisan need for things to get moving again in the economy and making the most of the stimulus packages (recovery act) that were put forward. There was support to take advantage of the crisis to make bets for the long term. That philosophy and investment plan he says has moved through on a bipartisan approach even under the new administration. He indicated that the strategy was built on three fundamental pillars. When we invest in infrastructure, we move from traditional roadways
and railways to digitisation infrastructure, research and development, human capital development and digitisation of the grid, healthcare sector and the like, Chopra said. Chopra added that, as we digitise, we need to create new boundaries. He indicated that we need new models of multi-stakeholder collaboration to ensure security and to work in the best interest of the people — not those who sponsored the digitisation in the first place. He said where we have key national priorities, the government can call for an all-hands-on-deck approach in the spirit of public private partnerships (PPPs) to bring about the best of our ideas to solve the issues of today. This is what he calls the importance of handshakes and handoffs. He said that ‘handshakes’ refers to the bipartisan political agreements to agree on the framework. Obviously figurative handshakes as physical handshakes are not allowed during the COVID19 pandemic. He added that being politically agreeable is not enough; there needs to be a handoff to a similarly energised private sector — the nonprofit sector — that
can take the baton and close the innovation gap. Simply agreeing on new policy is insufficient in this era — all hands must be on deck and then a critical handoff between the public sector and the private sector is needed. The pillars of this new infrastructure involves cloud computing, artificial intelligence, and research and development. According to Chopra, the Department of Energy itself has put unprecedented investments in projects that incorporate artificial intelligence tools in the energy sector itself. Whether it be to identify promising areas for exploration and production or modernising the grid to have best yields from intermittent renewable energy. The U.S. government has set a goal of investing 3% of GDP in research and development he said. Chopra said, in addition to digital infrastructure, we need to think about human capacity — like Science, Technology, Engineering and Mathematics (STEM) education, etc. He said that Science and Math are constant but Engineering and Technology are not treated equally as core components of the curriculum. He said though, that the jobs are in the trades or hands-on engineering. Chopra affirmed that you do
not need a PhD in artificial intelligence to learn how to apply the technology to the oil and gas field. He said to think that everyone needs to be an expert in science and math to enter those new occupations would be a false narrative. The biggest opportunity he sees is in the trades that use the technology as a complement to work, rather than a replacement. To capitalise on this, we need greater industry certification and the ability of people to take those skills in a globally competitive market where they are put to the best use, Chopra said. He said that technology is a way to make business more efficient, but it is also a way to lift people up and give them a chance to aim much higher than they would have, under the normal way of life. Chopra ended by saying, “I share this because I see it as the future of the Caribbean.” In closing, he challenged, “What new ideas exist adjacent to the oil and gas sector that can be developed … and can be scaled … everywhere.”
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| May 2020 energy.tt • @ttenergychamber
BPTT Matapal & Cassia C on track Staff Writer | Energy Chamber BPTT’s Matapal and Cassia C projects are on track, according to Project General Manager, Michael Daniel. Daniel gave an update on BPTT’s major projects at the company’s booth at the Trinidad and Tobago Energy Conference 2020. According to BPTT, the Cassia C is a compression project which will enable BPTT to access and produce low pressure gas reserves from currently producing fields in the Greater Cassia Area, maximising recovery from these existing resources. The company has stated that the platform will have a throughput capacity of 1.2 billion standard cubic feet of gas a day (bcfd). The project was sanctioned in 2018 and is
expected to come online in 2021. The Matapal project will develop the gas resources discovered by BPTT in 2017 with the Savannah exploration well. The project will be a three-well subsea tie-back to the existing Juniper platform. With production capacity of 400 million standard cubic feet of gas a day, first gas from Matapal is expected in 2022. Both developments are part of BPTT’s Area Development Plan which outlines the direction and pace of the company’s activities to develop their resources in the Columbus Basin. The plan includes a combination of exploration, development projects and activities focused on maximising production from existing fields. Daniel gave an update on the Galeota Expansion Project (GEP) which will extend the life of BPTT’s
onshore processing facility for another minimum of 20-plus years. The facility receives all of the water and condensate from our BPTT offshore fields and processes these liquids into market quality crude/ condensate and produced water. GEP is expected to be completed within the first half of this year. BPTT is also progressing work on its Cypre development. Cypre, which has not yet been sanctioned, is being designed according to what the company calls a ‘minimal normally unmanned installation (NUI)’ concept. The intention is to develop a platform that is simpler to operate, safer and greener, through reduced emissions. The project is progressing through BP’s project approval process. Daniel said: "Matapal and Cassia C are the latest
in a long line of projects that BPTT has invested in to develop resources off the east coast. We have a conveyor belt of future developments that will allow us to continue to deliver gas to the market. We are excited by the challenge to create new facility designs that are greener and safer. We believe we can do this with the new Cypre platform. We are proud that the jacket for the Cassia C facility is being fabricated in La Brea at TOFCO [Trinidad Offshore Fabricating Company] and it is nearing completion. We are looking forward to moving it into location in the coming months in time for commissioning works to begin."
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Columbus Energy/Predator moves into next stage of gas injection at Inniss-Trinity Staff Writer | Energy Chamber COLUMBUS Energy told investors that it looks forward to the next stage of continuous gas injection at the Inniss-Trinity project in Trinidad. InnissTrinity is being progressed as a pilot project, testing enhanced oil recovery within a mature field by Columbus Energy with partner, Predator Oil and Gas. Last year, state oil company, Heritage Petroleum, gave the go-ahead for the pilot project as Columbus operates under an incremental production service contract (IPSC) for the field. The company previously indicated that Predator will fund and help plan the carbon dioxide (CO2)-enhanced oil recovery pilot project. Trinidad and Tobago, like most countries, has implemented restrictions on movement of people for non-essential work and these policies will remain in place for at least the next few weeks. The Inniss-
Trinity Field does remain operational and oil field personnel have been issued with passes to travel to and from the field. The company stated that it is has injected more CO2 into AT-5X as part of initiating Phase 2 of the CO2 EOR pilot project and has observed encouraging downhole pressure build-up. The remote access data gathering system that was put in place before coronavirus struck, allows the Predator to monitor real-time pressure data and to adjust injection pressures and CO2-injected volumes remotely through the company's CO2 enhanced oil recovery (EOR) operating personnel in the field. The next step is to inject CO2 at even higher pressures and on a continuous basis and Predator's CO2 provider is currently working to achieve this objective as quickly and safely as possible working under the current revised HSE protocols. Predator is progressing with desktop work and
approvals processes to further develop its ability to increase the volume of CO2 supply to the CO2 EOR operations using only our existing in-country equipment and field site for CO2 equipment layout. The company has indicated that it is also importing spare components to ensure there is some ability to continue operations without being delayed by having to wait on replacement components, should the need arise during the early period of the coronavirus emergency. The directors of the company are encouraged by progress to date, despite a very challenging global environment. They see that this is an opportune time to gather more technical and reservoir engineering data and to prepare for an expansion of CO2 EOR operations both within the Inniss-Trinity field and to other fields in Trinidad, which have been identified as being potentially attractive for pilot CO2 EOR operations.
According to Predator, the company has developed a viable template for CO2 EOR projects and has achieved some recognition of its intellectual property rights in respect of this template. It makes commercial sense for the company to focus on developing these new opportunities to a stage whereby they can be implemented to increase potential cash flow from CO2 EOR by gradually upscaling, with very low capital commitments as the market begins to strengthen and coronavirus is ultimately defeated. Positive cash flow at low oil prices will be critical during this transition period and the company now has additional time to potentially expand CO2 EOR operations in Trinidad for very low capital investment and therefore potentially for additional revenues.
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Pumping jacks onshore Trinidad
Rystad Energy: COVID-19 and low oil price puts over 1m energy service jobs on the line Staff Writer | Energy Chamber ACCORDING to energy research company Rystad Energy, more than a million jobs in the oilfield service industry are likely to be cut in 2020 due to low project volumes. The company said that this was brought on by the Covid-19 epidemic and the ongoing oil price war and has suggested that the worst to be hit will be shale services. Currently, the price of oil is less than US$25 per barrel. More than 5 million people are employed in the Oilfield Services Sector (OFS) globally at present and Rystad Energy’s estimates show that this year alone, contractors will scale down their workforce by at least 21%.
Some 13 percentage points are attributed to oil-price-driven cuts and the remaining 8% reductions will be layoffs caused by measures taken by contractors who fear the spread of Covid-19 on their worksites and are forced to slow down project developments. Audun Martinsen, Rystad Energy’s Head of Oilfield Service Research said, “Low oil prices are likely to persist in 2021 and could lead to further workforce reductions. But as we move into the second half of 2021, with better market fundamentals and a fading Covid-19, recruitment is likely to pick up in the shale sector and from 2022 will also kick off in the offshore sector.” Unlike the downturn of 2015 and 2016, Rystad said “When the total OFS workforce was reduced by nearly 30% from its 2014 levels as a result of another
supply war, the industry now has to face the additional effect of a big decline in demand, caused largely by the Covid-19 outbreak around the world. Global supply will exceed demand by more than 10 million barrels per day (bpd) from April, when OPEC+ countries start increasing their production.” “E&P operators and contractors want to minimise the potential spread of Covid-19 by reducing the workforce to an absolute minimal level. This is happening across the world but Europe, currently, is the most impacted market,“ says Martinsen. The offshore workforce is likely to be reduced by a total of 19% in 2020 as the low oil prices will halt most of the exploration work and MMO projects in the second half of the year as the fear of a Covid-19 outbreak on offshore platforms and yards will force the E&P companies and contractors to suspend
several activities. The largest reductions in 2020 are expected to be within shale, just like during the 2014 downturn. Here the oil price risk is higher as a major drop is expected in drilling and completion activity, with operators canceling their drilling plans to secure cash. Completed fracked wells might drop to 3,800 wells in 2021. As much as a 32% cut in workforce is likely to be realised in this sector from now until December 2020. The data also shows that the workforce in other onshore operations is estimated to be slashed by some 17%.
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| May 2020
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Shell T&T gets approval for Colibri development Staff Writer | Energy Chamber SHELL Trinidad and Tobago announced that the company has taken Final Investment Decision (FID) for the development of Block 22 and NCMA-4 in the North Coast Marine Area (NCMA). This development project, Colibri, is expected to add a total of 43,100 barrels of oil equivalent per day (boe/d) (250 mmscf/d of gas production) through a series of four subsea natural gas wells. The Colibri development will also include the installation of flowlines from the wells to the existing Poinsettia Platform located in the NCMA acreage. Drilling of these wells is expected to commence in the second half of 2020, with first gas anticipated in 2022.
According to Shell, the two blocks are held in partnership with the Trinidad and Tobago national oil company, Heritage Petroleum Company Limited. Eugene Okpere, VP and Country Chair, Shell Trinidad and Tobago said, “We’re really excited to have achieved this milestone coming on the heels of the approval of the Barracuda project in November 2019,” “Both developments are critical to our near to mediumterm growth strategy in Trinidad and Tobago and to our commitment to help secure the country’s energy future,” he added.
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BHP Petroleum implements measures to help suppliers Staff Writer | Energy Chamber BHP Petroleum is implementing emergency measures to support cash flow to suppliers by making immediate payments of outstanding invoices and moving to seven-day payment terms for the next six months for small and local businesses that support BHP’s petroleum business. This is a reduction from the current payment terms and covers over 200 suppliers. The revised payment term arrangements will take effect in the week commencing April 13th. Geraldine Slattery, President Operations Petroleum said, ‘BHP’s first priority is the safety and health of our workforce
and communities. Communities across the country rely on the critical energy resources we produce and we rely on our suppliers to continue delivering this resource’. ‘A cornerstone of the social value of our business is the continued health of the companies we count as partners and suppliers, especially during this time of great uncertainty’. BHP Petroleum spends more than US$150 million per year with its small business supplier base across USA, Canada, Mexico and Trinidad and Tobago.
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Shell paid over TT$1.2 B (US$189 M) in taxes to T&T government in 2019 Staff Writer | Energy Chamber
Project Reports
SHELL has released its Report on Payments to Governments 2019. According to the report, Shell in total paid the government of Trinidad and Tobago TT$1.2 B in 2019 (US$189 M). The report shows that the company paid US$76.9 M in production entitlements, US$12.1 M in taxes, US$3.9 M in royalties, US$85 M in bonuses and US$11 M in fees. The report itemises the payments based on the active projects in Trinidad and Tobago. According to the report, 55% of the payments to the government were made through the North Coast Marine Area 1 (US$104.3 M), 34% was generated through Block 6B (US$63.3 M), 5% through Central Block US$9.3 M), 4% through Blocks 5C, 5D and 6D (USD$7 M). The remaining 2% was made as an entity level payment (US$4.6 M). According to the company, globally in 2019, Shell paid more than $61.3 billion to governments. They paid $7.8 billion in income taxes and $5.9 billion in government royalties. In addition, they collected $47.6 billion in excise duties, sales taxes and similar levies on fuel and other products on behalf of governments.
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Source: Shell Report on Payments to Governments 2019
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news
| May 2020 energy.tt • @ttenergychamber
Local content policy: a Guyanese perspective Staff Writer | Energy Chamber DURING the Trinidad and Tobago Energy Conference, there was a very stimulating conversation about local content. The perspectives that were explored ranged from global to local. One perspective that was very pertinent was the Guyana perspective which was highlighted by Nicholas Deygoo Boyer, President of the Georgetown Chamber of Commerce and Industry (Georgetown Chamber). Guyana just achieved oil-producing status earlier this year and has also just launched a local content policy. Boyer provided the context of the Georgetown Chamber’s views on local content policies. Boyer asked, ‘What does local content mean to the Guyanese people?’ He said, ‘To us, local content is the level of usage of Guyanese goods, services, people, business and financing’. According to Boyer, Guyana has a somewhat diversified economy and he said, ‘We hope not to lose that. Local content for us is not just a conversation about the petroleum industry. There are several other related industries including other extractives, agriculture that this conversation is going to happen around’. He said that what is considered a local company is pivotal in determining benefits which accrue. He added that the definition of a ‘local company’ should broadly be in accordance with the following: i)The company’s board meetings are held in Guyana ii) The company’s head office is located in Guyana iii) a percentage of the total workforce is Guyanese and iv) the company is registered in Guyana with a Guyanese ownership of 51% or more. During his presentation, Boyer mentioned that globally the thinking may differ, however, what is important to remember is the context. He said that Guyana is new to the industry. He added that an ideal policy must strengthen competitiveness and be in line with and exist alongside the national competitiveness plan. Boyer added that the policy should not exist on its own and it must be part of a whole — it should be paired with a petroleum commission, sovereign wealth fund and deletion policy. It should have a clear timeline for the introduction
of legislation so that it sends clear signals to foreign direct investors so that they understand the landscape. It should also encourage unbundling of contracts to allow new and fledgling firms to participate in the industry. Boyer said that a local content commission should be set up to encourage monitoring and reporting. He added that this commission should be governed by a multistakeholder group. He added that a good local content policy should also have consequences. The Georgetown Chamber head also said that a good local content policy should feature transparency, ring fencing (for local manufacturers), value creation (knowledge transfer) and capacity building. The Georgetown Chamber developed model legislation for discussion purposes and he indicated that legislation should promote private sector development and human capital development. He asked that the legislation also include some measures to deal with noncompliance. Local content policies should provide clarity to foreign investors looking at the market opportunity in the country and have security that the rules won’t change. Local content should be about dialogue between private sector, the people and the operators. Boyer said that local content would be enhanced if the government would assist in getting projects to move along faster. He indicated that it takes six months to get a construction permit in Guyana — if Guyana wants local content development, investors cannot wait that long to get approvals. He added that investors should have market entry strategies that provide the return on investment that should be given for the expertise, equipment and capital that will be deployed in Guyana. But similarly, the Guyanese must benefit from the opportunities they possess.
Learn more and have your say online: fb.com/ ttenergychamber · #energynow Nicholas Deygoo Boyer, President GCCI at the T&T Energy Conference 2020
Liza Destiny FPSO arriving in Guyana in 2019.
Work continues in Guyana but pending government approvals for 3rd FPSO will delay Payara development Staff Writer | Energy Chamber ACCORDING to a release by ExxonMobil, it is reducing its 2020 global capital spending by 30% and lowering cash operating expenses by 15% in response to low commodity prices resulting from oversupply and demand weakness from the COVID-19 pandemic. The company advised that Guyana remains an integral part of ExxonMobil’s long-term growth plans.
The release states that current operations on board the Liza Destiny production vessel are unaffected, and startup of the second phase of field development remains on target for 2022, with the Liza Unity production vessel currently under construction. The company, however, has stated that it awaits government approval to proceed with a third production vessel for the Payara development. As a
result, some 2020 activities are now being deferred, creating a potential delay in production startup of six to 12 months. According to ExxonMobil, the Payara development plan includes a floating production, storage and offloading (FPSO) vessel named Prosperity; it is expected to produce 220,000 barrels per day. The Payara development is similar to Liza phase 1 and 2, and will have up to 45 wells, including
production wells, water injection wells and gas injection wells. The Payara development startup was initially expected by 2023.
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09
| May 2020
regional
energy.tt • @ttenergychamber
Tullow writes off activities in Guyana and Jamaica Staff Writer | Energy Chamber IN 2019 Tullow had major projects in Guyana and Jamaica. However, these two projects have been written off as part of its global set of write-offs which also includes activities in Mauritania, Namibia, Uganda and Kenya. In its 2019 year-end report, the company indicated that it will be writing off $1.2 billion worldwide. In Guyana, Tullow drilled three wells in 2019. These were unsuccessful and did not yield the results which were anticipated. These include the Jethro, Joe and Carapa wells. The total write-off for Guyana was US$61.3 million.
Earlier this year in February, Tullow and its partners in the Walton Morant Basin were granted an extension on its production sharing agreement to July 31st 2020. However, according to Tullow’s 2019 year-end results, the decision was taken to write off its exploration license in Jamaica. According to the report, the Walton Morant license was written off due to ‘licence relinquishments, expiry or planned exit’. The value written off was US$35.8 million.
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Noble Sam Croft
Apache announces discovery offshore Suriname at Sapakara West-1 Staff Writer | Energy Chamber APACHE Corporation announced a significant oil discovery at the Sapakara West-1 well drilled offshore Suriname on Block 58. The well was drilled using the Noble Sam Croft with Apache as operator, holding a 50% working interest and Total, holding a 50% working interest. Sapakara West-1 was drilled to a depth of approximately 6,300 metres (20,700 feet), and successfully tested for the presence of hydrocarbons in multiple stacked targets in the upper Cretaceous-aged Campanian and Santonian intervals. Preliminary fluid samples and test results indicate at least 79 metres (259 feet) of net oil and gas condensate pay in two intervals. The shallower Campanian interval contains 13 metres (43 feet) of net gas condensate and 30 metres (98 feet) of net oil pay, with API oil gravities between 35 and 40 degrees. The deeper Santonian interval contains 36 metres (118 feet) of net oil-bearing reservoir with API oil gravities between 40 and 45 degrees. ‘Our second discovery offshore Suriname this year further proves our geologic model and confirms a large hydrocarbon system in two play types on Block 58. Based on a conservative estimate of net pay across multiple fan systems, we have discovered another very substantial
oil resource with the Sapakara West-1 well’, said John J. Christmann, Apache CEO and President. ‘Importantly, our data indicates that the Sapakara West-1 well encountered a distinct fan system that is separate from the Maka Central-1 discovery we announced in January this year’. Block 58 comprises 1.4 million acres and offers significant potential beyond the discoveries at Sapakara West and Maka Central. Apache has identified at least seven distinct play types and more than 50 prospects within the thermally mature play fairway. Upon completion of operations at Sapakara West1, the Sam Croft will move to the third prospect in Block 58, Kwaskwasi, which is located approximately 10 kilometres (6 miles) northwest of Sapakara West-1. The fourth exploration target is Keskesi, which will be drilled approximately 20 kilometres (12 miles) southeast of Sapakara West-1. Both exploration wells will test oil-prone upper Cretaceous targets in the Campanian and Santonian intervals in reservoirs that appear to be independent from the Maka and Sapakara discoveries.
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10
news
| May 2020 energy.tt • @ttenergychamber
Petrochemical prices take a tumble Staff Writer | Energy Chamber IN recent weeks, there has been sharpened focus on the price of oil. The price of oil has collapsed dramatically due to the Russia-Saudi Arabia price war and then further exacerbated by weak demand brought about by the novel coronavirus. Petrochemical prices, however, have also turned downward, especially methanol and ammonia. Demand for petrochemicals has also been significantly affected by measures implemented to curb the spread of COVID-19. According to John Floren, President and CEO of Methanex, ‘We anticipate that methanol demand could be impacted in the second quarter of 2020 as there has been a substantial reduction in manufacturing activity in countries that have had significant outbreaks of COVID-19. As a result, we are reducing production at our methanol facilities, where we have flexibility in our gas agreements, to prepare for lower demand for methanol’. Floren made these statements as Methanex announced the idling of its Titan plant in Trinidad and its Chile IV plant. The decision to idle these plants will be for an indefinite period. While the posted contract prices in the markets are above $200 per metric ton, industry
Methanex Monthly Average Regional Posted Contracted Price History 600 500 400 300 200 100 0 Jan-18 Mar-18 May-18 July-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar -20
European Posted Contract Price (£)
Asian Posted Contract Price ($)
Non-Discounted Reference Price ($)
insiders say that in reality the prices at spot markets can be as low as $160 per metric ton. According to an industry source, ‘It’s anyone’s guess where prices are heading at this time as the markets are still volatile’. The source said that ‘The apparent ‘strength’ of the U.S. market is supported by lower production in the Americas, particularly now that Methanex has
effectively idled Titan and its Chile IV plant. In North America, the overall industry average operating rate is estimated at a reduced 70% as other U.S. producers were reportedly down as well’. He said that ‘In terms of pricing, while the U.S. spot vs contract price differential is normally in the range of 20% below contract, reflective of the discount levels we are now facing, towards the end of
March and into April, we’ve seen spot price drop as much as 40% below contract prices’. He added that ‘In Europe, prices continue to fall and as an example, this week’s European spot price for April delivery decreased to £150 per metric ton, down a further £15 per metric ton from last week’s average price. With significant demand reduction all over, the global markets are very much over-supplied. The source said that there is a disconnect between methanol price and crude. He said, ‘We’ve seen this happen in 2008/9 and 2016 during what we call ‘distressed times’’. What is a little concerning, he added, is that the upward bounce in crude oil pricing back then likely played an influential role in the price recoveries, and that scenario is not expected in the near term this time due to the crude oil price war, coupled with the drastic reductions in oil demand. He said that regarding the ammonia market, agricultural demand has held up well so far, but industrial demand has been heavily impacted. The market is very over-supplied and we expect to see some significant price reductions in the next couple months.
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Atlantic LNG Facility in Pt Fortin
Weak demand for LNG leads to record low spot market prices and postponement of some investment decisions Staff Writer | Energy Chamber GLOBALLY, the demand for energy and energyrelated products has been collapsing due to the measures introduced to slow the spread of the coronavirus. The effects have also manifested in the liquefied natural gas (LNG) market. Amid plunging gas demand, LNG producers are under pressure to dump their cargoes on the spot market, further depressing already low prices. In Europe, prices for natural gas have fallen from about $4/mmbtu at the beginning of the year and is expected to be below $2 in May. This is also reflected in LNG prices which are now below $3. Low demand has also forced many importers
of LNG to break their contracts, citing force majeure clauses and forcing exporters to flood spot markets with excess cargoes. Spot supply has increased partly because of a big drop in demand from countries like India, as well as Italy and Spain, which have imposed lockdowns and strict travel curbs to slow the spread of the coronavirus. The result is an abundance of supply at the spot markets which are further pushing prices down as these markets function by the laws of demand and supply. China’s largest LNG importer, China National Offshore Oil Corp (CNOOC), suspended contracts with at least three suppliers and the LNG supply glut
is pushing down Asian spot prices toward a record low in February when demand sank in China where the coronavirus originated late last year. The low-price environment and economic uncertainty have led to the delay of some LNG gas supply projects and some operators deciding to walk away from investments. One notable project set to be delayed is BP’s Tortue Ahmeyim floating LNG project offshore Mauritania and Senegal. Floating LNG vessel specialists, Golar LNG, indicated that it received a force majeure notice from BP seeking to delay by a year receipt of a floating liquefied natural gas facility for the project. Golar said that ‘The notice received from BP claims that due to the recent outbreak of
the virus around the globe, BP is not able to be ready to receive the floating liquefied natural gas facility ‘GIMI’ on the target connection date in 2022’. Shell has also decided not to proceed with an equity investment into the Lake Charles LNG project that seeks to convert the existing LNG import terminal in Lake Charles, Louisiana to an LNG export facility. Their project partner, Energy Transfer, has said that they will proceed with the conversion project.
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11
| May 2020
opinion
energy.tt • @ttenergychamber
Necessity and invention Dax Driver Energy Chamber CEO @dax_driver
I
Drilling off the east coast of Trinidad
Recovering from the triple whammy T
HE oil, gas and petrochemical sector in the Caribbean is facing an unprecedented crisis brought about by the COVID-19 pandemic and sharply falling commodity prices, mainly due to a massive and sudden global decrease in demand but made worse by the collapse of the Organization of the Petroleum Exporting Countries (OPEC) supply controls. In the Caribbean, this crisis is exacerbated by continued political uncertainty in Guyana, the region’s newest, and already its biggest, oil producer. Outside of the oil, gas and petrochemical sector, electricity utilities across the region, which typically benefit in periods of lower commodity prices, are facing liquidity problems as demand has plummeted with the shutting down of the tourism sector and with many of their customers unable to meet their monthly bills. Dealing with these overlapping crises will be a major challenge for governments, the local private sector and the region’s international investors. This is going to require new and innovate approaches, and policy interventions not tried in the past. The immediate challenge is coping with the current health emergency and controlling the spread of the virus. In this regard, most regional governments have moved hard and fast and implemented strict social distancing measures and closed their borders. At the time of writing, the number of reported positive cases has remained modest, with infection rates not increasing at the exponential rates seen in Europe or the USA. There are, however, serious concerns in some countries about the number of tests that have taken place and if there are many unrecorded positive cases in the respective communities. Dealing with the health emergency has created a major economic crisis for the region that will last beyond the immediate health crisis. The energy sector is facing multiple serious challenges. The low commodity price environment coupled with the political uncertainty in Guyana has already led Exxon to announce that phase III of the massive Stabroek
development will be delayed by up to a year. In Trinidad and Tobago, the COVID-19 crisis has led to scheduled major maintenance projects in some of the petrochemical facilities and the liquefied natural gas (LNG) plant being postponed to later in the year, placing additional pressure on the contractors and service companies who were relying on these projects for a much needed revenue injection. With low commodity prices, operators will be seeking to further cut costs, but service companies and contractors were already operating on significantly reduced margins ever since the 2014/15 oil price crash. Any cost reduction will need to come from greater efficiency. Policy measures to improve the ease of doing business and cutting unnecessary regulatory red tape must be a central element of the recovery plan for the region. The COVID-19 crisis has forced everybody online and we must take advantage of this to really automate systems, especially government regulatory processes. Labour market reforms must also be central to the recovery plans, as well as removing subsidies that promote inefficient use of resources. Greater integration of Caribbean Community (CARICOM) labour markets, especially for skilled but currently uncertified workers, will help the overall efficiency of the region’s energy sector to everyone’s advantage. Governments are going to have to work closely with the local private sector and international investors to ensure that the overall investment climate promotes new energy sector investment. This includes getting the right fiscal measures in place to ensure that we continue to attract capital into the upstream oil and gas industry. Without this investment, the petrochemical and LNG sectors have a very uncertain future. All of this will require new ways of operating and new ways of thinking. But if the current crisis has taught us anything, it is that necessity is the mother of invention and the Energy Chamber of Trinidad and Tobago remains positive that the region can rise to the challenge. We are all in this together.
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President and Chief Executive Officer: Dr. Thackwray ‘Dax’ Driver Business inquiries: P (868) 6-ENERGY • F (868) 679-4242 . dax@energy.tt Suite B2.03, Atlantic Plaza, Atlantic Avenue, Point Lisas, Trinidad and Tobago
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HAVE been working from home since March 17th, 2020 as part of the Energy Chamber of Trinidad and Tobago’s (Energy Chamber) response to the COVID-19 crisis. My wife and two daughters have also been working from home. It has been an interesting challenge and I have learnt some unexpected lessons from the experience. One lesson is that it is not just at the office where meeting space is at a premium. We have had occasions when there are four separate important video conferences going on at the same time and we have all had to find our own quiet corners of the house. We have also had to institute colour code signs on our study door to show when other members of the family can enter freely (when the other person is working individually), enter quietly (when they are on a phone call or video conference with the camera off ) or not at all (when the camera is on). Like many other people working at home, I have adapted my work clothes to the needs of video conferencing and perfected the approach of a smart upper body, while wearing shorts below the desk. I have even done TV appearances like this, to my wife and children’s amusement. So far, we have managed to avoid the embarrassing video conference experiences of a family member wandering into the shot, though I have had trouble with my annoying dogs barking furiously in the background (more of an evening problem than daytime). I think like many other people in this unexpected crisis period, I have found that I have been working tremendously hard, and overall, very productively. Most of the Energy Chamber team have adapted very well to the change and most of my staff have been highly productive. I have seen some great problem solving and staff members stepping up to implement online processes that we probably should have implemented long ago. One of the challenges will be to maintain these changes and institutionalise the process improvements when we eventually return to a more normal way of working (though clearly the new normal post-COVID-19 is going to be different to the normal pre-COVID-19). This has been an incredibly stressful period for many of us as we have seen revenue evaporate with both the sharp decrease in activity due to the ‘stay-at-home’ regulations and the crash in oil and other commodity prices. This is a very different crisis than the previous economic crises caused by falls in commodity prices. It has happened much faster and everyone has had to adapt very quickly but it is also difficult to see how, and crucially, when it will end. Not knowing when we will be able to relax the tight regulations on social distancing, and what happens after they are relaxed, makes it very difficult to plan a business. Many of our major services, including
ADVERTISING Communications Coordinator, Energy Chamber: Michelle Ramrattan-Rahman (868) 6-ENERGY • michelle@energy.tt Member Relations Officer, Energy Chamber: Jodine Abhiram (868) 6-ENERGY • member-relations@energy.tt
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future and how we will be operating in six months or one year from now is unsettling. But we have no choice but to adapt and find a way through. One thing that has been clearly reinforced during this working from home period is that necessity really is the mother of invention, including colour codes on our study door. our big revenue-generating activities rely upon face-to-face meetings. The networking opportunities that are so important to our service company members are literally about handshakes. Our certification services, including the PLEA assessments, involve people either coming into our facilities or our assessors going to facilities, in the case of Safe to Work (STOW). Much of what we do, including some training and some of our seminars, can be easily switched to online formats. Like most chambers and associations around the world, we have begun to schedule more online meetings and they can be useful communication channels, but that can only go so far. The uncertainty about the future and how we will be operating in six months or one year from now is unsettling. But we have no choice but to adapt and find a way through. One thing that has been clearly reinforced during this working from home period is that necessity really is the mother of invention, including colour codes on our study door.
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Disclaimer: Except for the editorial on this page, all opinions are those of the authors or interviewees and do not necessarily reflect the views of the Energy Chamber.
12
opinion
| May 2020 energy.tt • @ttenergychamber
Becoming skilful sailors Conrad Enill | Chairman NGC
W
E have arrived at an inflective juncture in global history where several things are happening at once. A global health crisis has forced the world to disarticulate and retreat behind physical and legislated borders. Global production and economic activity have stalled as a result, disrupting supply chains and driving fuel demand and prices sharply down. On the margins of this crisis, oil giants are revving to flood global markets with cheap supply, wresting profits and market share from their competitors in the process. As an energy producer coming into this precarious scenario with challenges of our own, Trinidad and Tobago can understandably be anxious about the future. However, if there is one thing we have learnt well from more than a century in the energy business, it is how to weather cycles of change. In fact, we will find that in those times of challenge there are more opportunities for growth. After all, as the proverb goes, calm seas do not make skilful sailors. So how can we grow from the challenges now before us? The first thing we can do is use the opportunity to build our digital culture. Well before COVID-19 took the stage, the NGC Group had been preparing to operate in a business landscape presided over by technology. Critical functions had been brought online in the areas of enterprise management, procurement, Geospatial Information Services and communications. Still, many processes that could have been automated continued offline. Now compelled to use the digital tools available, including some we may never have had cause to use before, we may find we can work more
efficiently and productively with technology. This is true not just for the NGC Group, but across other sectors. Many retailers are now introducing online shopping and delivery services, both of which can significantly improve the country’s service sector and build our collective competitiveness postCOVID-19. From a human resource standpoint, we should use this opportunity and available technology to learn how to work from home with the same or even greater levels of efficiency. Telecommuting has long been touted as a tool to help mitigate climate change and promote work-life balance. Coming out of this crisis, our companies should be better prepared and more willing to start integrating this practice into operations. The second thing we can look to do is leverage our strengths. To speak first of the NGC Group experience, we have been working for some years to capture synergies across our member companies in areas such as supply chain management, information and communications technology (ICT) and communications. In this period of pronounced challenge, we have seen new strengths emerge that we intend to capitalise on in order to grow our capability set moving forward. At a more granular level, we are seeing ingenuity at all levels of our organisations as employees and teams find innovative ways
to deliver on important work processes. We are immensely grateful for their efforts and excited about what we can achieve if we harness that same energy and resourcefulness on the other side of this crisis. At the country level, we should also be looking to turn our strengths to economic advantage. For more than a hundred years, oil and (later) gas have been Trinidad and Tobago’s bread and butter. As prices of these and associated commodities plunge, and as the future increasingly favours cleaner fuels, we must mobilise other sources of income. What does a centenarian in energy have to offer in this new age? The answer is a wealth of expertise. We are a mature hydrocarbon province, but many new players are entering the game that will have need for expert guidance. These include new producers (in Africa, Guyana and potentially Grenada), as well as new consumers across the Caribbean as islands look to transition from oil to natural gas. It is a point of pride that Trinidad and Tobago’s world-scale oil, gas and petrochemical industries are almost completely staffed and run by locals. This speaks to our knowledge and capacity at all levels of the respective value chains. Importantly, we have also spent years refining legislature and policies to incubate and grow these industries. The NGC Group has already started exploring avenues to take this intellectual property to market in collaboration with other local stakeholders. Now that we have done, we can teach. This crisis can also help accelerate our process of diversification. For many years, diversification has been a frustrated effort as attempts to grow alternative sectors failed
to produce sustainable economic impact. Perhaps one of the reasons is that the energy sector was healthy enough to carry most of the country’s breadwinning burden. Today we are faced with two threats to our status quo. Firstly, we are earning less from our staple exports, with revenues to take a greater hit due to developments in the oil market. Secondly, even if we can still earn to cover our import bill, COVID-19 has disrupted supply chains and slowed global trade. If this disruption continues much longer, it could impact availability of critical imports such as food and pharmaceuticals. What this means is that diversification into areas such as food production is no longer a pre-emptive strike, but has become imperative to our survival. Even if the current situation normalises without impacting our ability to feed ourselves, it highlights the risk that exists, and we must take note. Both public and private sector investment is needed to build our self-sufficiency in agriculture, food processing, storage, and logistics in the first instance. With enough local capacity, this could even be built into an export industry supplying regional markets. Perhaps our greatest opportunity for growth lies in inter- and intra-sectoral collaboration. There is no doubt that the confluence of challenges that we face as a nation can only be overcome with collaboration. Today more than ever we can appreciate the symbiotic relationships in our economy and how reduced capacity in one sector can have knock-on effects on others. Businesses across the board are granting concessions to customers, especially lending institutions, whose reprieves will go a long way to help customers who find themselves
under financial strain. Why these gestures of support? Altruism aside, businesses recognise that an economy functions optimally when all participants are able to contribute. If the productivity of any sector falters, so does its purchasing power. The reverse is also true — if we can raise productivity through greater collaboration within and between sectors, we can build a stronger economy. The relationships brokered during this period will set a precedent for future partnerships. Companies will learn how they can support one another for mutual benefit and strategic advantages of collaboration will become evident. In the energy sector, collaboration can take the shape of infrastructure sharing, joint venture investments, open channels of communication around work programmes, and collective efforts to build our entire value chain. In the manufacturing sector, small and micro enterprises can pool resources to access credit or share logistical resources. If we carry the current cooperative spirit through to the future, we may find we are able to achieve much more together. John F. Kennedy famously pointed out that the Chinese word for crisis is composed of two characters — one represents danger and the other, opportunity. As a country, we need to approach this crisis with eyes and minds open to possibilities for growth. We must not just survive this experience, but emerge as skilful sailors.
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How do we innovate in a crisis? Contributor | T&T Business Clinic
A
S we navigate the challenges of Covid-19, a virus we don’t yet fully understand, we continue to adjust our lives, our routines, our plans, our finances, our businesses and even the way we educate our children. One day we will talk about pre-Covid-19 and post-Covid-19, a marker that will define the year 2020. In the midst of this crisis, necessity is the mother of innovation as large businesses adjust their systems to produce the only supplies that now matter — medical, sanitation, hygiene or food. Media has transitioned online, even as shows and interviews are completed in separate studios and locations. Churches, universities and public institutions steeped in tradition and slow to change, are now applying digital technologies to reach congregants, classrooms, customers and citizens. It is a virtual production show as we are now in the throngs of witnessing micro, small and medium-sized businesses accelerate their digital strategies for working remotely, delivering virtual services or providing contactless product delivery. Covid-19 is the most important story to everyone, and whether we expected it or did not plan adequately for it, we are the generation in unchartered waters. At best, Covid-19 is inconvenient from an economic and financial standpoint; at worst, it can be fatal and demands behavioural and social changes, irrespective of the cultural sceptre. As we adjust to the distinction between essential and non-essential services, the pause in operations for many businesses is a blow to business models. We have always known that life trumps business, or did we really? Societies elevate what they value through payment, prestige, position or power. Where did we place health workers, sanitation workers, food service workers? Even as we now
rightly laud health workers as ‘frontliners’ at the battle line, let us not be lulled into artificial comfort. The rate of transmission of a virus we are still learning about demands such a high degree of personal and collective responsibility that it should instead tell us that we are at the frontline, our families and communities are at the frontline, and health workers are our last line of defense. The fluidity of this pandemic has created conditions akin to a medical war zone. How do businesses innovate in a crisis and brace for an onslaught of unknown drivers beyond its sphere of control? Don’t panic, point fingers or retreat; rally the troops, review and redesign. 1. Rally the troops Beyond an audit of your business, if you intend to stay in business, your staff, employees and independent contractors need you more than before to show up; they need to see you and hear from you. Compassionate and strategic leadership matters to shape the vision, define the priorities and communicate the hard messages. For the entrepreneurs and business owners we engage and mentor, mindset matters more than ever to push through the metaphorical Groundhog Day of quarantine. A shift in mindset precedes a shift in ability, and ultimately a shift in action. You can’t succeed in a crisis without having a success mindset that also engages your team. 2. Review One asset most of us are now gifted with is time. We should use this time to review strategies, test new digital tools and brainstorm activities and collaborations to address evolving needs and new market demands. Covid-19 preys on passivity. Through virtual channels, we
can continue engaging our team in meaningful ways (with adjusted frequency) to review two primary questions: does our market still have the same problem that we solve? Are there new people who have the problem we solve? In a crisis, all businesses need to return to the fundamentals: what problem do we solve and who do we serve? 3. Redesign All markets function on the basis of supply and demand. Assess current market needs, review your strengths and pivot your business model to immediately plug any cash flow leaks and be responsive to market needs. It may be hard to imagine at the moment, but one day things will be normal again. As our lives continue to evolve, so too will the way we do business. Are you willing to consolidate and shift even the core of your business operations? 4. Release In a pandemic crisis, we are no longer working with traditional templates. There are too many indicators that are impossible to predict, and businesses that revert to what they know, or are slow to change, will bleed resources and diminish in relevance. In one of the greatest rearrangements of power in modern history, we are collectively housebound. While we do not know what tomorrow may bring, our response demands change and creative solutions. In the most stable of times, change is tough. Getting an employee to vary the routine with a bi-weekly afternoon meeting is already a negotiation. But under the cover of Covid-19, change is the new normal. As we focus on flattening the curve in this pandemic crisis, we are
also confronting our own mindset challenges, financial challenges and business continuity challenges. How do we innovate in a crisis? In short: plan differently; test faster; improve again. An okay solution at the right time is always superior to a perfect solution at the wrong time. Communicate with suppliers/vendors, test new solutions and target new markets or different customers. One day when we come out of this crisis, we will reflect on the value of the MBA. If the business of business is business, the very core of its purpose is called into question. But don’t waste a crisis. If at the end of our ‘Stay at home’ and quarantine measures, we have not developed a skill, discovered new knowledge, deepened our strengths or destroyed a poor habit, then we did not lack time, but rather discipline all along. Although 2020 may be remembered as a year of crisis and change, the forecast may be bleak because we are still in the storm with rolling peaks happening across the globe. However, we do have some clues about how our lives will evolve. In time, we would gratefully recognise and reward leadership qualities that are diametrically opposed to celebrity idolatry and create space for roles and services that we previously begrudgingly accepted, neglected or dismissed. There will certainly be a next normal in the workplace, in the way we work out, socialise, communicate and congregate, but the upheaval in business tells us that we have to do a lot better with food security, but that is a whole other discourse. Our world has more problems now and so do our markets and stakeholders. Let’s be sure to champion and deliver on our collective needs next time.
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opinion
| May 2020
13
energy.tt • @ttenergychamber
The frog and the caterpillar Dr. Sterling Frost | Contributor
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T the 2020 Trinidad and Tobago Energy Conference, Aneesh Chopra, former Chief Technology Officer of the United States, proffered that Trinidad and Tobago is lagging in technological advancement. In response to the question of how do we ‘catch up’, Chopra challenged business leaders to instead consider how do we ‘leapfrog’ the competition. To contrast this school of thought, Chopra also indicated, ‘it’s one thing to invent the future, but it’s another thing to have the culture to bring those ideas to life’, which lends to a more gradual approach to development. This dichotomy of leapfrogging vs gradual development at the national level also has implications at the company level with respect to transforming the organisation. As such, considering the unique context of Trinidad and Tobago, this article will explore the feasibility of organisations ‘leapfrogging’. The frog Leapfrogging is applied in both the macroeconomic and business innovation contexts. The main idea is that the smaller firm or lesser developed country is normally outpaced with respect to incremental innovations as the larger, more established player had the first-starter advantage. However, the opportunity to innovate radically is greater for the smaller player as they do not have the legacy sociotechnical infrastructure of the larger player, i.e., larger and more embedded systems are more complex to transform. Moreover, there is less incentive to innovate if you are still realising return on investment on existing sociotechnical systems. To add to this amphibious analogy, systems thinkers often cite ‘the parable of the boiling frog’. This refers to a frog, when placed in a boiling pot, will immediately leap out, vs a frog that is placed in cool water with the pot set to gradually boil. In the latter instance, the frog does not sense the impending danger and eventually boils to death. This is a fitting narrative for the organisation in its comfort zone just keeping up with gradual changes in technology. This organisation may eventually face elimination by new competitors which can immediately respond to disruption. In the context of the fourth industrial revolution (4IR), which is set to profoundly transform business models, labour markets and the competitive landscape, Trinidad and Tobago needs to examine the realities of leapfrogging. Generally, leapfrogging is touted by ‘technocentrists’, especially in the context of emerging regions such as Africa. However, it is useful to examine its feasibility. Some publications have commented on the misconception of skipping an industrial revolution: ‘the limits of leapfrogging’ and ‘looking before you leap’. One author, in reference to digital technology in Africa, cautioned against the rhetoric of introducing ‘exogenous solutions’ without examining existing social conditions, e.g., the introduction of Internet in rural areas do not alleviate problems of illiteracy, social inequity, poor governance and disease. This alludes to the need for an endogenous maturity path. Here, a World Economic Forum (WEF) publication titled, How businesses can win at leapfrog, stresses that certain capabilities such as innovation, human capital and institutional frameworks are vital for leapfrogging and posits that leaders ‘must be realistic in assessing what will be required of their country and industry talent ….In the Fourth Industrial Revolution, these comprise not only technical prowess but also the ability to continuously learn, creativity, emotional intelligence and other soft skills.”
Systems thinking Systems thinking, in the context of the organisation, is a set of interrelated parts with culture being the DNA that integrates and permeates the social system. Systems thinking looks for multidimensional, non-linear causal relationships, and as such, seeks to pull the right ‘levers’ in the system. These levers have an indirect impact beyond their original domain, minimising the need to overturn everything. The Burke-Litwin Causal Model below helps to frame these levers and interdependencies. These interdependencies can also create a systemic resistance if the change is too disruptive. Some use ‘the parable of the boiling frog’ as an example of how to avoid this resistance to change, i.e., it may be appropriate to introduce incremental changes to the system to avoid unnecessary disequilibrium. This sentiment is reflected in Peter Senge’s seminal contribution to organizational development in his book, The Fifth Discipline. Here the fifth discipline is systems thinking and offers 11 laws. One law states, ‘the harder you push, the harder the system pushes back’, i.e., well-intentioned interventions create responses from the system that offset the benefits. Another law says that ‘faster is slower’ which points out that all systems, from zoological to organizational, have intrinsically optimal rates of growth. Excessive growth will be compensated by slowing down or putting other parts of the system at risk. This ecological notion is especially found in macroeconomic steady state analysis. The caterpillar From this counter to leapfrogging, a new creature emerges, i.e., the caterpillar. Visualise the caterpillar’s movements: the front moves first, with the middle and back portions following in sequence. However, all parts are connected systemically and still move forward together. Through systems thinking, the business transformation practitioner can determine which levers to pull first, second, etc., taking advantage of the natural cadence of the organisation and allowing for the maturity of different facets of the organisation to harmonise. For example, the practitioner may discover that processes are an emergent property of peoples’ competencies and mental models. By focusing first on the ‘people’ strategy, this may in turn create a lever for the future “’’ strategy. It may follow that once processes are optimal, ‘technology’ implementations will become less complex, i.e., avoiding the ‘garbage in, garbage out’ scenario and the need for rework. Local context Chopra’sobservationaboutTrinidadand Tobago lagging in the new digital revolution is corroborated by many of the World Economic Forum’s (WEF) competitiveness indices and other global reports which show Trinidad and Tobago’s ranking in areas of innovation, entrepreneurship, work ethic, institutions, productivity and ‘skills of the future workforce’. These rankings are disproportionally low for a relatively high gross domestic product (GDP) country, indicating a ‘bubble’ of sorts, sustained by the energy sector. Here, the analogy of leapfrogging is fitting for Trinidad and Tobago as during the oil boom, our standard of living became suddenly disconnected from
Figure 1 - The Burke-Litwin Causal Model of Organization Performance & Change People Process
Technology
Figure 2 - Calibrate the cadence of Strategies the rest of the ‘caterpillar’, i.e., culture and institutions. Now in the wake of the 4IR and peaking fossil fuel demand, we are finding it difficult to diversify due to the immaturity of our socioeconomic system. To say the least, we may have leapfrogged into a ‘boiling pot’ as evidenced by escalating national debt and crime. Systemically, the local organisation is a microcosm of this bubble and as Industry 4.0 persists, the un-competitiveness of local firms in the global arena will be fully realised. As such, the local business transformation practitioner should employ the temporal dialectic of the ‘caterpillar’ in identifying the organisation’s historical source of current pain points, e.g., poor performance management or hiring practices, before moving forward with cutting-edge solutions. Moreover, the WEF posits that where a single organisation may not have all the capabilities to leapfrog, it should seek out symbiotic relations in what the WEF refers to as the ‘economic ecosystem’. A meta strategy for metamorphosis Fittingly, the caterpillar eventually morphs into the butterfly, perhaps a more agile creature than the frog. However, in reality, the practitioner may invoke a more
hybrid creature depending on the nuances of the organisation and the environment. In determining what strategies to use, i.e., elements of the frog or the caterpillar, consider the following framework: 1. Philosophy The narrative amongst the transformation team should start with everything is interconnected spatially and temporally. Facilitate this by utilising McKinsey’s 7s Model to frame strategy. This model interconnects hard elements — Strategy, Structure & Systems — with soft elements —Style, Skills & Staff — and the center of the model — Shared Values — i.e., culture. 2. Culture Culture being the essence of the system, needs to be measured, understood and targeted before attempting to calibrate it. Utilise the Competing Values Framework and Hofstede’s Cultural Dimensions to frame and communicate this understanding. Your target culture should be informed by your targeted value proposition and operating model. 3. Levers Decide which levers to pull and in what
sequence. To frame which elements of the organisation are lagging and which areas will have the greatest impact, utilise Kaplan and Norton’s Strategy Maps and the Burke-Litwin Model. The former links all the strategic objectives in the organisation in a cause and effect chain along the four Balanced Scorecard Perspectives (Financial, Customer, Process, Learning & Development) and the latter frames the interlinkages among the organisational components that impact effectiveness. 4. Capabilities Juxtapose the above three areas with your own internal capabilities and capacity before deciding which components of the organisation are ready to leapfrog vs which require a more evolutionary approach. This may also inform whether you allow for organisational learning to fill capability gaps gradually or whether you seek out immediate intervention via external consultancy.
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14
opinion
| May 2020 energy.tt • @ttenergychamber
The HSG amendment Dr. Roger Hosein | Contributor
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he Heritage and Stabilisation Fund (HSF) fund in the Trinidad and Tobago economy was established in March 200, with the intent to save and invest the revenues government received in the energy sector above what is budgeted. The HSF replaced the Interim Revenue Stabilisation (IRSF) fund by an Act of Parliament. The IRSF in turn was introduced in 2000 with the intent of promoting fiscal discipline in the economy and also to help cushion the impact on the economy and on the budget, should there be a sharp unexpected fall in oil prices. The thrust for the HSF came out of the economy’s experience in the 1970s when the economy made substantial amounts of economic rents and did not save the surplus, but rather engaged in expansionary fiscal policies. From conceptualisation, the purpose of the HSF was to ‘save and invest surplus petroleum revenues derived from production business in order to (a) cushion the impact on or sustain public expenditure capacity during periods of revenue downturn whether caused by a fall in prices of crude oil or natural gas; (b) generate an alternate stream of income so as to support public expenditure capacity as a result of revenue downturn caused by the depletion of non-renewable petroleum resources; and (c) provide savings for future generations.’ Savings into the HSF is triggered when actual energy revenues (AER) exceed forecasted energy revenues (FER) by 10%. The savings rule states that if actual energy revenues are more than 10% of forecasted energy revenue, then 60% of this excess revenue (ER) at a minimum, goes into the HSF. For the Trinidad and Tobago economy, although these rules provide a framework for stabilisation, in practice, the various energy price assumptions across the years have limited deposits into the HSF, of savings. From conceptualisation, this fund was poorly managed. Thus, starting from the point of the IRSF up to 2019, the government of Trinidad and Tobago collected TT$324.4 billion in energy revenues. In this same time period, the amount of money deposited into the HSF totalled TT$25
Port of Spain
billion (approximately) and the total expenditure on Transfers and Subsidies was TT$365.2 billion. This is macroeconomic planning at its worst, in my judgement. The brutal economic effects of the COVID-19 has triggered a decline in both oil prices and gas prices. The decline has been accentuated by a potential price war led by Saudia Arabia against the Russians and the U.S. Indeed, oil prices tumbled from US$62 in December 2019 to US$23.5 on March 24th 2020. Gas prices similarly tumbled. Against the brutal economic effects of the COVID-19 on commodity prices, Minister of Finance Colm Imbert brought to Parliament a bill to amend the conditions under which he accesses the HSF. This amendment included a new clause linked to the emergence of a dangerous infectious disease in the economy. ‘The clause would also limit withdrawals to one and one half billion (US) dollars and the Minister would be required to report to the House of Representatives within sixty days of any withdrawal’. Because the HSF is in US$, this means that the Ministry of Finance can withdraw up to US$1.5 billion in a fiscal year. If the maximum amount is removed in one go, then this amounts to approximately 25% of the resources in the HSF or about 21.7% of the TT$47.7 billion in forecasted government revenues for FY 2020. It is clear to all and sundry that the world and the country is in a trying state — we are in world war 3 and the aggressor is lethal and invisible. The state has several avenues it can target for emergency funds; these include the HSF, the multilaterals, international bilateral lenders and the domestic market. In my view, the HSF should have been the last port of call. Note that early in March,
the World Bank approved a US$14 billion package to help treat with the coronavirus. Is there any way our emergency spending on pharmaceutical and food needs can be a basis to access some of these funds? The Inter-American Development Bank (IADB) has indicated that it has up to US$2 billion in resources which can be programmed for public health services; can we draw down on some of these funds during this pandemic? Even more, the IADB noted that the bank can also work with countries which have undisbursed loan balances to redirect these balances to pandemic response efforts. The International Monetary Fund (IMF) has also made US$50 billion available via its rapid-disbursing emergency financing facilities for lowincome and emerging market countries; can we tap into any of this? If this doesn’t work, the IMF has provided emergency financing for other members through the Rapid Financing Instrument to provide about $40 billion for emerging markets that could potentially approach the IMF for financial support. Can we get some funds from this source? To be very clear, if we tried those other avenues and they did not work, then by all means use the HSF as we are in an emergency. (Since the time of writing, the HSF was accessed to the tune of US$1.1billion). But note this, the funds in the HSF is money we ‘borrowed’ to save, and overall, our country’s track record with savings is a dismal one. In this regard, what do we do should there be a more dangerous outbreak next year? Shouldn’t we try to get the job done now using other sources of funds where we can, if we can? Another aspect that I will raise here but discuss in more detail after the pandemic is rules-based borrowing. Multilateral loans come with rules and the rules are designed to ensure that the resources create some degree of sustainability. By going into the HSF, Minister Imbert is more dependent on himself than on the structured policy guidelines of the multilateral lending institutions. With a relatively weak institutional base in Trinidad and Tobago,
it makes long- term sense to be guided by rules from these financial and developmental institutions with experience in the field. In these times, it is critical that policymakers be careful and clinical as no amount of interest rate amendment, no change in the repo rate or the prime lending rate as was announced a few days ago, will work, unless we flatten the pandemic curve in the country. All the measures proposed by the Ministry of Social Development are to help people get through this rough time period. These measures may have a handout attribute now, but they are also part of an investment by the state to maintain the quality of the country’s limited stock of human capital. Ultimately, the economy can be revived via the usual mechanisms, but we must get this health management aspect correct first. Alongside the Miscellaneous Provisions Bill that allows withdrawals from the HSF, there are also the modifications to the Development Loans Act. After all that was stated above, it is hoped that the modifications proposed for the Development Loans Act which facilitates, if needed, a further borrowing of TT$10 billion would be used to ‘replace’ the money withdrawn from the HSF. I certainly hope so as we will need all the funds in the HSF should we have an even worse outbreak of this same virus or some other catastrophic event in the near future. Even more than all this, the HSF has been one of the bright spots in the Trinidad and Tobago economy and the fund has been generating a healthy return for this country. Great care must be taken in reducing its balance as in so doing, we diminish its capacity to replenish itself, as already seen with the turmoil in investment markets abroad, the fund declined from approximately US$6.3 billion to US$5.9 billion in March 2020.
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opinion
| May 2020
15
energy.tt • @ttenergychamber
Institutional knowledge and a cognitive property Gary Clyne | Contributor The back story RINIDAD has a mature petroleum industry. Our first oil well was drilled in 1857 in the vicinity of Trinidad and Tobago’s Pitch Lake in La Brea and our first successful well was drilled way back in 1866. Until the mid-1950s, petroleum exploration and production were land-based. Trinidad and Tobago was one of the first countries in the world to switch from ‘dirtier’ carbonintensive fossil fuels to natural gas to generate its electricity. The major sources of carbon emissions in the country stem from the manufacture of petrochemical products, which utilise the natural gas produced in Trinidad. The petrochemical sector is responsible for an estimated 60% of carbon dioxide (CO2) emissions. Trinidad and Tobago was also one of the first countries to carbon capture, sequester and utilise (CCSU) CO2 emissions. According to reports by the Ministry of Energy and Energy Industries, carbon dioxide enhanced oil recovery (EOR) projects took place in Trinidad between 1976 and 2004. The CO2 supplied from downstream sources recovered an additional 3 million barrels of oil in mature fields over a 28-year period before the practice was abandoned due to CCSU system design problems … problems that since have been solved.
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Here are two greenwash technology options United Nations (UN) climate negotiations should be the one place that is free from fossil fuel influence. Everyone knows who is responsible for global warming, but it is not considered to be politically correct to point fingers at UN venues. Rich nations have promised developing ones US$100 billion annually starting next year to help them adapt to future climate impacts. There is no provision in the climate treaty for damages already incurred. As the world economy slows, it will be more difficult for developed nations to meet the US$100 billion commitment and lead on climate change. As with past financial climate commitments, those promises will be broken. The broken promises are a symptom of general polarisation and lack of cooperation among countries, but the UN climate space is the only place where poorer countries — that have done the least to pollute and yet are suffering first and worst from the consequences of climate change — have a voice at all. Having a voice is not enough. Trinidad and Tobago must look forward and use its institutional knowledge and cognitive properties to compete in a global lowemission and renewable energy market space. Hope is not a strategy. There are two viable pathways forward. Hydrogen is the first element of the periodic table and is a green and inexhaustible source of clean energy leaving nothing behind but water vapour. This makes it extremely enticing and sellable as a fuel source option for a decarbonised future economy and several local clean-tech developers are looking in that direction. The fossil-fuel-free production of green hydrogen is not only possible, it’s already being produced as well, just not at the same scale or as cheaply as conventional fossil-fuelproduced hydrogen. The cost curve will come down, just as it did with solar and wind power. Few projects have more buzz than the ‘black box’ energy solution that is green hydrogen and nuclear fusion combination. Hydrogen has the potential to replace fossil fuels one day. But I think that day is a long way off and local developers require solutions that meet the Martin Luther King, Jr. test of ‘the fierce urgency of right now’. The back story above suggests that a quicker payback and more substantial way to benefit from climate change mitigation
worldwide lies in CCSU technologies. The reasons are stated below: 1. CCSU is projected to become a US$4 trillion per annum market in the globally. 2. US$4 trillion is equal to 5% of the global economy. CCSU is a ready market for experienced Trinidad developers and contractors that will generate badly needed foreign exchange for the country. 3. CCSU more than rival opportunities in the Guyana oil blocks because rich nations have policies and agencies in place that make CCSU feasible and profitable now. 4. CCSU offers foreign markets the additional flexibility and time to make the leap to cleaner systems. Industry can retrofit, rather than replace, vast parts of its energy infrastructure. 5. CCSU has demonstrated that it works in the real world and is becoming more and more reliable and affordable. 6. CCSU will help set a price on carbon because it addresses the cost gap between carbon capture and transport, and will ultimately determine the amount that companies will pay for captured carbon in projects that store CO2 for EOR, other beneficial use or storage in geological formations. 7. CCSU technology and rich country internal policies are now such that capturing, repurposing or permanently storing carbon dioxide is becoming more profitable than emitting it into the atmosphere. 8. CCSU technology is the only climate change initiative being promoted by the Trump Administration. 9. CCSU expands developer eligibility to a broader array of industries that can beneficially use captured carbon emissions for CO2 capture in industrial applications and for direct air capture technologies that capture CO2 from ambient air. 10. CCSU provides certainty that the finance will be available once the timeline and requirements are met to store and/ or utilise the captured carbon. This improvement to financial certainty will catalyse significant investment in carbon capture projects. Trading with a climate enemy The Energy Chamber of Trinidad and Tobago (Energy Chamber) carbon credit system will generate the funding required to design and build needed best practice CCSU improvements, but our system is not trading yet due to a stalemate over carbon markets at the UN climate negotiations. Reducing CO2 emissions from the global natural gas systems, oil fields and the petrochemical industries are important for Trinidad and Tobago’s climate security. A carbon market is preferred by experts as the best vehicle for delivering emissions reduction. When global climate-related opportunities and risks are incorporated into Trinidad’s entrepreneurial portfolios, capital will migrate to the low-emission development global economy. New capital will flow to projects that capture and utilise methane emissions and other climate-friendly investments. CCSU developers will benefit from the billions of dollars freed up from coal investments. By taking our knowledge and credit system cognitive property abroad, the project equity generated from links between other cap-and-trade systems (like the ones in the
United States) and the carbon credit system in Trinidad, will provide all the near-term costsaving and risk-diversifying advantages that linking offers to developers. A new Trump Administration tax credit allows companies to participate that often cannot take advantage of traditional U.S. tax credits, such as tax-exempt cooperatives, municipal utilities and Trinidadian project developers. Companies without U.S. tax liability will be able to fully monetise the credit by selling the credits to U.S. companies with a tax liability and then use the money to help finance CCSU projects. The new tax code provides for a performance-based tax credit for CCSU projects which can be claimed when an eligible project: • securely stores the captured carbon dioxide in geologic formations, such as oil fields and saline formations; or • beneficially use captured CO2 or its precursor carbon monoxide (CO) as a feedstock to produce fuels, chemicals, and products such as concrete in a way that results in emissions reductions as defined by tax code requirements. The tax credit pays or can be sold to buyers at $35/ton for using captured CO2 in EOR or synthetic fuels and $50/ton for sequestering CO2 in geological storage. A U.S. Congressional bill under consideration might amend the tax credit law to pay an even higher credit for direct air capture at $43.75/ton for EOR or fuels and $65.50/ton for geological storage. The tax law reduces the cost and risk to private capital of investing in the deployment of CCSU technology across a range of industries, including electric power generation, ethanol and fertiliser production, natural gas processing, refining, chemicals production, and the manufacture of steel and cement in the U.S. What’s in it for us? In developing countries that reduce or avoid greenhouse gas emissions, carbon credits can be used to offset pollution with industrialised nations. Carbon credit markets like the one developed by the Energy Chamber puts a price on carbon. Carbon markets fall into two categories: cap-and trade systems and emission reduction carbon credit systems. Under the cap-and-trade, regulated emissions are ‘capped’ and the sources purchase allowances equal to their emissions. In a carbon credit system (like the Chamber’s), sources voluntarily undertake emission reduction projects and are awarded ‘credits’ that are sold to emission sources in cap-and-trade systems. The transaction is known as an ‘offset’. The U.S. tax credit supports investment in other industries where innovation is needed to reduce costs and achieve increased deployment. Many industry sectors have significant potential to deploy carbon capture and reduce their emissions but are precluded from claiming the tax credit due to the eligibility requirements. The U.S. tax credit is a form of offset because it can be sold to a buyer as a result of emission reductions (and not necessarily from a polluter or from a cap-andtrade regulated source) and as such should be able to be linked to and have trading cleared via the Energy Chamber credit system. The above is a UN Climate Change Article 6 Rulebook credit system designfeature matter that the Energy Chamber and/or its members should lobby for at the UN Conference of Parties in Glasgow this year, and upon its adoption, promote Trinidad institutional knowledge of CCSU and cognitive properties like our carbon credit market to work in sync for the benefit of Trinidad and Tobago.
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16
opinion
| May 2020 energy.tt • @ttenergychamber
The future of social expenditure Melanie Richards | Contributor
Figure 1 – Total Social Expenditure by TTEITI Reporting Company 2012-2017
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s the 2020 Energy Conference looks towards Shaping the Caribbean’s Energy Future, it may be useful to first explore how energy has shaped our past, particularly in Trinidad and Tobago. The positive impacts of the energy sector on the local economy are well known; oil and gas has been seen as our elixir for decades, creating economic prosperity through its contribution to gross domestic product (GDP) as an earner of foreign exchange, creator of service industry, employment etc. But speak with many people at a community level, especially in host communities and their experiences can be quite different. Often, the feeling is that the benefits of the sector that bring revenue to the national economy through royalties, taxes etc., do not usually ‘trickle down’ to the communities that need them most. And, while there is value in some of the large national projects we see, like new highways and government buildings, this does little to appease the single mother in a fence line community who is struggling to manage her small cottage business and send her child to a school that is ill equipped to deal with, for example, children with special needs, or the bright young student who, against all odds has excelled in school, but cannot afford tuition or books to further his studies, or even the transportation cost to get from his community to attend classes. And this is where social expenditure from the energy sector has, in the past, and will in the future, play an important role in shaping the lives of people in host communities in Trinidad and Tobago. Note, social expenditure by the energy sector is explored here with two major caveats; first, this is not to infer that the energy sector, or any sector for that matter, should provide the services that are the responsibility of government (that leads to its own problems), and second, this is also not to suggest that the actions of the energy sector in local host communities always lead to positive impacts (the negative impacts can often be quite glaring). However, the reality in Trinidad and Tobago is that social expenditure made by companies in the oil and gas sector is a significant contributor to directly impacting the lives of persons in host communities. According to data from the Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) for fiscal periods 2012-2017, the oil and gas sector contributed TT$469, 822, 125 in ‘social expenditure’. Excluding the state-owned enterprises (SOEs) — The National Gas Company of Trinidad and Tobago (NGC) and Petrotrin — the private sector contribution is TT$200,462,045. Figure 1 shows total social expenditure over the six-year period by TTEITI Reporting Company. Table 1 provides a breakdown of social expenditure by TTEITI Reporting Company over the sesame period. This is not to say that the state spending on social infrastructure and programming is negligible. According to data from the Social Sector Investment Programmes (SSIP) 2017 and 2018, the national budgeted allocations for the same fiscal periods 2012-2017 amount to TT$69,670,393,836. Table 2 below provides a breakdown of these budgeted allocations over the six-year period. The figures for Energy Sector Social Expenditure reflect a sharp decline from 2016 and Government Social Allocations show a decline from 2017, both of which are
203,776,408
117,883,717
65,583,732 62,456,445
Social Infrastructure includes allocations to both the ‘Development Programme’ and the ‘Infrastructure Source: Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) Development Fund’ while Table 1 - Breakdown of Social Expenditure by TTEITI Reporting Company 2012-2017 Social Programming includes programmes such as Community-based Environment Protection & Enhancement Programme (CEPEP), Disability Assistance Grant (DAG), Source: Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) based on amounts reported by companies on their TTEITI Reporting Templates. *Figures not reported. Government Assistance for Tuition Expenses (GATE), The TTEITI defines social expenditure as ‘the provision by public and private extractive Senior Citizens Pension sector and related companies of benefit to, and financial contribution targeted at, (SCP), Unemployment Relief communities, civil society organisations, households and individuals. Such payments Programme (URP), Public can be cash transfers or direct (in-kind) provision of goods and services, but shall exclude Assistance Grant (PAG), advertising and/or promotional costs related to the expenditure’. etc. more comparable with the energy sector ‘social Table 2 – Breakdown of Budgeted Allocations 2012-2017 expenditure’. 4,865,101
BPTT
quite worrying given the needs that exist in many communities throughout Trinidad and Tobago. Even with these declining trends, the government allocations totalling near TT$70 billion over six years is still a lot of money. So why then does it appear to not be reaching some of the people and communities in need? The National Social Mitigation Plan 2017-2022 notes that ‘the country has approximately 100 social programmes and supports more than 100 NGOs, which provide economic and social support to citizens in need [however] there is still a sizeable population living in poverty, 16.7 percent in fact, according to the most recent official estimates’ and asks the question “why many persons are not yet resilient given the array of support programmes that have been available for some time”. It further suggests “another disturbing reality is that as the downturn progresses, more persons are expected to fall below the poverty line or at the very least, become more vulnerable due to unemployment’. One school of thought purports that
BHP
8,330,855
EOG
6,925,927
NGC
Perenco
Petrotrin
Shell
Source: Trinidad and Tobago Social Sector Investment Programmes (SSIP) 2017 & 2018
because of the social expenditure contributed by oil and gas companies, governments then rely on this sector to support social services in host communities and less funding is allocated to programmes in these areas. Whatever the reason, which is certainly more complex than these explanations suggest, the reality is that a significant percent of the population, many of whom live in ‘marginalised’ communities remain vulnerable and are not benefitting from the spoils of the
energy sector that has made significant contributions to the national economy over the past decades. So as we explore what it takes to Shape the Caribbean’s Energy Future, let’s ensure that this future is a future for all, especially those who remain marginalised and most vulnerable.
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17
| May 2020
news
energy.tt • @ttenergychamber
Energy Chamber Survey: 90% of energy services significantly impacted by COVID-19 Staff Writer | Energy Chamber
Please indicate the impact of COVID-19 on your operations
Minor Impact 10%
Significant Impact 90%
THE energy services sector has been badly impacted by the current overlapping coronavirus and oil price crises. In a recent Energy Chamber survey of members, it was revealed that operations of energy services companies were significantly impacted by the coronavirus. Eighty-one percent of the energy services companies indicated that they had financial obligations to local banks and 8% indicated that they had financial obligations to foreign financial institutions and 11% said that they had obligations to both foreign and local banks. On average it was estimated that each energy services companies paid TT$676,000 to local banks per month. From the survey it was also estimated that on average companies paid US$398,000 to foreign banks per month. The virus has severely impacted on the cashflow of the energy services companies and these companies estimate that loans accounted for 36% of their total revenue per month. This is compounded by the fact that the companies project their decline in revenue to be over $56%. The energy services sector will not recover until there is a significant increase in activity in the sector.
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Welder on the LABIDCO Estate
18
news
| May 2020 energy.tt • @ttenergychamber
efficiency
Shell part of consortium that aims to build the largest Green Hydrogen project in Europe Staff Writer | Energy Chamber HYDROGEN is one of the most abundant elements in the universe and according to major energy players, it could play a significant role in the transition to a clean and lowcarbon energy system. Bloomberg has said in a special report that the falling cost of making hydrogen from wind and solar power could cut greenhouse gas emissions by 34% in fossil fuel dependent sectors of the economy, such as steel, heavy-duty vehicles, shipping and cement. The production of hydrogen through renewable sources is called ‘green hydrogen’. Many of the major oil and gas companies have been eyeing hydrogen projects to add to their portfolio in their quest for net zero emissions. Hydrogen projects are also included in many countries’ ambition to reduce emissions. Oil major Shell is now part of the consortium that aims to build the largest green hydrogen project in Europe.
PowerGen Plant Pt LIsas
The consortium of Gasunie, Groningen Seaports and Shell Nederland, announced that they intend to launch the NortH2 project: the production of green hydrogen using renewable electricity generated by a mega offshore wind farm, 3 to 4 gigawatts in 2030. Additionally, it aims to grow to about 10 gigawatts around 2040. Green hydrogen production, initially in Eemshaven and later possibly also offshore, is expected to be around 800,000 tonnes per year by 2040. This would avoid about seven megatonnes of CO2 per year. NortH2 has the support of the province of Groningen and is looking for partners to expand the consortium and realise this project. Green hydrogen, produced with renewable sources such as wind and solar energy, is central to the Dutch Climate Accord and the European ‘Green Deal’. At present, industry is already using large quantities of hydrogen, but this is mainly produced from natural gas. Replacement with green hydrogen contributes significantly to the decarbonisation of the industry.
NortH2 envisages the construction of very significant wind farms in the North Sea, which can gradually grow to a capacity of about 10 gigawatts. This would be sufficient to meet the current electricity consumption of some 12.5 million Dutch households. Many wind turbines will need to be installed to enable this. The first ones could be ready in 2027 and will be used for green hydrogen production. In addition, the plan provides for a large electrolyser in Eemshaven, where wind energy is converted into green hydrogen. The consortium is also considering the possibility of placing electrolysers offshore. In addition, a smart transport network in the Netherlands and Northwest Europe is required to deliver the 800,000 tonnes of green hydrogen to mainly industry, and later possibly also to consumers. This could save an estimated seven megatonnes of CO2 emissions per year around 2040, according to Shell. In this project, Gasunie’s natural gas infrastructure – which is now mainly used for natural gas and green gas
– is also used for the storage and transport of hydrogen. Marjan van Loon, President-Director of Shell Nederland said, “Together, we are launching an ambition that puts the Netherlands at the forefront of hydrogen globally. In addition, it contributes to achieving the objectives of the Dutch Climate Accord and accelerates the energy transition. This project offers opportunities throughout the entire hydrogen chain. In addition, it fits well with our New Energies aspirations and our ambitions to find new ways to reduce CO2 emissions and deliver more and cleaner energy, at home, on the go and at work. In order to realise this project, we will need several new partners. Together, we will have to pioneer and innovate to harness all the available knowledge and skills that are required. The energy transition calls for guts, boldness, and action.”
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19
| May 2020
energy update Yearly Review
Crude Oil Production Daily Average (OOO's Barrels)
Natural Gas Production (mmcf/d)
5,000 4,500
120
4,000 100
3,500, 3,000
80
2,500
60
2,000 1,500
40
1,000
20
500 0
0 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2011
2012
Liquefied Natural Gas Production (c um)
2013
2014
2015
2016
2017
2018
2019
Depth Drilled (ft) 600,000
40,000,000 35,000,000
500,000
30,000,000 400,000
25,000,000 20,000,000
300,000
15,000,000
200,000
10,000,000 100,000
5,000,000 0
0 2010
2011
2012
2013
2014
2015
2016
2017
2018
2010
2019
2011
Number of Rig Days
2012
2013
2014
2015
2016
2017
2018
2017
2018
2019
Production of Ammonia (000's Tonnes)
3,500
5,800
3,000
5,600 5,400
2,500
5,200
2,000
5,000
1,500
4,800 4,600
1,000
4,400 500
4,200
0
4000 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2011
2012
2013
2014
2015
2016
2019
20
| May 2020
energy update
energy.tt • @ttenergychamber
Yearly Review
Production of Methanol (000's Tonnes)
Export of Methanol (000's Tonnes)
7,000
7,000
6,000
6,000
5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
0
0 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2011
Crude Oil Exports (000's Barrels)
2012
2013
2014
2015
2016
2017
2018
2019
2018
2019
Export of Ammonia (000's Tonnes)
7,000
6,000
6,000
5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
0
0 2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2011
2012
2013
2014
2015
2016
2017
21
| May 2020
renewables
energy.tt • @ttenergychamber
Proman explores bio-methanol in T&T and opens opportunities for fuel blending Staff Writer | Energy Chamber PRESENTING at the Trinidad and Tobago Energy Conference, Anita Gajadhar, Managing Director, Proman Shipping, provided an overview of the role methanol plays in the energy transition and the future of methanol in Trinidad and Tobago. She revealed that Proman, which is the second largest methanol producer in the world, has submitted a proposal to the Ministry of Energy and Energy Industries to produce ‘bio-methanol’ using municipal waste from Trinidad and Tobago’s landfills. The process will have significant reductions in carbon dioxide (CO2) emissions, Gajadhar said. Bio-methanol represents the best opportunity to become carbon-neutral, especially for Trinidad and Tobago, she said. Gajadhar commented, “Imagine if we could use 85% of the waste that currently goes into the Beetham landfill and convert it into bio-methanol.” As part of wider efforts to promote global
decarbonisation and increase recycling, Proman joined forces with GP Energy and Enerkem in August 2019 to submit a proposal to the Ministry of Energy and Energy Industries for the Waste to Energy Project, she said. The Enerkem technology efficiently derives methanol from waste in Trinidad to reduce methanol production carbon intensity by up to 65%. Gajadhar said, “We project that this process will require up to 1,550 tonnes per day of waste —this is equivalent to approximately 120 full garbage trucks every day, therefore requiring waste not only from Beetham but also from the Guanapo and Forres Park landfills.” The bio-methanol output from the Trinidad and Tobago Bio Refinery can then be blended into the country’s gasoline, providing an opportunity to supply regionally produced, lower-cost, environmentally friendly petrol for the Caribbean and Latin American region. Trinidad and Tobago, as a leading methanol exporting country, could maintain its status as a pioneer in the Caribbean energy sector, blending between 3%15% of methanol into its gasoline pool with these blends,
requiring zero engine modification to most modern vehicles, she said. Methanol has shifted in demand from uses as a petrochemical derivative to an energy application. In fact, Gajadhar said that 45% of methanol consumption is from energy applications with methanol consumed as a fuel. According to Gajadhar, methanol has lower emissions when used as a fuel when compared to other fuel sources and she added that methanol can also be generated renewably through net carbon neutral pathways. Renewable methanol is an ultra-low carbon chemical produced from sustainable biomass and is often referred to as bio-methanol. Renewable methanol can also be derived from hydrogen renewable electricity and CO2. The Methanol Institute found that renewable methanol can reduce emissions by 65-95% when compared to fossil fuels. Bio-methanol offers the highest potential in CO2 reduction when compared to any fuel currently being developed to displace fossil fuels,
including green hydrocarbons. Based on 2017 costs, methanol fuel blending offers Trinidad and Tobago the opportunity to save approximately TT$73 million per year in fuel costs and the Caribbean TT$237 million, if regionally implemented. As a major methanol producer, Trinidad and Tobago has the opportunity to champion methanol gasoline blending for the benefit of the Caribbean region and support efforts to meet the Paris Accord commitments to cut emissions. Bio-methanol applications also extend to the marine fuel industry since it can assist shipping companies in meeting the International Monetary Fund (IMO) regulations for reducing sulphur content in fuel. The benefit to using methanol fuel blends is that it requires minimal infrastructure changes to terminals and bunkering barges.
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LightsourceBP gets approval for 20-year PPA for a 132mw project in USA Staff Writer | Energy Chamber THE Conway Corp Board of Directors approved a 20year purchase power agreement with Lightsource BP, a global solar leader in April. According to Lightsource, the agreement is for the development of a 132MWdc solar energy project in White County, Arkansas. Lightsource BP will finance, build, own and operate the facility and will deliver the solar energy it generates to Conway Corp under the fixed-rate power purchase agreement. The Happy Solar project is located on 700 acres near Happy, Arkansas, approximately 55 miles northeast
MHTL plant Pt Lisas
of Little Rock. It will supply clean energy to Conway Corp’s customers in the city of Conway and will generate enough electricity to power more than 21,400 homes. The project will also play a role in reducing the city’s carbon footprint by the equivalent of carbon dioxide (CO2) emissions from 35,270 fuel burning cars. ‘We are committed to providing safe, reliable, affordable, innovative and environmentally sound service to our customers. This solar project checks all of those boxes’, Conway Corp Chief Executive Officer Bret Carroll said. ‘We know this project is a great long-range strategy in our continued efforts to serve our customers with excellence’.
In addition to providing fixed, low-cost power, the project will create 250 jobs during the construction of the facility. Kevin Smith, Chief Executive Officer of the Americas for Lightsource BP, said, ‘We applaud Conway Corp for taking the lead in delivering the many benefits of solar energy to its customers and look forward to our continued collaboration as we work to bring this exciting project online. We believe renewable and affordable solar energy is an important part of the state’s future energy mix, and we’re dedicated to making it a positive contribution to local communities’. With Lightsource BP’s model of developing, owning
and operating their projects, the company is committed to be a long-term partner of the local communities in Arkansas. Their approach includes community engagement, maximising local benefits, and development of a site-specific, long-term land management plan that will optimise environmental benefits of the project in order to help improve the land. The project is expected to go online at the end of 2022.
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renewables
| May 2020
Cabinet gives BP and Shell go ahead to negotiate a PPA for solar project in T&T Staff Writer | Energy Chamber TRINIDAD and Tobago is now one step closer to having significant renewable energy on the grid. At a post-cabinet briefing, Prime Minister Dr. Keith Rowley announced that the cabinet took a decision to proceed with our renewable energy initiative. The Energy Chamber of Trinidad and Tobago is extremely pleased to hear the announcement from
the Prime Minister that the project is moving forward and regards this as a very positive development for the country. In 2018, the Ministry of Energy and Energy Industries (MEEI) launched a request for proposals (RFP) for the provision of grid scale renewable energy projects in Trinidad and Tobago. Dr. Rowley indicated that proposals were evaluated and the joint proposal put forward by the country’s two largest natural gas
producers, BP and Shell (and renewable energy developer, LightSource), won the bid. Dr. Rowley indicated that the companies will now negotiate a power purchase agreement (PPA) which must come back to cabinet for approval. ‘And then we will be aiming to produce 130mw of power from renewables’, he added. According to the MEEI, a tender-opening ceremony was held for the project in July 2019, and it was revealed
that 11 proposals had been received for the renewable energy projects for both solar and wind . The request for proposals called for the supply of up to 130mw of electricity generation from renewable sources on a build, own and operate basis.
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IRENA: Staying on Course: Renewable Energy in the Time of COVID-19 Staff Writer | Energy Chamber IN a short few weeks, much of the world has been shut down due to the novel coronavirus, COVID-19, which has crossed borders and oceans, rapidly devastating communities and livelihoods. Decisions being taken now to address the social and economic impacts of the crisis come amid profound uncertainty about both the course of the pandemic and its long-term ramifications for societies across the world. The immediate priority remains to save as many lives as possible, bring the health emergency under control and alleviate hardship. At the same time, governments are embarking on the monumental task of devising stimulus and recovery packages. These are at a scale to shape societies and economies for years to come. This response must align with medium- and longterm priorities. The goals set out in the United Nations 2030 Agenda and the Paris Agreement can serve as a compass to stay on course during this disorienting period. They can help to ensure that the short-term solutions adopted in the face of COVID-19 are in line with medium- and long-term development and climate objectives. Stimulus and recovery packages can also accelerate the shift to sustainable, decarbonised economies and resilient inclusive societies. A coherent design approach is needed to secure political buy-in, business support and social acceptance. As the current crisis makes clear, we can no longer afford to make policy decisions and investments in isolation amid elaborately intertwined social, economic and environmental challenges. The fundamentally economic, more than financial, nature of this crisis calls for a major state role in the response. This involves defining the strategies and initiating direct interventions for the way out. Expansionary budget policies may be envisaged to support this effort. Stimulus and recovery measures in response to the pandemic must foster economic development and job creation, promote social equity and welfare, and put the world on a climate-safe path. By making the energy transition an integral part of the wider recovery, governments can achieve a step change in the pursuit of a healthy, inclusive, prosperous, just and resilient future. Energy transitions are already underway in many countries. These transitions have become increasingly affordable because of forward-looking policy frameworks, ongoing innovations and falling technology costs for renewables. Solar photovoltaic (PV) and wind power have become the cheapest sources of electricity in many markets, with other renewable power sources poised to reach cost parity within a few years. In the power sector, renewables have dominated new capacity additions and increasingly outpaced fossil fuels for the past seven years. Last year alone, renewables accounted for nearly three-quarters of global power capacity additions. The economic fallout from the pandemic is farreaching, with an adverse impact on many sectors including renewables. For many reasons, however, the impact may be different than in other economic sectors. Governments can turn to a renewables-based energy transition to bring a range of solutions at this difficult moment. Many renewable technologies can be ramped up relatively quickly, helping to revive industries and create new jobs. Decentralised solutions tend to be comparatively labour-intensive. Adopting renewables can therefore create employment and boost local income in both developed and developing energy markets. Employment in the sector, which reached 11 million jobs worldwide in 2018, could quadruple by 2050, while jobs in energy efficiency and system flexibility could grow by another 40 million. Decentralised technologies also allow for greater
involvement by citizens and communities in energy decisions, with transformative social implications. Importantly, they offer a proven approach for remote health care in energy-poor communities and add a key element to the crisis response toolkit. In the creation of future infrastructure, energy solutions aimed at scaling up renewables provide a safe and visionary strategic investment choice. Recovery measures could help to instal flexible power grids, efficiency solutions, electric vehicle (EV) charging systems, energy storage, interconnected hydropower, green hydrogen and multiple other clean energy technologies. With the need for energy decarbonisation unchanged, such investments safeguard against short-sighted decisions and increased accumulation of stranded assets. The latest oil price developments and the heightened unpredictability of returns on hydrocarbon investments make the business case for renewables even stronger. Current market dynamics could further weaken the viability of unconventional oil and gas resources and longterm contracts. The moment has come to reduce or redirect fossil-fuel subsidies towards clean energy without added social disruption. Research and innovation are vital to keep improving the technologies and reduce the costs for sustainable energy. This is especially true in end-use sectors like transport, heating and cooling, as well as for enabling technologies such as energy storage and green hydrogen. Governments must embrace these forward-looking options to ensure that public policies and investment decisions reflect the true potential for low-carbon economic development. These should be major considerations as policymakers put together recovery measures. A purely market-driven approach will not be adequate, either to respond to the immediate crisis or to mobilise longer-term investments. Governments will have to consider innovative approaches to secure financing at the required scale and speed. Clear long-term objectives, combined with targeted public investment and appropriate market incentives, will also enable the private sector to act swiftly and confidently. While the current crisis has undoubtedly underlined global interconnections and strengthened the vision of a more resilient society at national and regional levels, it has also highlighted the vast differences in countries’ circumstances and capacities. International co-operation is needed to tackle deeply embedded shortfalls and vulnerabilities, and crisis responses must reflect global codependency. Investments must be directed everywhere they are needed, including to the most vulnerable countries and communities. This year was meant to be a turning point for climate and sustainable development, with 2020 marking the start of the decade of action. The unexpected pandemic, with its devastating consequences for communities and economies, is upending plans, interrupting trends and testing assumptions. We are yet to see the contours of the post-COVID world. The mounting loss of life is devastating, and the strain on communities and economies will require thoughtful and far-reaching strategies. A wider perspective is needed, viewing energy, society, economy and the environment as parts of a unique, holistic system. The response must provide more than just a bailout for existing socio-economic structures. Now, more than ever, public policies and investment decisions must align with the vision of a sustainable and just future. Such undertakings are certainly ambitious. But they are entirely achievable with a collective, co-ordinated response.
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Wind turbine at UTT Energy Campus with historic Brechin Castle Sugar Factory in the background
23
| May 2019 energy.tt • @ttenergychamber
Execs back plan to reduce output in Texas According to Bloomberg, two of the biggest drillers in America’s largest oil-producing state have asked Texas regulators to consider a cut to crude output after a historic price crash. Pioneer Natural Resources Co. and Parsley Energy Inc. asked the three-member Texas Railroad Commission on Monday to call an emergency virtual meeting no later than April 13 and issue an order setting the ‘reasonable market demand for oil from Texas’. Bloomberg has also reported that execs from U.S. majors are set to meet with President Donald Trump in the White House in the near future. Among the topics expected to be discussed are possible tariffs on oil imports into the U.S. from Saudi Arabia.
Shell, Exxon offshore exploration in Somalia Reuters reports that the Somalia government has agreed to an initial roadmap with a Shell/ Exxon joint venture to explore and develop potential offshore oil and gas reserves. Minister of Petroleum and Mineral Resources, Abdirashid Mohamed Ahmed, said, ‘I am delighted we have agreed to an initial roadmap with the Shell/Exxon joint venture. This gives us confidence in (the) ability to further explore any offshore hydrocarbon potential.’ Last month, Somalia President Mohamed Abdullahi Farmajo signed petroleum legislation into law to help open up a new frontier market in Africa as the strife-torn country hopes new petroleum finds will help transform its economy. Seismic data suggests there could be significant oil reserves offshore.
international news
Geo-Park finds gas in Chile Geo-Park, a leading independent Latin American oil and gas explorer, operator and consolidator with operations and growth platforms in Colombia, Peru, Argentina, Brazil, Chile and Ecuador, announced the discovery of the new Jauke Oeste gas field in the Fell block (GeoPark operated, 100% WI) in Chile. The company drilled and completed the Jauke Oeste 1 exploration well to a total depth of 9,596 feet. A production test, through different choke sizes, in the Tobifera formation resulted in an average production rate of 4.4 million standard cubic feet per day of gas (or 729 boepd) and 52 bopd of condensate with a wellhead pressure of 3,141 pounds per square inch. Additional production history is required to determine stabilised flow rates of the well and the extent of the reservoir. Surface facilities are in place, the well is in production, and the gas and condensate are already being sold to offtakers.
Changes at PDVSA Rigzone has reported that Venezuela President Nicolás Maduro has made several new appointments at Petroleos de Venezuela SA (PDVSA), the company revealed last weekend. According to the article, executive changes included the appointment of Erwin Hernandez as Vice President of Exploration and Production, Gabriel Oliveros as Vice President of Refining, Antonio Perez Suarez as Vice President of Commerce and Supply, and Oswaldo Perez Cuevas as Vice President of Finance. In addition, Victor Ramon Zamora was appointed Human Resources Manager of PDVSA and German Marquez became the new President of the Venezuelan Petroleum Corporation (CVP). CVP is described as a subsidiary that manages PDVSA's interests in joint exploration and production companies with national and foreign private oil companies. Last month, Maduro signed a decree for the creation of a presidential commission for the defense, restructuring and reorganisation of the oil industry. In late March, Maduro was charged with narco-terrorism along with other senior officials in the country by the U.S. Government.
Hess announces significant reduction in capital expenditure Hess announced a revised $2.2 billion capital and exploratory budget for 2020, an $800 million reduction from the previous budget of $3.0 billion. The company also announced a new $1.0 billion three-year term loan agreement. These actions further strengthen the company’s cash position and financial liquidity in response to the sharp decline in oil prices. The company has indicated that the reductions to the company’s 2020 capital budget will be primarily achieved by shifting from a six-rig programme to one rig in the Bakken, which is expected to be completed by the end of May. Most discretionary exploration and offshore drilling activities, excluding Guyana, will also be deferred.
Petrobras cuts capex and production In Brazil, state oil company, Petrobras, has taken the decision to reduce disbursements and preserve its liquidity. The move was taken as a result of sluggish oil and gas demand. The company has opted to reduce planned investments for 2020 from $12 billion to $8.5 billion by delaying exploratory activities, well connections and the construction of production and refining facilities. Petrobras has also accelerated the reduction of operating expenses by an additional $2 billion by mothballing operating platforms in shallow water fields that started to have negative cash flow. The company has also elected to reduce a total of 100,000 bpd of its oil production by the end of March, due to oversupply in the market and the reduction of global demand for oil.
Equinor makes discovery in North Sea (first for 2020) Equinor and partner, Neptune, have struck oil in the Sigrun East prospect in the North Sea. Recoverable resources are estimated at between 7 and 17 million barrels of oil equivalent. This discovery is Equinor’s first for 2020. Nick Ashton, Equinor’s Senior Vice President for Exploration said, ‘Sigrun East is a win-win. Exploring near existing infrastructure, we prove resources that can be profitably realised, while producing with low CO2 [carbon dioxide] emissions’. The Sigrun East wells are follow-up wells to the Sigrun appraisal well (15/3-11) drilled in 2018. The aim was to prove extra resources and clarify the commercial basis.