The Energy Years Leading Trinidad and Tobago s energy sector in a time of global change

The Energy Years Leading Trinidad and Tobago s energy sector in a time of global change By Kevin C. Ramnarine KBH Center, University of Texas at Austin January 24 2017

Structure of Lecture The global energy context and megatrends in 2010 - present Trinidad and Tobago energy sector overview Major policy decisions 2011 to 2015 High points 2011 to 2015 Low points 2011 to 2015 Lessons Learnt / Conclusion

What s the big idea? Oil and gas producing countries must have a competitive investment environment that attracts capital and strikes a balance between fair returns to the State for extraction of its resources and fair returns to the company for risks it has taken.

The global energy context and megatrends in 2010 - present

Major energy trends driven by. Technology ( 3D seismic, microprocessing, fracking) Globalization ( access to acreage) Climate Change debate ( decarbonization) Geopolitics Increased energy demand driven by Asia (China & India, population and economic growth) Texan George Mitchell Father of Fracking

The Climate Change debate has dominated the global policy agenda for this decade and impacted on energy policy in most countries. There are persons who question that the burning fossil fuels has caused climate change ( anthropogenic climate change)

Key oil supply trends 2010 to present Supply Growth in supply outstrips growth in demand in 2014. Increased American and Iraqi production of shale oil. Oil prices collapse. Same trend for natural gas Country 2010 production / bopd 2015 production/ bpod United States 7550 12704 68% Iraq 2490 4031 62% Colombia 786 1008 28% Saudi Arabia 10075 12014 19% OECD 18535 23534 27% OPEC 35149 38226 9% World 83283 91670 10% % change

Barrels of Oil per day 14000 Oil Production in USA, Russia and Saudi Arabia 1996 to 2015 12000 10000 8000 6000 Saudi Arabia Russia USA 4000 2000-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

BCFD 80.0 Natural Gas Production 1996 to 2015 70.0 60.0 50.0 40.0 30.0 20.0 10.0-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Axis Title Russia Iran Qatar USA

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 MTOE 14000 Primary Energy Consumption Millions of Tonnes of Oil Equivalent (MTOE) 12000 10000 8000 6000 4000 2000 0 Total North America Total S. & Cent. America Total Europe & Eurasia Total Middle East Total Africa Total Asia Pacific

MTOE 1000 United States' Oil, Gas and Coal Consumption 1965 to 2015 900 800 700 600 500 400 300 200 100 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Oil Gas Coal

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 MTOE Oil remains king of the world 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Gas Coal Oil

In 2011, the IEA asked Are we entering a Golden Age of Gas?

Millions of Tonnes of Carbon Dioxide 12000.0 Carbon Dioxide Emissions / millions of tonnes 1965 to 2014 10000.0 8000.0 6000.0 4000.0 2000.0 - Japan USA Germany China

MTOE 250 Global Wind and Solar Capacity 1995 to 2015 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 OECD Solar Non OECD Solar OECD Wind Non OECD Wind

Trinidad and Tobago energy sector overview

Trinidad and Tobago Overview Commercial Oil production started in 1908 Currently producing 71,000 bopd ( peak 1978) One Refinery capacity 165,000 bopd Currently producing 3.3 billion cubic feet of gas per day ( similar to UK and Argentina and West Virgina) Most gas produced from offshore / continental shelf by multi-nationals

T&T Overview continued Eleven Ammonia plants ( first 1959) Seven Methanol plants ( first 1984) One Natural Gas processing plant. Four LNG Trains ( first export 1999) Five Gas Fired power plants ( 2 GW) Main State players: Petrotrin, NGC Main MNC s: BP, Shell, BHP Billiton, EOG Resources and Repsol LNG exported mainly to South America Ammonia, methanol exported mainly to the USA Refined petroleum products exported mainly to Caribbean and USA. Kevin C. Ramnarine Trinidad s Point Lisas industrial estate at night 1/24/2017

1908 1911 1914 1917 1920 1923 1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 BOED 107 years of oil and gas production Trinidad and Tobago 800,000 700,000 600,000 500,000 400,000 300,000 Nat Gas 200,000 100,000 0 Land Oil Marine Oil

Barrels of Oil Per day mmcfd of natural gas 160,000 Oil and Gas Production 2000 to 2015 ( The emergence of the gas economy of Trinidad and Tobago) 5,000 140,000 120,000 100,000 4,500 4,000 3,500 3,000 80,000 2,500 60,000 40,000 20,000 2,000 1,500 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 Oil Prod Natural Gas Prod

With the Amoco deal we got Trinidad and Tobago which turned out to be one of the combined group s crown jewels Lord John Browne former CEO of BP plc, Beyond Business

GDP Per capita US$ current prices 1960 to 2015 ( Trinidad and Tobago vs LATAM and Caribbean)

3/1/1995 8/1/1995 1/1/1996 6/1/1996 11/1/1996 4/1/1997 9/1/1997 2/1/1998 7/1/1998 12/1/1998 5/1/1999 10/1/1999 3/1/2000 8/1/2000 1/1/2001 6/1/2001 11/1/2001 4/1/2002 9/1/2002 2/1/2003 7/1/2003 12/1/2003 5/1/2004 10/1/2004 3/1/2005 8/1/2005 1/1/2006 6/1/2006 11/1/2006 4/1/2007 9/1/2007 2/1/2008 7/1/2008 12/1/2008 5/1/2009 10/1/2009 3/1/2010 8/1/2010 1/1/2011 6/1/2011 11/1/2011 4/1/2012 9/1/2012 2/1/2013 7/1/2013 12/1/2013 5/1/2014 10/1/2014 3/1/2015 8/1/2015 1/1/2016 6/1/2016 Millions of USD 3500 Current Account of Trinidad and Tobago 1995 to 2016 / US$ Mn 3000 2500 2000 1500 1000 500 0-500 -1000 Series1, -659.7-1500 -2000

Millions of Tonnes Per Annum REAL GDP ($TT Billions) 16.00 14.00 LNG Production vs Real GDP 2000 to 2015 100 95 12.00 10.00 90 85 80 8.00 75 6.00 4.00 2.00 70 65 60 55-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 50

Trillion Cubic Feet 22 20.76 PROVEN RESERVES OF NATURAL GAS TRINIDAD AND TOBAGO 2002 TO 2015 20 18.81 18.78 18 17.05 17.00 16 14 15.37 14.42 13.46 13.26 13.11 12 12.24 11.50 10.60 10 8 6 4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Proven Natural Gas Reserves are in decline

Guiding Philosophy and Policy Framework

My Guiding Philosophy 1. Maintain the integrity of the Ministry of Energy ( respect is earned). 2. Appreciated that the oil and gas business is high risk and capital intensive. 3. Never compromise safety for production or results. 4. Companies will invest if they think they can get the minimum return that satisfies their shareholders. 5. Capital is mobile, it does not have to come to Trinidad goes where it is treated the best.

My Guiding Philosophy 6. We should be doing business with the best companies in the world. 7. Recognize the companies that have demonstrated long term commitment to Trinidad. 8. The Government is in a partnership with the companies we are not adversaries. 9. The public directly should own part of the energy sector.

Policy Direction Simplify petroleum taxation regime Reduction in levels of taxation. Increase cost recovery rates in PSC s. Restructure capital allowances to improve project economics. Simplify bidding process ( only 2 biddable items) Get ride of taxable PSC Vertical integration of the National Gas Company Initial Public Offerings are great vehicles to transfer wealth Empowerment of private sector partners of Petrotrin. Communicate effectively with the public and stakeholders.

Govt Revenue Reserves & Production Drilling Investment Correct Incentives

High Points 2011 to 2015

Govt Revenue Reserves & Production Drilling Investment Correct Incentives

2500.0 FDI 2000 to 2015 / Petroleum Related ( TT Central Bank Data) 2000.0 1500.0 1000.0 500.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Upstream Activity on Steroids Signed twenty one (21) production sharing contracts and/ licenses for exploration and production. This is the largest number ever signed by any Minister of Energy and Energy Affairs. These agreements constitute an investment of up to $US 2.0 billion and creates an active upstream programme for the remainder of the current decade.

Rig Days Took initiatives that led to a significant turnaround in upstream activity as evidenced by an increase in rig days from 1132 rig days in 2010 to 2443 rig days in 2014. In addition, there was a significant increase in acquisition of 2D/3D seismic data during the aforementioned period. 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500-2,600 3,331 2,472 Rig Days ( Trinidad and Tobago) 2000 to 2016 2,369 2,501 2,214 3,274 3,409 2,690 744 1,132 2,189 2,788 2,486 2,443 2,765 1810 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

BP Rig Days 800 700 BP s Rig Days 742 600 500 514 519 400 300 235 279 265 330 307 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016

August 2014 January 2017

Initial Public Offering (IPO) of Phoenix Park Phoenix Park Gas Processors Limited Initial Public Offering (IPO) or TTNGL IPO (August 2015). This was the first time an energy company was listed on the Trinidad and Tobago Stock Exchange. This IPO was successful and was oversubscribed by 1.5 times.

PDVSA Head Office, Caracas - July 2013 Between 2012 and 2015 three agreements were negotiated and signed with the Venezuelan Government on the development of cross border natural gas reserves.

Port of Spain, Trinidad February 2015

Mitsubishi of Japan invest in methanol plant Presided over the progress to Final Investment Decision (FID) of a Methanol to Di- Methyl Ether petrochemical complex by a consortium led by Mitsubishi Gas Chemical of Japan and including the Trinidad based conglomerate Massy. This investment is valued at $US 987 million and will create 2000 construction jobs and 200 permanent jobs in a depressed community in south Trinidad.

Low Points 2011 to 2015

Kevin C. Ramnarine 1/24/2017 1/24/2017

Looking forward and Conclusions

mmcfd 4500 T&T supply demand balance 2016 to 2022 4000 3500 3000 2500 2000 1500 1000 500 0 2016 2017 2018 2019 2020 2021 2022 DCQ Total Sales

Deepwater Exploration Opened up Trinidad and Tobago s deepwater acreage to exploration. In total nine production sharing contracts were signed with BHP Billiton and its partners. Arising out of these nine contracts, in 2014/2015, BHP Billiton conducted the largest 3D seismic survey ever conducted by an International Oil Company (20,199 square kilometers).

Estimates of the Ministry Of Energy of the potential of the deepwater for oil resources range from 2.2 billion to 8.2 billion barrels of oil initially in place. Deepwater Area

Conclusion.the bad news Trinidad is past its peak gas production of 4.3 billion cubic feet per day in 2010. The industry will struggle to keep production above 3.5 billion cubic feet per day beyond 2017. Oil production is in continual decline due to issues around the no longer relevant business model of Petrotrin. There will be a need to rationalize Point Lisas and / or Atlantic LNG ( shut down plants). New natural gas projects beyond 2017 will not produce enough gas to offset the decline of mature gas reservoirs.

Areas of potential..a leader is a dealer in hope Potential for big deepwater discoveries ( BHP s drilling campaign in progress technical and geological risk) Potential for Venezuelan gas to come to T&T ( political risk). Potential to apply technology to increase oil production. ( commercial risk). There is an urgent need to privatize Petrotrin ( political risk). Partnerships with Guyana and Suriname ( political risk).

The world is what it is The world is what it is; men who are nothing, who allow themselves to become nothing, have no place in it. From A Bend in the River by Sir V.S Naipaul ( Nobel Prize, Literature 2001)