trinidad and tobago hydrocarbon development process- olade first latin american and caribbean oil...

Trinidad and Tobago Hydrocarbon Development Process-

OLADE First Latin American and Caribbean Oil and Gas Workshop, Quito

Penelope Bradshaw-NilesJuly 13, 2011

THE GOVERNMENT OFTHE REPUBLIC OF

TRINIDAD AND TOBAGO

• Trinidad and Tobago- Overview of Energy Sector

• Country Hydrocarbon Objectives

• Petroleum Legislative Framework

• Bid Round Procedures

Contents

2

Trinidad and Tobago Strategic LocationTrinidad and Tobago Strategic Location

Population - 1.3M

Labor Force - 0.5M

Literacy Rate - 88% LOCATION

Northeast of VenezuelaSouthernmost of Caribbean Total Area – 1,820 sq. miles

Latitude 10 1/2°N, Longitude 61 1/2° W

Overview of Energy SectorOverview of Energy Sector

1974 First PSC

1996 Model PSC1998 Deep Water Blocks

• 1867 First Well Drilled

• 1908 Commercial Oil Production

•1954 First Offshore Well

•1969 East Coast Discovery

Petroleum Industry - Highlights

The Energy Sector:

• 3% of global energy business

• Energy sector employment - 6%

Trinidad & Tobago’s Oil and Gas Fields

Gulf ofParia

Point Fortin-Atlantic LNG Plant

GRANDERAVINE

SOLDADOFIELDS

PALOSECO

VENEZUELA

Caribbean Sea

Mejillones/Patao

Dragón

CHACONIA

BRIGHTONMARINE

Arima

PORT-OF-SPAIN

Cocorite

Frederick

BARRACKPORE/PENAL

FORESTRESERVE

HIBISCUS

PoinsettiaOrchid

Poinsettia-SW

Point Lisas

Longdenville

San Fernando

Phoenix Park

Pointe-a-Pierre

BEACH

GOUDRON

GaleotaPoint

Km

0 20 40

TRINIDAD

BALATA

MORA

POUI

Iris

TOBAGO

Angostura

TEAK

PELICAN

KISKADEE

OSPREY

KAPOK

CASSIA

IMMORTELLE

Starfish

Dolphin Deep

DOLPHIN

MAHOGANY

Manakin

Loran

Coralita

Cocuina

Atlantic Ocean

Tajali

T&T Gas Reserves(TCF)

1993(TCF)

1996(TCF)

2005(TCF)2009

Proved Reserves 8.2 12.3 18.8 14.4

Probable Reserves 4.6 3.7 9.0 7.8

Possible Reserves 1.1 2.0 7.1 5.9

Total 13.9 18.0 34.9 28.1

7

Identified Exploratory Resources 25.9 Tcf

**Based on Revised Audit by Ryder Scott Co. – January 1 2010

Historical Hydrocarbon Production

Country Objectives

9

Effective and optimal monetizing of the natural resourcesEffective and optimal monetizing of the natural resources

Security of country’s energy suppliesSecurity of country’s energy supplies

Protection and preservation of the environmentProtection and preservation of the environment

Establishment of research initiativeEstablishment of research initiative

Training and development of nationalsTraining and development of nationals

What does Trinidad Offer?

10

Substantial petroleum reserve baseSubstantial petroleum reserve base

Competitive gas pricing regimeCompetitive gas pricing regime

Equitable taxation systemEquitable taxation system

Strategically located in the Atlantic Basin with strong markets Strategically located in the Atlantic Basin with strong markets

close byclose by

Highly skilled labor forceHighly skilled labor force

Well developed land and harbor infrastructureWell developed land and harbor infrastructure

The Cabinet of The Cabinet of Government of the Republic of Trinidad and Tobago Government of the Republic of Trinidad and Tobago

Ministry of Energy & Energy Affairs

State Enterprises

Petrotrin

National Energy Corporation

Standing Committee on EnergyChairman: Prime Minister

National Gas Company

Government’s Decision-Making Model

Legislative Framework


TRINIDAD AND TOBAGO

• The Petroleum Industry is governed principally by (i) the Petroleum Act (1969),and its amendments, the Regulations (1970) , and (ii) the Petroleum Taxes Act (1974).

• The Petroleum Act establishes a framework for the grant of licenses/contracts for the conduct of petroleum operations.

Petroleum Legislation


TRINIDAD AND TOBAGO

• The Minister is responsible for determining areas to be made available for petroleum operations.

• He/She may elect to invite applications for the rights to explore and produce hydrocarbons

• Competitive Bidding Process is the preferred option:• The element of Competition• Transparency of process

– Policy has been in existence since 1987 and no change is contemplated



TRINIDAD AND TOBAGO


• The following type of licences/contracts may be issued by the Minister :

- An Exploration Licence grants a non-exclusive right to carry out petroleum operations

- An Exploration and Production Licence grants an exclusive right to explore for, produce and dispose of petroleum

- A Production Sharing Contract grants the contractor the right to conduct petroleum operations within the prescribed contract area.


TRINIDAD AND TOBAGO

Government’s Policy

• Pre 1995 – few PSCs

• Post 1995, the Government’s policy has been to issue Production Sharing Contracts for the conduct of Petroleum Exploration.

• This does not preclude the option of utilising the licensing regime


TRINIDAD AND TOBAGO

PSC Highlights

• Phased exploration period • 9 years for deep water• 6 years for shallow and average water depths

• Biddable minimum exploration programme. • Term of Contract

• 25 years for shallow • 30 years for deep water.

• Flexible relinquishment provisions tied to the phased exploration work programme.

• Exploration acreage can be retained


TRINIDAD AND TOBAGO

PSC Gas Provisions

• Attractive Gas Provisions– A prescribed natural gas market development

phase of up to five (5) years – seven (7) years deep water.

• Extension of the term of the contract,• subject to the execution of a gas sales contract for a period

which will allow for the supply of natural gas under the terms of the gas sales contract.


TRINIDAD AND TOBAGO

• Technical review of open acreage• Nomination process • Blocks to be offered chosen based on nominations and

T&T’s strategic interests.• Recommendations made to Cabinet on the areas to be

offered and the terms and conditions of the bid.There is a prequalification process for the right to be operator.

It can be done at any time and lasts three years

Competitive Bidding Process


TRINIDAD AND TOBAGO

TERM OF CONTRACT Shallow Water/Deep Water

1st Phase - seismic option – 2/3 years 1st Phase - seismic and exploration drilling - seismic and 1 well – 3/41/2 years - seismic and 2 wells – 4/6 years - seismic and 3 wells – 5 years

2nd Phase - exploration drilling

3rd Phase - exploration drillingDrilling of exploration wells is a requirement in the second and third phases of the exploration period.

Summary Tender Form for 2010 Bid Rounds (1)


TRINIDAD AND TOBAGO

MINIMUM WORK PROGRAMME WORK UNITS (US$1MN equivalent to one work unit)Geophysical SEISMIC 3D Seismic ____________ Other Geophysical ____________ Geological Studies Drilling:

Wells Depth _____________ SIGNATURE BONUS US$_____________

Summary Tender Form for 2010 Bid Round (2)

Crude OilCrude Oil

Price

MBOPD

A B C D

< $50.00

$50.00 -$75.00

$75.00 -$100.00 > $100.00

%

< 75 X X X X

75 - 100 X X X X

100 - 150 X X X X

150 – 200 X X X X

> 200 X X X X

Profit Share Matrices

Windfall Feature: BR + 70%*[(P – US$100.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price

Cost Recovery: 60%

Price

MMCFD

A B C D

< $4.00 $4.00 - $6.50

$6.50 -$9.00 > $9.00

% < 200 X X X X

200 - 350 X X X X350 - 500 X X X X500 - 750 X X X X

750 – 1,000 X X X X > 1,000 X X X X

Natural Gas

Windfall Feature: BR + 70%*[(P – US$9.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price

Example of Bid Evaluation Criteria

Geophysical 30pts Seismic 3D seismic 20ptsOther Geophysical 10pts2D seismic,Gravity, Magnetics etc

Geological Studies

Bidders are asked to provide details of named studies proposed and illustrate their value in contributing to improving the understanding of the petroleum system.

Drilling 70ptsWells - Depth

The work programme is totally self assessable

Each Element of the bid attracts a certain number of points


TRINIDAD AND TOBAGO• Sharing of Production – 100pts

– Minister’s Share of Profit Oil- 50pts– Minister’s Share of Profit Gas - 50pts

• Signature Bonus (where applicable) – one point per million dollars (open ended)

• Currently being utilised as a tie breaker in the deep water

• All other bonuses contributions are no longer biddable

Bid Evaluation Criteria


TRINIDAD AND TOBAGO

• Evaluation of bids and announcement of results within a two months from the date of bid submission.

• There are two Cabinet appointed committees which perform the evaluations:– A Technical Evaluation Committee comprised of staff of the

Ministry of Energy, Finance and the Attorney General.

– An Overview Committee chaired by the Permanent Secretary, Ministry of Energy.

Bid Evaluation


TRINIDAD AND TOBAGO

• The Overview Committee makes recommendations on the awardees to the Cabinet.

• Cabinet forwards the recommendations to the Standing Committee of Energy

• Committee makes recommendations to Cabinet

• Cabinet then acts on the recommendations of the SCE

Evaluation cont’d


TRINIDAD AND TOBAGO

Control– At the mercy of a dynamic/volatile global

environment

– To complete the process in the project time frame - 9 months

– Not in control of the entire process

Challenge

Results of the Last Two Bid Rounds


TRINIDAD AND TOBAGO

Shallow Water•Production Sharing Contracts signed with four companies

– NCMA 4 – Centrica– NCMA 2 – Niko/RWE DEA Ag– NCMA 3 – Voyager/Niko– Block 4(b) – Niko

Deep Water•Three blocks received bids

– 23 (a) – BP, Niko, BHP/Total/Repsol– 23(b) - BHPB/Repsol– Block TTDAA 14 - BP

Results

Upstream Activity

Niko/RWE

Centrica

Voyager/Niko

Niko

23(a)TTDAA 14

23(b)


TRINIDAD AND TOBAGO

• Mixed Experience - by and large successful– Depends on the global environment (price, supply-demand,

energy security)– Perceptions of prospectivity of the acreage

• Obligations contained in the CBO are varied to suit the operating environment (carried participation)– Fiscal incentives where necessary

• New fiscal regime for deep water enacted into legislation• Incentives built into the PSC

Trinidad and Tobago’s Experiences


TRINIDAD AND TOBAGO

• 28 PSCs in various stages of their operations

• 20 (BP has 120 but will be counted as one) licences in various stages– Productive oil and Gas areas– Acquisition of Seismic– Drilling– Deep Water round undertaken and bids received

• Should have deep water drilling soon

• Shallow Water and Land acreage being almost exhausted

Achievements

Future Developments: Upstream

Blocks for nomination are coloured light

blue.

There are currently 36 deep water

blocks available.


TRINIDAD AND TOBAGO• Current Focus is on Deep water

• Expected to climax in September, 2011 with the next Competitive Bid Round

• Shallow water and land acreage are not readily available

• The MOE will be reviewing all remaining acreage – Operators will not be encouraged to keep acreage

inactive

Investment Opportunities via Bid rounds


TRINIDAD AND TOBAGO• Legislation allows for application to be made for State acreage

– This would involve blocks less than 100sqkm minimum size

– Where there is 1 interested party

– Company already has tenure and good exploration /exploitation record

Other Avenues for Access to State Acreage


TRINIDAD AND TOBAGO

• Ongoing Licence Negotiations for Blocks in the Western Offshore Gulf of Paria – Pt Ligoure/ Brighton Marine/Guapo, East Brighton

• Will result in new exploration work programmes• Seismic and wells

• Streamlining/optimisation of acreage– Impending Data Policy important part of this thrust

Other Activities


TRINIDAD AND TOBAGO • Complete the entire bid process in 9months

• Offer more deep water acreage– Needs more technical work

• Vibrant industry focused on deep water exploration and production and the optimisation of production from shallow water and land areas

• Generation of business opportunities for all companies providing services to the industry and its spin-offs

Aspirations and Way Forward

Thank you


TRINIDAD AND TOBAGO

• Petroleum Profits Tax reduced from 50% to 35%

• Uplift of 40% on capex for exploration drilling• SPT of 18% up to US$90, >US$90 – 0.2% for

every dollar increase• Royalty

Legislation


TRINIDAD AND TOBAGO

• Profit Share matrices opened

• Price and Production Bands widened

• Windfall profit feature

• Profit Shares and work programmes are biddable

• Abandonment Provision • Escrow Account from time of development

• Financial Obligations fixed in PSC

• Cost Recovery fixed at 60%

•

Incentives in the PSC

40

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