Trinidad &Tobago

A Special Report From Oil and Gas Investor July 2011 - OilandGasInvestor.com and Global Business ReportsP-1 ’s OIL & GAS INDUSTRY Reinventing itself Trinidad and Tobago is one of the oldest producers of oil in the world, but the time has come to reinvent its industry.

Overview: Current Operations “They call me Mr Fete, since I born I Claims as to where the first successful oil well was drilled never miss one yet.’ are disputed, with Philadelphia and Trinidad and Tobago vying for the honor. Regardless, the first successful oil well –Machel Montano drilled in the country (and possibly the world) was in La Brea in 1857. Since then, the industry has come a long way, peaking at a total oil production of 240,000 barrels of oil erhaps there is no better way to describe Trinidad per day (bopd) in 1978. The country’s offshore production and Tobago’s presence in the ‘fete’ that is the oil is dominated by a few of the industry’s bigger players; BP, and gas industry than by using the words of the coun- formerly Amoco, has seen Trinidad and Tobago become P its biggest hub, while BG, BHP, EOG and Repsol all have try’s most famous soca singer; since it was born, the coun- try has been a constant player in global energy markets. significant offshore operations as well. In tandem with these bigger players, Trinidad and To- In fact, Trinidad and Tobago celebrated 100 years of com- bago’s fields have provided the ideal space for juniors to mercial oil production in 2008, a feat achieved long before operate, with companies such as Canada’s Niko Resources the country gained its independence from Great Britain being the largest landowners in the country. The most re- in 1962. Trinidad and Tobago has been a presence in the cent deepwater bidding round drew attention from an even world of hydrocarbons since its inception; indeed, it has wider array of locations including China, Azerbaijan, Israel not missed out yet. and Saudi Arabia. UK-based Centrica Energy purchased To an outsider, life in Trinidad and Tobago may PetroCanda’s Trinidadian assets in August of 2010 and has well seem like one never-ending fete; Trinbagonians already seen the country become a promising prospect for enjoy ‘liming’ at any and every opportunity they get— future development. ‘liming’ is a British-inspired term of unclear origins today From its peak production in 1978, Trinidad and To- used to describe essentially any form of social gathering. bago’s 2011 average in crude oil production was just over In such a diverse country, opportunities to lime are never 90,000 bopd and the energy sector’s contribution to Trini- hard to come by. From the more family- and food-orient- dad and Tobago’s energy sector was just under 45%, down ed festivals of Eid and Diwali to the official three-month from a high of 50% in 2006. While crude oil production Christmas season before the country’s world-famous has decreased significantly over the past few decades, Trin- Carnival, a good celebration is never too far away. As in- idad and Tobago’s daily natural gas production has nearly trinsic to Trinidadian culture as celebrating is, so is its oil tripled, going from 1.5 bcf per day in 2001 to just over 4 bcf and gas sector. today, signaling a shift from an oil-based economy to a nat-

T-2 January 2013 - OilandGasInvestor.com ural gas-based economy, a change which has been develop- ronment is “attractive, because we have a well-established ing for quite some time now. With proven non-associated legal system, a democratic government, solid infrastruc- natural gas reserves at 13.4 tcf in comparison to a 3P total ture, a highly educated workforce, a liberalized currency of just under 30 tcf in 2011, even with a downturn in pro- regime and a strategic location.” Ms Bhoolai has worked duction, Trinidad and Tobago’s gas reserves hold signifi- on structuring Production sharing contracts (PSCs) in cant promise. Where oil was the mainstay of the country’s Southern Africa and South Asia and finds the regulatory production for the better part of its history, today the natu- framework of Trindad and Tobago to be notably more ral gas-based sector is the fashionable commodity. favorable in comparison. The country’s first, oldest, and now only refinery at If the vibrant downstream petrochemicals industry Point-a-Pierre has been in operation since the 1930s and is seen as a separate industry to the upstream oil and is today operated by the national oil company, Petroleum gas sector, then certainly Trinidad and Tobago’s econo- Co. of Trinidad and Tobago Ltd., more commonly known my is successfully diverse. Unfortunately, the two are so as Petrotrin. In the face of falling output, the Petrotrin re- closely intertwined, this is a near impossible distinction finery’s output has remained more or less stable in the last to make. Even so, there is widespread agreement both ten years; the government-owned company has tradition- within and outside the industry that other avenues of eco- ally imported crude oil for refining and further sales given nomic development need to be pursued. The question to its capacity of approximately 150,000 bpd, which is cur- ask about Trinidad and Tobago, then, is not whether rently greater than the national output. Plans to engage it suffers from Dutch Disease but whether the nation in a Clean Fuels Program and increase the efficiency of has become too dependent on its energy sector and on the the refinery and to explore bunkering opportunities at the heels of its remarkable successes, too complacent in its Panama Canal reflect optimistic growth plans for Petrotrin continued development. and indeed signal a hopeful outlook for It is an exciting time to be examining the industry. Trinidad and Tobago’s oil and gas sector, as the country looks to diversifying its economy, “Houston’s Secret” both beyond the energy sector and within Trinidad and Tobago’s proximity to and close it. Diversification of the economy, however, trade relationship with the U.S. has earned it must include a diversification within the en- the designation “Houston’s Secret.” Where ergy sector. Trinity Exploration and Produc- in the earlier part of the 20th century, the tion CEO Joel Pemberton reminds us that the country accounted for over 30% of Britain’s idea of “Trinidadian investment” does not— oil production, more recently Trinidad and and should not—only mean creating the right Tobago’s chief business partner is the world’s environment for investment in the country. chief consumer of energy, the U.S.. With the While Trinbagonians have long been known majority of its exports going to its northerly Kamala Bhoolai, Energy throughout the world for their expertise and Consultant, Mair and neighbor and the remainder going to a hand- Company knowledge in the industry, the abundance of ful of Far Eastern and countries, it successful service companies and models for is no surprise that Trinidad and Tobago had fallen some- industrial integration that exist in Trinidad and Tobago what below the global radar. could potentially prove highly successful around the world. With a steady, high-demand market mere hours away, The country ranks very low in the World Bank’s ‘Ease Trinidad and Tobago quickly became the Caribbean’s most of Doing Business’ survey and despite its political stabil- prosperous nation with a GDP per capita of $26,000; ity, needs to make itself more competitive to more relevant around 40% of this GDP is provided by the hydrocarbons markets than just North America. In a word, what is re- sector. Unlike its island neighbours, Trinidad and Tobago quired is reinvention. Reinvention will be key to recovering has not seen the need to develop a tourism industry and, in from a downturn that has plagued the market for the past the face of consistent oil growth, has not taken advantage of two years, it will be key to developing further what already its climate and fertile lands to maintain or revive its once- exists in the country and attracting increased investment vibrant agricultural industry. The country’s infrastructure, from abroad, and it will be key in ensuring Trinidad and though significantly better than most other Carribean Tobago’s place as a global—not just regional—hub for the Community (CARICOM) nations, seems to be lacking the oil and gas industry. In order to continue taking advantage organization and efficiency that one might argue a country of its significant remaining resources, Trinidad and Tobago with billions in annual oil and gas revenues should have. needs to reinvent its energy sector, both from within and Like so many resource-rich developing nations, most of its on the outside. other industries are only in their infancy in comparison to the energy sector. Still, one hesitates to label Trinidad and Tobago as a victim of “Dutch Disease.” Although only 50 years old, it This report was prepared by Caroline is one of the more stable oil and gas jurisdictions today and Stern, Maher Ali and Chloe Dusser of Global holds great potential for continued development. As Ka- Business Reports. For more information contact mala Bhoolai, Energy Consultant to local law firm Mair and [email protected]. Company, puts it, Trinidad and Tobago’s investment envi- January 2013 - OilandGasInvestor.com T-3 TRINIDAD AND TOBAGO’s OIL & GAS INDUSTRY Kevin Ramnarine, Minister for Energy and Energy Affairs Speaks to GBR about his plans to reinvent the sector durıng the third year into his mandate.

Results of the latest deepwater bid round are being an- nounced this week. This round saw considerably more suc- cess than past ones; in this context, could you elaborate on the changes in the structure of these biddings rounds compared to previous rounds? We made a number of changes to the fiscal regime for this bidding round. First, we increased the rate of cost recov- ery to 80 % (the recovery rate was 60 % in prior rounds). Second, we repurposed all the 3D seismic data that we held for deep water. Third, we marketed the bidding rounds very differently, attending many international conferenc- es. We also presented a smaller number of blocks—only 6 blocks as compared to 11 deepwater blocks in previous rounds. Another factor was the opening up of the basin, which contributed to greater prospects for Trinidad. Finally, many companies have now realized Trinidad is a good place to do business, due to our stable political situa- tion and ability to speak English. Companies like BP have had a good experience in Trinidad over the last 50 years.

What levels of interest are you expecting to see from for- eign companies in next year’s bidding rounds? I do not believe Trinidad’s fiscal regime is competitive Senator the Honourable Kevin C Ramnarine, Minister For Energy enough—we still need to come up to par with , and Energy Affairs Brazil and West Africa. Early next year a government com- mittee will conduct a comprehensive reform of the fiscal re- ranked Trinidad in the top quartile in terms of highest gime for the energy sector. There will also be a land-based government take in the world. I would like Trinidad to be bid round launched in January, spearheaded by Petrotrin competitive but still have a fair return to the state. Mov- and supported by the Ministry of Energy. We went on a ing forward, we will be reexamining taxation, production road show in Calgary to promote this bid round, because sharing agreements, etc, to see how we can best reach that we believe smaller companies are the best fit for land in balance. Production sharing contracts have evolved signifi- Trinidad. In March 2013, we want to launch another deep cantly in Trinidad; in the 1970s, the government take was water round with 6 new blocks, and three companies have based on level of production, and in the 1990s we intro- already shown interest. Deep water is still in the explora- duced a matrix based on production level and price. To- tion phase. Exploration took place on our continental slope day, we also need to consider costs—costs in the industry in 2002, which proved the existence of a working hydrocar- began to increase dramatically around 2005, concurrently bons system but did not find commercial quantities of oil with the demand for steel in China. Costs are a major and natural gas. However, things will have changed a lot factor with regard to the competitiveness of the environ- since 2002 and the technology has taken new leaps. With ment. The costs to produce natural gas are the same as a new fiscal regime, new technology, and greater process- to the costs to produce a barrel of oil, but gas is much less ing, we believe Trinidad’s deep water holds great potential. valuable; Trinidad of course has become predominately a gas-based economy. Regarding the overhaul of the fiscal regime, what needs to change in order to make Trinidad more competitive? With the recent shale gas discoveries in the US, there The fiscal regime cannot be considered solely as a mecha- have been moves to diversify Trinidad’s export markets. nism to collect money; it must meet the objectives of the Which international destinations have become attractive country, for example through fashioning the fiscal regime to Trinidad? around CSR or local content. Many global reports have In 2009, 80 % of our gas was being exported to the U.S. T-4 January 2013 - OilandGasInvestor.com Today, we export about 19 % of our gas to the U.S. as of purchasing oil for power generation and transportation. LNG, and the remainder goes mainly to Latin America, All the islands in the Caribbean use fuel-oil fired or diesel- including Chile and Argentina. We also send cargoes into fired power stations, which are both more expensive and Europe and Asia, where prices are sometimes three to six less clean than gas. There is a desire in the Caribbean to times higher than in North America. We believe demand convert to natural gas fired power. It has happened in the for LNG will always outstrip supply, and our cargoes will Dominican Republic and in Puerto Rico, but it has not yet continue to find a buyer on the global market. happened in the rest of the English-speaking Caribbean. The only supply in close proximity to many of the Carib- Examining the pioneering NGC model, how do you think bean countries is Trinidad, because has not de- the structure might change, making sure that the supply is veloped a gas export industry yet. The supply side is also guaranteed for a fair amount of risk? beginning take hold in Trinidad. The NGC model has worked very well since its inception in 1975, and has made the NGC the most valuable com- Regionally, Colombia provides an interesting model for pany in the Caribbean with assets close to 6 billion USD, Trinidad and Tobago to observe in the development of its healthy profits and constant dividends. I have questioned energy sector. What lessons do you believe Trinidad can the relevance of the NGC model moving forward, as it was learn from Colombia? premised on a world in which the U.S. was in decline with Colombia has democratized their oil industry, and made it regard to gas. We are reconsidering the model by which available to smaller operators. These small operators are the NGC acts as the sole monopoly on natural gas. Devia- nimble and have smaller overheads. Another aspect is the tion away from this model has already begun—there are refining industry. In the past two years, two refineries have a couple of hybrid (or back-to-back) contracts, where the closed in the region, including the Valero Aruba Refinery customer has a direct relationship with the upstream sup- and the Hovensa refinery in the U.S. Virgin islands. This plier. A big policy question for 2013 is how the NGC can leaves us with the Petrotrin refinery and refineries in Vene- mitigate movements between the increasing cost of buying zuela, the latter of which have issues with maintenance and natural gas, while companies on the Estate continue to de- accidents. No new refining capacity is coming onstream mand lower prices. anywhere in the Americas, with the exception of Brazil. In the next 5-10 years there will be a bottleneck with regard to What models have you looked at for the future role of refining capacity in this region, and this is where Trinidad the NGC? can play an important role thanks to its strategic location. The NGC will continue to be a pipeline operator, as well The National Energy Corporation (NEC) will be express- as a buyer and seller of natural gas due to the long-term ing interest for a new refinery in Trinidad. nature of contracts. However, a third dimension would be for the NGC to go global. Growth can no longer be guar- Trinidad is at a crossroads at the moment, and in many anteed on our current model. We expect growth to take areas of the sector there is a need for reinvention. Could place through acquisitions—the NGC is a cash-rich com- you elaborate on this? pany, and we are looking at several acquisition prospects The sector needs to be reinvented both from the point of within and outside of Trinidad, including in West Africa. view of the oil industry and preparing the gas industry for The company has also started to market its own LNG, and this new world. We have to change the way we do business we are also looking at marketing Petrotrin’s cargoes as well. in Trinidad. We may see the emergence of an LNG marketing company that is jointly owned by Petrotrin and by the NGC. How has political stability facilitated successful projects in Trinidad? We have also seen a move towards local infrastructure, in- Regarding political stability, the largest investment in the cluding the Eastern Caribbean pipeline and smaller CNG history of the Caribbean is Atlantic LNG—it has over 5 projects. What would the impact of these projects be for billion USD worth of foreign investment coming into Trin- Trinidad? idad. That project spanned the period 1995 to 2006, dur- These projects are all very small—the gas fill project is a ing which we had three different governments in Trinidad. small scale LNG project that would not require more than This project remains the lowest cost per ton of LNG in the 70 million standard cubic feet of gas. The LNG market world today, which has made Trinidad very competitive in in the first decade of the 21st century focused on size— global markets. larger ships and trains—whereas now there is an emerging market for smaller countries that need smaller ships and As you begin your third year as Minister, what would you trains. Small countries have both market and geographical like your legacy to be in the oil and gas industry in Trinidad constraints. There is also a CNG project plan for Trini- and Tobago? dad and Tobago, which is centered on Centrica’s develop- I would like to reinvent the entire energy sector, ment of block 22. The CNG facilities will supply CNG to which includes the oil industry, deepwater exploration and consumers in the Caribbean, and most likely a significant the downstream industry. Furthermore, I am pushing for amount of the gas will go to Puerto Rico. In the last 6-7 the internationalization of Trinidad’s energy sector, us- years, all the islands in the Caribbean have paid a lot of ing the NGC as a vehicle to take the Trinidad and Tobago attention to balance of payments with regard to the cost name abroad.

January 2013 - OilandGasInvestor.com T-5 P-6 July 2011 - OilandGasInvestor.com TRINIDAD AND TOBAGO’s OIL & GAS INDUSTRY Reinvention from Within: On The Island(s) Trinidad and Tobago has realized that the time has come to look again at the processes and practices of its energy industry and to adapt modern methods.

nlike nearby Colombia, Trinidad and Tobago is not dad and Tobago’s overall production, our reduced produc- experiencing a flurry of activity for the first time. In tion has a very visible impact, but the situation has been Ufact, it is experiencing a downturn in activity after exacerbated by similar work occurring across the sector 100 years of mostly stable production. Though the nature at the moment.” of the energy sector is often cyclical, the reasons behind Following the Macondo disaster, Trinidad and Tobago this slowdown in production are not simply due to chang- entered into a maintenance season, with a number of pro- ing headwinds in the global economy. As such, it is im- ducers on the island using the incident as a catalyst to ex- portant to take a look at the sector and its challenges as amining their own integrity and carrying out repair work. they stand currently to understand how reinvention can This became one of the larger contributing factors to the be achieved from within. The country has no shortage of downturn, with shutdowns occurring across many of the long-term players of all sizes who can provide an accurate country’s rigs. It must be remembered, however, that in commentary of the issues holding the industry back and any mature oil or gas industry, maintenance activity will how these have been addressed over the years. occur eventually, causing a decrease in output for a period of time. The longevity of Trinidad and Tobago’s industry Health & Safety Standards means that it was, regardless, due for some revitalization. Examining the timeline of Trinidad and Tobago’s produc- While this is to be expected, health and safety guidelines tion, 2009 was one of the better years in recent history on the whole have not been clearly defined in Trinidad and Tobago until recently. before output numbers decreased significantly. The second The North Sea is often taken as the golden standard for quarter of 2010 saw BP experience the Macondo blow- safety and integrity management in the oil and gas indus- out at its Deepwater Horizon rig in the Gulf of Mexico, try. Companies operating in Trinidad and Tobago are ap- effectively putting the company’s operations to a preciative of the fact that safety levels have been improving global halt. With BP Trinidad and Tobago (bpTT) being over time. On discussing Trinidad and Tobago’s standards, one of the company’s highest-performing assets, the ef- William Eyres, Tidewater Marine International’s Area fect of a shutdown at bpTT was severe. As bpTT’s Re- Manager for the Caribbean & Andean Region, says, “For gional President Norman Christie observes: “Because of the last 20 years, the industry as a whole has undergone a BP’s contribution of 400,000 barrels of oil per day to Trini- substantial shift in focus to reducing the number of injuries in the workplace which, in the past, were accepted with a certain level of machismo and fatalism. The industry has stepped up to curb this and injuries have dropped signifi- cantly, which goes to show the improving standards that govern our work.” Trinidad and Tobago was one of Tidewater’s first in- ternational locations outside of the U.S. 40 years ago, and though it is one of their smallest offices, the strong cur- rents coming up from the Orinoco Delta require some of the company’s most advanced positioning vessels to sup- port offshore activity on Trinidad’s east coast. One of the main initiatives of the Energy Chamber— the energy sector’s representative organization—is the cre- ation of uniform health and safety conditions and compe- tency certification standards. Commenting on the purpose of the Safe To Work (STOW) certification, Chamber CEO Dr. Dax Driver explained, “local companies have to meet certain specifications to work with multinationals, so we BpTT’s Immortelle Quality of Life Helideck Fabrication at decided to make one clear and transparent standard across Carillion’s yard in Waterloo. the industry.”

January 2013 - OilandGasInvestor.com T-7 Roger Packer, the Chamber’s current President, adds, true goal when it has been more fully harmonized with the “We are very adamant that multinationals meet the stan- standards that exist across companies.” dards as well, which are in fact a step above international Stauble is one of many in the industry who applaud standards.” The Chamber has come a long way towards the Chamber’s intentions but worry that it creates an- achieving its goals; companies from across the industry other level of qualification and bureaucracy without truly agree that standards in the country are of the highest order, creating a new and uniform higher standard of health, safe- often surpassing those required by multinationals across ty and competence practices. Both the level of standards their global operations. and the independent body inspecting and implementing As integrity works are performed, however, many in the them must be clearly established before STOW can bring sector also question the viability and success of the STOW Trinidad and Tobago on par with the North Sea. On the certifications. Gerard Stauble, CFO and Director of Trin- other hand, Gilberto Ordoñez, Managing Director of the idadian-owned H.J. Stauble Ltd., remarks, “it has been a partnership between a local conglomerate and multina- long process to develop STOW and it definitely has a fu- tional-engineering-company Neal & Massy Wood Group ture, but at the moment it has not achieved the efficiency Ltd. points out that “the biggest trend we are seeing is op- we had hoped for. For the time being, it has made everyone erators wanting to put their money where their mouth is; more aware and committed to safety and created a mini- we are all willing to talk about safety, but implementation mum set of standards for the industry to abide by, which is is the crucial aspect. Operators are no longer willing to pro- definitely something we needed.” duce if there is a risk to their people, the environment, or H.J. Stauble, a family-run fabrication and maintenance to their facility.” company with a 47-year history in the industry, represents The awareness of safety requirements has certainly in- Canadian firm Superior Machine Shop and Engineer- creased, but the added certification must progress beyond ing Works on the island. As their business has evolved its status as “red tape” to a more integral part of the indus- to suit the needs and requirements of the industry, Stauble try. Currently many companies still see the need to call for remains skeptical on the effectiveness of STOW thus far. additional requirements beyond those in the STOW certi- “In theory, STOW should be more efficient and cost-ef- fication. As more companies look to establish a presence fective, but it is not. Every and every company has in Trinidad and Tobago, they are assessing the amount of their own requirements for which we have to orient work- time and expense involved in meeting the country’s stan- ers and, like STOW, these requirements have to be recerti- dards, and whether this is a worthwhile investment. More fied at frequent intervals […] STOW will have achieved its uniform regulations implemented by an independent body

T-8 January 2013 - OilandGasInvestor.com sector evolving in response to its tal consulting firm Coastal Dynam- growth rather than in anticipation of ics Ltd., believe that as much impor- it. While most companies operating tance needs to be placed on emulating in Trinidad and Tobago have their North Sea environmental standards own global policies on environmental as it does on emulating fiscal and and community relations, one of the health and safety ones. “One of the seemingly more frustrating aspects main concerns is that companies are of this industry is the lack of clear still being allowed to discharge waste guidelines dictating official standard offshore … the pressure is not on operating procedures for safety, en- them to install a system that cleans vironmental, and human resource the water,” says Teelucksingh. Coast- departments. Where Trinidad and al Dynamics is the only locally-owned Tobago was once an attractive operat- firm to provide numerical modeling Gilberto Ordoñez, Managing Director, ing environment for companies wish- in Trinidad and Tobago and since Neal & Massy Wood Group ing to escape the bureaucracy of more its founding in 1996, has seen im- developed oil and gas jurisdictions, a mense growth both because of the and in line with the highest of mul- number of organizations touting the level of service it provides and its ful- tinational expectations must be put causes of environment, health and fillment of local content requirements into place if the added requirement safety have made operators’ obliga- for multinationals. of STOW is to be seen as a benefit tions equally present here without North Sea regulations require rather than an impediment. any laws to guide them. In no area safe disposal of cuttings and pooled is this more visible than that of resources to maintain monitoring of Environmental Standards the environment. chemical levels in the water. Further Trinidad and Tobago is the fifth Just as the North Sea is seen as a to this, community relations are often highest emitter of CO2 per capita in model of health and safety regulation, strained, causing slowdowns in proj- the world. The country’s oil and gas so too is it seen as one for environ- ect development which could easily industry has existed for twice as long mental regulations. Nazeer Gopaul have been avoided. “There is a dis- as the independent nation itself has, and Frank Teelucksingh, founders of connect between the government, the resulting in standards governing the and directors at marine environmen- industry, and the communities. The

January 2013 - OilandGasInvestor.com T-9 government receives money from the grams that are quite clearly defined industry but the community does not and listed in their public literature. see any of it. As a result, the commu- As a result, they can and are held nities feel left out of the development accountable to those processes. In process and the companies feel they most cases, they are quite stringent are unfairly targeted by communities,” with the targets they place for them- adds Gopaul. Companies like Coastal selves. Their standards have evolved Dynamics, in providing consulting over time and the country has kept up services, often become middlemen be- with them.” tween communities, companies and As local communities become the government, negotiating terms in more aware of the environment and a space where no official ones exist. the effect industries can have upon it, A common complaint is that too the government will need to dedicate Douglas de Freitas, President of Kaizen often companies have shaped stan- more resources to developing its own Environmental dards which the government then set of rules and regulations to govern follows, rather than the other way waste management and project devel- gineering Limited, is taking the lead around. Discussing the evolution of opment; local relations and CSR ef- along with the Energy Chamber in environmental standards in Trinidad forts become all the more challenging developing the country’s first Clean and Tobago Douglas de Freitas, Presi- when companies are wholly account- Development Mechanism (CDM) dent of Canada-based environmental able for their actions with no system project for Petrotrin. If successful, consultancy Kaizen Environmental, against which to check their perfor- the project will reduce carbon emis- voices the concern that companies mance and impact. sions equivalent to 80,000 cars per have shaped standards which the gov- Despite being one of the largest year by capturing, processing, com- ernment then follows, rather than the emitters of CO2 per capita in the pressing and feeding associated gas other way around. “The internation- world, Trinidad and Tobago was one into gas pipelines. Says TOSL’s CEO, al risk and requirements for due dili- of the first countries in the world to Shazan Ali, “Trinidad and Tobago’s gence have changed […] nowadays sign up and ratify the aims of the previous governments have never re- any of the major players has environ- Kyoto Protocol. One of the country’s ally paid attention to emission rates; mental and safety management pro- largest engineering firms, TOSL En- their main focus has always been

T-10 January 2013 - OilandGasInvestor.com maximizing the economic potential of hydrocarbons […] the government now is putting into place a low carbon de- velopment strategy.” Though projects and strategies such as this are but a small step in developing environmental standards across the industry, they are a step in the right direction.

The NGC Model: Renegotiating Terms The Point Lisas Industrial Estate, Trinidad and Tobago’s economic gem, was created in 1976 to absorb and mon- etize the excess supply of natural gas that was, until then, being flared. The estate—a fully integrated petrochemical complex—is now home to 90 companies, including the largest methanol plant in the world which, along with five additional , produces 13% of global methanol output. The National Gas Co. of Trinidad and Tobago Ltd (NGC) was founded alongside this as an aggregator and distributor of feedstock provided by the upstream. The idea behind the NGC was to consolidate supply and provide guaran- teed distribution to the various consumers at the ends of its 880-kilometer network of pipelines. The elimination, by and large, of individual contracts between upstream producers and downstream consumers created an efficient system of gas flow from which the estate was fed. With the recent downturn in the country’s oil and gas output, however, even the NGC model has failed to prevent a shortage in supply to Point Lisas’ various pet- rochemical plants. As contracts are due for renewal in the coming years, suppliers question the pricing model and whether it is beneficial to them. “The model of sup- ply from the NGC has historically worked well,” says Eugene Tiah, President of Phoenix Park Gas Processors. “But with the current reduction in supply and maturity of the gas sector, the pros and cons of the model are now a subject for national discussion. Increasing efficiency and avoiding monopoly rates should be the goal.” Phoenix Park Gas Processors, a joint-venture partner- ship between the NGC NGL Co. Ltd. of Trinidad and Tobago, ConocoPhilips Inc. and Pan West Engineers and Constructors. This consortium of owners has allowed for a pooling of resources resulting in Phoenix Park becoming one of the largest processors of natural gas in the Americas. Charles Percy, Managing Director and CEO of Meth- anex’s Trinidad and Tobago operations, agrees with Gar- nett. “The face of the Trinidadian market is about to change completely,” says Percy. “The government and the associa- tions need to be nimble and wise enough to make the best decisions for the whole of the value chain.” Methanex has recently made the decision to shut down its operations in Chile in favour of opening a methanol plant in the U.S., where cheaper gas prices and more favourable terms made it the more sensible location. As if to counter this same skepticism in Trinidad and Tobago, industrial gas supplier Air Liquide’s local Manag- ing Director Garnett adds, “Both Trinidad and Tobago and the company have worked on mitigating risk through diver- sification … People are investing to build long-term plants, which indicates that there is a positive future for the in- dustry as a whole.” Garnett maintains that the country will January 2013 - OilandGasInvestor.com T-11

have to work on maintaining its competitive edge in such a rapidly changing economy. “There are major economic headwinds to overcome in this regard,” says Garnett. Traditionally, the price of gas through the NGC has been set according to the price of downstream commodi- ties. Producers are finding that they can receive better prices for their output by shipping more product abroad. While the NGC model is one that can be continued moving forward, its structure and those of its contracts needs to change. bpTT’s Norman Christie suggests that this conversa- tion “must revolve around providing sufficient incentive for the upstream players in this changed paradigm to con- tinue to produce the resources whilst still allowing the ulti- mate recipients of the gas—the downstream or midstream producers—enough of a return for Trinidad to remain an attractive place to buy the gas.” Using the analogy of a pie in discussing the reinvention of the industry here, one of the key “slices” to be examined is that of the NGC. “NGC plays an important role in this as an aggregator, and so receives part of the rent. NGC’s role in the future will be determined by how we decide this pie needs to be distributed to incentivize upstream players and ultimate off-takers.” Upstream players and ultimate off-takers also includes a number of smaller companies op- erating in Trinidad and Tobago’s fields using gas in their recovery methods. Oil, one such player, fears that the NGC model does not cater to small businesses. Kirk La Borde, Offshore Installations Manager of Mora Oil Ven- tures Ltd., says, “For smaller producers, we need to foster a better working relationship with the NGC … they do not seem to take smaller operators seriously given the relatively small amounts of gas we purchase from them. As contribu- tors to the oil and gas industry of Trinidad and Tobago, we should be treated with the same respect as the multina- tional companies are.” A good deal of the country’s reservoirs fall under the radar of global majors; while BP and BG may find Trinidad to be of utmost importance to their network, juniors and smaller operators are finding opportunities in Trinidad and Tobago to be of the perfect risk and investment profile. These companies need to be encouraged and reassured that the industry can and will adjust to their presence as it be- comes more relevant.

Onshore Opportunities: Shifting Focus Recent years have seen proven reserves depleting in the face of no new exploration. While the government prepares to announce the results of the latest successful (and over- subscribed) deepwater bid round and gears up for several further editions in 2013, little attention has been paid to the potential of Trinidad’s existing onshore fields. With an onshore bid round slated to take place early next year, the country need not wait until lengthy offshore exploration is carried out to see a resurgence in its production numbers; a spate of smaller players have had their eyes on opportuni- ties provided by the state oil company’s lease operatorship and farm-out programs in the onshore space. Petrotrin believes that only 20% of the estimated 1.5 billion barrels initially in place on shore have been recov- T-14 January 2013 - OilandGasInvestor.com Neil Ritson, CEO, Leni Gas & Oil plc ered in Trinidad’s 104-year produc- tion history. Granted an automatic stake in all exploration and produc- tion licenses issued in the country, the company has taken a renewed interest along with the Ministry to increase the current onshore produc- tion of just under 14,000 bopd. Since 2005, Petrotrin has been granting li- censes to private operators to perform workover activities on idle wells. By the end of the 2005 fiscal year alone, 19.1 million barrels of oil were pro- duced from these programs. With the market dominated by global players such as BP, BG, and EOG Resources, junior operators from across the globe are beginning to realize the underex- Typical well (GY-200) on the Goudron Field plored niche market that awaits them. The program allows for companies to revitalize the significant onshore not be forgotten in Trinidad and techniques to maximize production. acreage under Petrotrin’s jurisdic- Tobago’s reinvention. The continued use of EOR in rejuve- tion that it could not exploit on its Wilson Lalla, key architect of the nating the country’s mature oilfields own. Dwight Mahabir, Chairman of Ministry of Energy and Energy Affairs will also result in increased produc- onshore producer-turned-contrac- (MEEA) for the upcoming onshore tion almost immediately. tor Damus Oil Ltd., says, “Onshore bid round, points out that, even with Leni Gas & Oil plc, an AIM-list- programs are critical for both employ- a successful deepwater bid round, it ed junior with assets in Spain, has ment reasons and for putting idle may be five to seven years before new just sold its operations in the Gulf assets to work. The refinery pro- and existing players move from ex- of Mexico as a part of its strategy to cesses about 160,000 bopd, of ploration, through development and bring increased focus to Trinidad and which only 55-60,000 are locally into production. “The need to take Tobago. In addition to the company’s sourced, because the refinery can- initiatives to arrest the decline and 1,900-acre Icacos Oilfield on the Ce- not produce the very light oils from increase production is extremely im- dros Peninsula, Leni has just acquired the east coast. Therefore, it has also portant,” says Lalla. “This is precisely the underexplored Gourdon Oilfield been very important to reduce the why we are promoting the onshore in the island’s southeast, which has costs of import.” While Damus Oil bid round; it can have an immediate an estimated production potential Ltd. found the opportunities as- effect on production numbers. Being in the range of 1,000 to 4,000 bopd. sociated with onshore acreage to onshore and in the middle of produc- Neil Ritson, Leni’s CEO, sees the be numerous, it also found the as- tion country, both the risk and the mix of already-producing wells and sociated risks to be unsuitable for timeline for seeing results are signifi- unexplored territory as a golden op- the company and gave up its posi- cantly lowered.” portunity for publicly-listed, inde- tion as one of the key lease opera- Trinidad and Tobago has, for pendent oil companies such as Leni, tors. The importance and viability of much of its history, employed vari- Range Resources and Trinity (with the program for other operators must ous Enhanced Oil Recovery (EOR) its newly-acquired Bayfield assets) to January 2013 - OilandGasInvestor.com T-15 experience some healthy competition. governing the industry are at the top Although these assets are situated in of the list. the middle of proven and producing The country has gone through fields, increased attention to deep- a series of production sharing con- water exploration and production tracts (PSCs) which govern the rela- has left onshore infrastructure to fall tionship and tax structure between behind. Insufficient rigs and service the government and the industry. providers are a persistent impediment Since the 1970s, the PSC has un- to companies looking to ramp up their dergone several reincarnations and onshore assets quickly. adjustments; the 1996 model was the Range Resources, a junior explo- most successful and Trinidad saw ration and production company dou- some of its best performance years ble listed on AIM and the ASX, has Walter Cukavac, Country Manager for ensue as a result. In 2006, the gov- adopted a similar tactic to Leni Gas & Trinidad and Tobago, Range Resources ernment of former Prime Minister Oil in making Trinidad and Tobago Patrick Manning’s revisited the PSC the center of its operations. Walter argues that 90% of the oil recovered and created a new model which intro- Cukavac, Range’s Country Manager to date in Trinidad and Tobago is pri- duced less favourable terms for cost for Trinidad and Tobago, says, “Trin- mary oil. “As much as 4 billion of the recovery. This slowed down interest idad and Tobago provided an interest- 12 billion barrels of oil remaining in in exploring Trinidad and Tobago’s ing option for Range mainly because the ground is economically recover- field any further, and subsequent bid there are different levels of projects able at today’s oil prices using carbon rounds were largely unsuccessful as a with different levels of associated risk. dioxide as the EOR mechanism,” says result. Under Minister Kevin Ram- Instead of simply offering exploration Dr Persad. With 210,000 acres spread […] Trinidad offered turnkey oppor- across two blocks just below the Her- narine, this structure has been revis- tunities that had existing production rera Field, 500 million barrels lie un- ited and a new PSC has been put into and infrastructure.” touched in a low-risk setting ideal for place taking into account the short- Cukavac and Leni’s Ritson both more junior companies to occupy. comings of previous models. The lat- agree that the country’s onshore fields est bid round was oversubscribed for provide investors with an attractive Doing Business: five of the six blocks included, draw- mix of opportunities from across the ing attention from such varied parts value chain. The exploration required Reinventing The Fiscal of the world as Israel, Azerbaijan, onshore would also mean several years Regime and China. A series of bid rounds is before production can begin but, as Trinidad and Tobago ranks 69th scheduled for 2013 aimed at encour- Cukavac points out, the capital flow in the World Bank’s “Ease of aging further exploration and given from wells that are already producing Doing Business” survey, making it an the continued interest being shown, would eliminate any downtime—in- extremely uncompetitive jurisdiction indicators point towards the fiscal re- deed a luxury in the exploration phase in which to operate for oil and gas gime being on its way to recovery. of this industry. companies. While its attractiveness as Ernst & Young’s Gregory Han- a resource-rich destination has kept Geologically speaking, the on- nays believes that the face of the in- the industry afloat until now, increas- shore possibilities by and large run dustry would have been quite differ- ing capital and equipment mobility along the same trends that feed ent were it not for the hiccup caused Trinidad’s massive offshore wells. mean that investors and operators by the 2006 PSC revision. “The mo- One of Range’s two main controlling have sig­nificantly wider footprints. mentum which Trinidad and Tobago areas falls along a series of anticlines Companies can afford to be much had from contracts signed between on the Southern Range just off the more fickle in their decision making 1996 and 2006 should have continued island’s south coast. A geologist by and with significant oil and natural profession, Cukavac says, “there gas finds in several locations around quite nicely to keep our replacement are over 200 oil seeps along the the world, Trinidad and Tobago ratios high,” says Hannays. “The Southern Range anticline, […] and can no longer rely on its convenient activity that is taking place today many of the structures have never ac- location and relatively cheap sup- with the current bid rounds is really tually been drilled onshore, so there ply. In order to remain competitive, a natural progression of the run that are tremendous opportunities that it is imperative that the government Trinidad and Tobago had between have smaller reservoirs of 5 to 10 mil- re-examine the fiscal regime that 1996 and 2006.” lion barrels.” governs the oil and gas indus- Given the rising costs associated Both the government and the in- try to ensure that current opera- with the various parts of the industry dustry would do well to keep in mind tors remain interested and poten- value chain, Trinidad and Tobago will the role that EOR can play in boost- tial players are attracted to the have to reconsider government take in ing the sector through other means. market. As Minister Ramnarine profits to ensure a more balanced and Dr Krishna Persad, one of Trinidad stated, reinvention of the industry reasonable environment for incoming and Tobago’s most senior geologists, is his main goal, and the financials and existing operators. T-16 January 2013 - OilandGasInvestor.com TRINIDAD AND TOBAGO’s OIL & GAS INDUSTRY Rikhi Rampersad, Partner, Deloitte Speaks to GBR about the steps Trinidad and Tobago must take to continue attracting foreign direct investment.

Deloitte is the youngest of the ‘big four’ in Trinidad and Tobago; what was the impetus behind entering the market? Deloitte Trinidad began operating in early 2009 and has grown from a firm of four partners and 35 staff to six partners and nearly 100 staff. Deloitte Canada has just ac- quired a geological consultancy firm called AJM Petroleum Consultants, which they have rebranded as AJM Deloitte. We are looking at establishing a branch in Trinidad and Tobago to service the Caribbean cluster as well as South America. Although we are the youngest of the ‘big four,’ we have seen tremendous growth and remain confident in our growth potential here. Deloitte Trinidad is currently not seen as a player in the oil and gas consulting or advi- sory space, but we are hopeful that we will be able to carve out a niche for ourselves with the establishment of AJM Deloitte here.

How do you find the operating environment for companies in Trinidad and Tobago? The operating environment in Trinidad and Tobago is definitely an issue. We ranked quite poorly in the World Bank’s ‘Ease of Doing Business’ survey and need to fix that. The corruption perception needs to be corrected and a change in cultural mindset needs to occur to invite re- newed investment in the country. Photo courtesy of Range Resources

What needs to be done to improve Trinidad and Tobago’s familiar with. As a result, many of the smaller players that ranking in the World Bank’s ‘Ease of Doing Business’ sur- could propel the country and sector forward have a difficult vey? time breaking into this circle. The entire mindset needs to One of the biggest stumbling blocks for doing business change and become more open before local banks would be here is the lack of automation and computerization; far too willing to support the industry. Once that happens, local much paperwork still has to be completed on actual paper investment may surpass FDI. instead of digitally. The public sector as a whole needs a boost in its training and work ethic. Before we can push Where do you hope to see the firm in a few years’ time and local content laws on foreign companies, we need to en- how indicative would this be of the industry’s potential? sure that our local content undergoes a transformation that We are placing a strong focus on getting AJM Deloitte es- makes it competitive on a more global scale. We do have a tablished in the country, which will improve our perception very skilled workforce in the energy sector, but poor invest- in the oil and gas industry while adding to our staff and ment has slowed down the development of Trinidad and capabilities. Energy should become our number one prior- Tobago into a first world country. ity in the next year and we hope to expand our team to in- clude senior geologists and reservoir engineers. Essentially, It is a common complaint in the sector that access to fi- we are working on driving our energy practice forward. nance is very difficult to come by locally. Foreign Direct This outlook is indicative of our thoughts on the indus- Investment (FDI) accounts for a great deal of financing in try’s potential; there are some hurdles to its development the energy sector because, despite being liquid, banks are and these do need to be overcome, but we are confident not willing to support the industry. Why is that? that this will happen. The government has been working Trinidad and Tobago is a very closed society that functions towards improving the framework surrounding the energy in large part on relationships. Banks are not willing to pro- sector for the past two years and we believe that this will vide reasonable rates to projects and people they are not become more apparent in the coming year. January 2013 - OilandGasInvestor.com T-17 TRINIDAD AND TOBAGO’s OIL & GAS INDUSTRY Reinvention: On The Global Stage No longer able to rely on consistent demand from the U.S, Trinidad and Tobago is looking to diversify its trading and business partners.

hile individuals from Trin- CEO of Perfection Services Ltd., upgrade the accommodations on idad and Tobago are well- believes that several factors are in their rigs. W known globally, the Trini- place for Trinidad and Tobago’s en- dad and Tobago ‘name’ has a much ergy sector to maintain interest both Shifting Sands: Casting The weaker recognition than Canada, the at home and abroad. “More so than LNG Export Net Wider U.S., the United Kingdom or any of the competitiveness, or lack thereof, Necessity may, as the old English the world’s other established produc- the problem is not grasping the op- proverb suggests, be the mother of ers. Of the spate of service and support portunities when they present them- all invention, but shale gas finds companies—and even producers— selves … things are lining up for Trin- in the U.S. may prove to be the present on the island, remarkably few idad and Tobago to establish itself as unlikely mother of reinvention if have a footprint that spreads beyond a leader and hub in the Caribbean Trinidad and Tobago is to learn from the Caribbean. As global economic oil and gas industry; we just need to recent developments in North Ameri- headwinds begin to change, Trinidad be sure to take advantage of this,” can gas markets. Only three years and Tobago’s traditional advantages says Roberts. ago, approximately 75% of the coun- might be diminishing in importance, Perfection Services Ltd. pro- try’s LNG exports went to the U.S. but the country still has several of vides offshore container accommo- This has plunged to less than 20% them at its disposal that it can—and dation units for most of Trinidad in 2012. Minister Ramnarine has should—develop in order to main- and Tobago’s major operators and even suggested that American im- tain its industry and expand its rec- has seen an increase in business ports of Trinidadian LNG could fall ognition abroad. Desmond Roberts, during maintenance season as clients to zero in the coming years. Ernst

T-18 January 2013 - OilandGasInvestor.com and Young’s Gregory Hannays says, “the hallmarks of the energy sector here—cheap gas and proxim- ity to key markets—are no longer advantages found only in Trini- dad and Tobago. As a result, it is absolutely vital that the industry reinvent itself.” The potential remaining for the country’s assets even after more than 100 years of production is remarkable, and must not be overlooked. An esti- Roger Packer, President of the Energy mated 1 billion barrels of oil remain Chamber and Managing Director of Nigel Darlow, CEO, Atlantic LNG Tucker Energy Services onshore alone. Diversification is a key feature of indicating global demand to increase Point Lisas And The NGC: the country’s reinvention, and it has to 425 million tonnes in the next ten already begun casting its export net Models In High Demand years. “With the current global LNG wider to take into account shrink- Each successive Trinidadian govern- network, supply in reservoirs is not ing demand in the U.S. and growing ment has been accused of not fully being replaced by new finds; so not demand elsewhere. Research from understanding the previous one, only is demand increasing and shift- Australian bank Macquarie sug- leading to a series of disconnected ing, but we are seeing major changes gests that LNG trading will rise by policies and regimes that have ham- in the markets from which the supply over four % per year between now and pered the development of the coun- originates.” Despite the gas shortfall 2020. Trinidad and Tobago already try’s energy sector. If there are two that Trinidad and Tobago has expe- exports 15 % of its gas to Asia, and projects, however, that are models of rienced recently, once most upstream continued growth across the region government and policy success, they players complete their integrity pro- means that markets such as Korea are the Point Lisas Industrial Estate grams, the outlook for the country is and Japan will provide the majority and the NGC. From contentious be- of this increased demand for the fore- bright,” says Darlow. ginnings, Point Lisas has been the seeable future. Demanding far higher While markets in the Far East fundamental driving force in pushing LNG prices than the US, where do hold enormous potential, Trini- the Caribbean island to becoming the shale gas discoveries have slashed dad and Tobago’s location holds world’s leading producer and exporter prices in half on the Henry Hub several advantages in its proximity of methanol and ammonia, allowing index over the past four years, to South American markets as well; Trinidad to export value-added pet- Asian markets will come to ab- Minister Ramnarine sees Trinidad rochemical production rather than sorb a substantial shore of Trinidad and Tobago as the Atlantic Basin’s raw commodities. In tandem with the and Tobago’s gas at higher prices, “LNG pioneer.” Talks are under- estate, the NGC has been key in en- and the widening of the Panama Ca- way to develop an LNG-export net- suring that the country’s gas has been nal will only serve to facilitate this work within the Caribbean, both successfully captured, distributed avenue of great opportunity. Nigel through a pipeline to Barbados and in and monetized in a centralized and Darlow, CEO of Atlantic—opera- medium-sized tankers shipping CNG efficient manner. tor of one of the world’s largest LNG throughout the region. Roland Fish- The MEEA and Energy Chamber trains—suggests that both his com- er, CEO of Gasfin says, “We have have engaged in a number of trade pany’s and their client’s diversifica- been besieged by people in the region missions recently to discuss the de- tion to further markets has poised wanting a small-scale LNG receiv- mand for these two models in a vari- the industry to remain strong in ing service.” Gasfin, a Luxembourg- ety of markets. Desmond Roberts of coming years. registered company specializing in Perfection Services Ltd. says, “The Roger Packer, President of mid-scale LNG infrastructure, has vein coming in from West Africa to the Energy Chamber and Manag- also identified Trinidad and Toba- French Guyana and con- ing Director of Tucker Energy Ser- go as a potential supplier to nearby tinues into our waters and looks to vices, agrees with this outlook. “We Caribbean islands. While Ameri- provide some promising finds.” Fol- have been able to change and move can shale gas finds have thrown the lowing this vein to its origins, West our shipments into different areas traditional structure of Trinidad’s African markets have been develop- of the world. If you look at where gas markets into question, Minis- ing their own vibrant energy sectors our LNG shipments are going today, ter Ramnarine believes that gas will and have been looking westwards for it will show you how we have really replace oil as the fuel of the 21st help in setting up efficient models to changed direction and been able to century, creating a reinvented and drive their economies. take advantage of better-priced mar- diversified—but not diminished— Yara Tringen, Trinidad and To- kets,” says Packer. Atlantic’s Darlow space for Trinidad and Tobago on the bago’s largest producer of ammonia also points to further key research global gas stage. has been in existence since before the January 2013 - OilandGasInvestor.com T-19 Any Service. Any Industry. Any Time.

The Point Lisas Estate in Couva has been a major engine of Trinidad's growth since its establishment in 1976

Point Lisas estate was created. Yara’s President, Richard de la Bastide, says “there are several advantages to the Point Lisas Industrial Estate beyond just concentrating several The right people, technology and companies in one geographical area. Local contractors have been able to develop and gain experience from a variety of experience to keep your plants companies involved in one wider industry.” The synergy online and in production that Point Lisas has encouraged has allowed for a more in depth development of Trinidad and Tobago’s downstream sector while providing substantial employment in the area around Couva, where the estate is based. “By creating an Team Services industry-focused estate, a number of job opportunities NDE/NDT Inspection Field Machining were created which may not have arisen in a more diluted setting,” remarks de la Bastide, speaking to what might be Advanced Inspection Technical Bolting one of Point Lisas’ greatest strengths. Today, the NGC has an asset base of over US$4 bil- Field Heat Treating Valve Repair lion, making it one of the Caribbean’s most lucrative Leak Repair Valve Insertion enterprises. This model, along with the industrial es- tate setup to create a domestic value chain, is more or Emissions Control Turnarounds/Outages less a pioneering effort by the Trinidadian government and has seen remarkable success. Emerging oil and gas Hot Taps, Line Stops Water and Wastewater economies in West Africa and beyond would benefit im- mensely from this shared knowledge. Both companies Isolation Test Plugs have, hand in hand, allowed for Trinidadian business to flourish through the thorough utilization and processing of the country’s resources.

Production, Service And Support: South Trunk Rd. La Romaine Expanding The Value Chain & Taking Trinidad, W.I. It Abroad +1-868-652-4565 As lucrative and successful as the industrial estate and teamindustrialservices.com NGC models would be abroad, so would any number of Trinidadian companies that constitute the country’s en- ergy sector. In fact, in the face of a general downturn in activity across the industry, service companies have fared exceptionally well as ongoing integrity works at home have pushed companies to opportunities abroad. Edsel Lee, Re- gional Manager for Team Industrial Services, says “even with the downturn in production, we have not seen a T-20 January 2013 - OilandGasInvestor.com “This is where much of the opportunity for other Trinidadian companies lies; in identifying their strengths and niches where they would be needed. The opportunities are numerous.” –Roger Packer

Lee’s supervision from Trinidad and tifies completions, wire line logging Tobago. The diversification of ser- tools, sand control and, in particu- vice companies in Trinidad and To- lar, cementing as areas in which the bago—both in terms of their offerings company has managed to bring a and their locations—is demonstrative particular ‘Trinidadian operational of a business acumen aimed at ensur- model’ overseas. “We have succeeded ing that the service sector remains in entering niche markets where our strong regardless of domestic eco- strengths—such as cementing—are nomic conditions. in high demand,” says Packer. “This Tucker Energy Services Limited, is where much of the opportunity for one of the oldest companies in the other Trinidadian companies lies; in lapse in service work. As a matter of country’s industry, is also one of its identifying their strengths and niches fact, service companies have seen in- biggest success stories of a Trini- where they would be needed. The op- creased performance in recent years, dadian company operating abroad. portunities are numerous.” with Team marking record years for Tucker’s Packer believes that local Douglas Boyce, COO of marine each of the past four years.” Team’s partners are one of the most impor- support services company Hull Sup- success has lead its U.S.-based head tant aspects of taking a company port Services Limited, believes that office to place the management of abroad into new markets. In discuss- Trinidadian companies will have an the company’s Angola branch under ing Tucker’s strengths, Packer iden- advantage over their European coun-

January 2013 - OilandGasInvestor.com T-21 the island nation’s industry alone fied repair center for helicopters from provides a wealth of opportunity. throughout the region as well. Joshey The Kenson School of Production Mahabir, the company’s Managing Technology (KSPT) was founded by Director, says “in the past two years, Chairman Kenneth Ferguson to fill we have seen an increase in the explo- a gap in education geared towards ration and drilling activity in Trinidad the energy sector, and has success- and Tobago’s waters, mainly on the fully identified yet another niche for northeast coast of the country.” Be- expansion abroad. In the late 1990s, ing one of two helicopter operators on when Ferguson founded the school, the island, NHSL’s growth is reflec- he says “most petroleum companies tive not only of the company’s suc- were having great difficulty in sourc- cesses, but of the industries projected Kenneth Ferguson, President, The ing locally skilled and experienced performance. “Due to the amount Kenson Group of Companies nationals to work offshore.” Fergu- of clients we have already gained as son built KSPT around the model of a result of this interest,” continues terparts in West African markets. placing students directly from colleges Mahabir, “our two current check-in “A mentality of favorable south- and technical schools with multi- locations have outgrown the size of to-south relations … stems from a nationals operating offshore. This our operations.” NHSL’s heliport and similar history or even a similar soul on-the-job training has been increas- repair center will make air transport between West Africa and the Carib- ingly popular locally, with most op- across the island’s onshore fields and bean,” says Boyce. Hull Support Ser- erators having ties to KSPT directly to its offshore rigs more efficient and vices is looking to brand themselves or indirectly. Kenson’s management comprehensive. NHSL has identified as a Trinidadian company abroad by has been exploring opportunities in and is already working on expanding creating strategic partnerships with West Africa and Tanzania to export its presence in the region, beginning companies in foreign markets, simi- both their technical and educational with Guyana and Suriname. If the lar to the partnership they are offer- services to the region. KSPT has al- government can embody a similar at- ing to foreign companies wishing to ready seen a round of students from titude to ensuring the country’s road enter their home market. The strong Uganda who will be returning to their network is expanded, the industry will currents where the Caribbean sea country to join the industry, thus truly be prepared for the growth it is meets the Atlantic ocean means that creating a network of qualified set to experience. subsea service companies originating individuals to continue sharing Entering the Trinidadian market from Trinidad and Tobago have the knowledge locally. can prove to be somewhat of a chal- added experience of working in par- National Helicopter Services lenge for new companies, as indicated ticularly complex conditions, which Limited (NHSL), a formerly govern- by Trinidad and Tobago’s low ranking serves them well in applying that ex- ment-owned transportation logistics in the World Bank’s Ease of Doing pertise overseas. company, will begin construction Business Survey. In this context, com- In the small space that Trinidad of a new, comprehensive heliport panies like JSL International have also and Tobago occupies, the number at its current site in Couva in 2013. been successful in establishing a one- of niche services required to support The company plans to add a certi- stop-shop solution to provide advisory

T-22 January 2013 - OilandGasInvestor.com and practical services to newcomers. Naturally, the lag between initial Javid Ramcharitar, JSL’s Managing “Our liquidity situation exploration, drilling and actual pro- Director, says “a well-prepared entry is very decent and with duction is a significant risk for small- strategy is essential, as is a key service er banks to get involved in. Jordan provider who will navigate a company the right circumstances, has identified service companies as through the often complicated set-up we have a great deal of the ideal investment, because their procedure; the current government money to lend.” capital expenditure for equipment lies has introduced incentives for oil and –Anthony Jordan within a more manageable range. Be- gas companies to set up in Trinidad sides the relatively easy availability of and Tobago, including a reduction in capital for E&P’s in North America petroleum taxes.” and Europe, there is a general lack of Ramcharitar hopes to take his technicalities and geographical im- understanding of the energy industry one-stop-shop model of helping com- pact of a project. It is only natural, from the perspective of the financial panies establish operations abroad; then, for the finance and energy institutions. Joel Pemberton, CEO of he has already seen success region- sectors to experience significant over- Trinidadian-owned Trinity Explora- ally and believes that the experience laps. Trinidad and Tobago, however, tion and Production, is attempting provided by Trinidad and Tobago’s breaks the mold for this overlap and to mend this gap. “Providing loans to industry will be particularly useful in the lack of any real relationship be- the oil and gas industry can be very other emerging markets. “From the tween the country’s energy sector and technical and local banks need to gas viewpoint,” he says, “Trinidad the remainder of its economy— build their internal expertise,” Pem- and Tobago has a skilled resource base finances included—is intriguing. berton says. “We are bringing the top that should be exported.” JSL main- As Anthony Jordan, Regional analysts from RBC London to Trini- tains a running database of qualified Corporate Manager of Repub- dad to host a session with local banks CVs for use both domestically and lic Bank, Trinidad’s largest, points on how to value oil and gas companies abroad, should the last-minute need out, “Our liquidity situation is and structure their finances”. arise. Given JSL’s success in establish- very decent and with the right Trinity is the country’s sev- ing companies within the country in circumstances, we have a great enth largest operator and the only recent years, there is no reason why deal of money to lend.” Jordan is not company operating onshore and on exporting Trinidad’s skilled resource the only figure to endorse the liquidity both coasts. With its name meant to base will not prove equally successful. of banks in Trinidad and Tobago, nor reflect its Trinidadian heritage, Trin- is he the only one to be both hope- ity is setting the example for what ful and skeptical about chances for successful reinvention will mean for Bridging A Disconnect: investing in the energy sector. “There Trinidad and Tobago, both at home Financing And The Energy certainly is potential in this area of and abroad. Taking the lead in re- Sector the financial sector, but for this to forming the financing of the oil and With capital being as globally happen … the government has to gas sector while promoting Trinidad- mobile as it is today, pitching to provide more incentives for banks to based investment abroad, Pemberton and securing investors is given as lend to the upstream exploration and hopes that Trinity is only the first of much importance as evaluating the production sector,” explains Jordan. many such companies that truly rep-

January 2013 - OilandGasInvestor.com T-23 Rikhi Rampersad, Managing Partner, Deloitte

Wain Iton, CEO, Trinidad and Tobago Stock Exchange (TTSE)

resent Trinidad and Tobago’s poten- tial in the oil and gas world. This financial disconnect is made all the more acute given the further complexities of such a small market. “Trinidad and To- bago is a very closed society that functions in a large part on relation- ships. Banks are not willing to pro- vide reasonable rates to projects and people they are not familiar with,” explains Rikhi Rampersad, Man- aging Partner at Deloitte’s Trini- dad and Tobago office, the most recent arrival of the Big Four to the island. Deloitte has just ac- quired geological consultancy firm AJM Petroleum Consultants, rebranding the partnership as AJM Deloitte. Rampersad intends to see 2013 bring the expansion of Deloitte’s offices in Port of Spain to include AJM Deloitte and a team of geologists dedi- cated to improving the company’s service offerings to the sector. “As a result, many of the smaller play- ers that could propel the country and sector forward have a difficult time breaking into this circle,” says Rampersad. In order for Trinidad and T-24 January 2013 - OilandGasInvestor.com Diver prepares to inspect a rig

Tobago’s local production and Beyond Expertise: service companies to develop, the Technology mindset in the local finance industry The technology available for moni- needs to change to help foster smaller toring activity at both onshore and business growth. offshore oil wells have developed This is a sentiment echoed by into extremely advanced systems Wain Iton, CEO of the Trinidad and as new terrains and geological Tobago Stock Exchange (TTSE). By challenges have been ecountered way of explaining the lack of compa- across the globe. Not to be left nies listed on the TTSE, Iton says, “It out, in addition to its highly is an entrenched business ethic for skilled people, Trinidad and smaller companies not to go public.” Tobago has made some con- Similar to Trinity, the TTSE is also tributions to the technologi- Anton Paul, Managing Director, working towards educating potential Hydrocarb TT investors to the benefits of listing on cal side of things as well. Gregory Trinidad’s admittedly stagnant stock Boyles, President of Houston-based ing drilling, the well will cease to exchange. Currently, Mora Oil Ven- New Horizon Exploration Ltd., produce oil, and that was the im- tures is the only oil company listed on came to Trinidad and Tobago with petus to develop our technology.” the secondary exchange. the goal of introducing a new The efficiency and cost-effectiveness Reinvention encompasses a technology to a market in of the Smart Pumper technology de- change in attitude, target markets which he saw opportunity. In veloped by Boyles and distributed by and competitiveness. At the same describing New Horizon’s arti- its sister company PetroCom prom- time, reinvention does require fund- ficial lift work in the southern ises to be popular amongst smaller ing. In order for the finance sector Parrylands block, Boyles says, companies such as New Horizon, to grow—and thus encourage greater “During the last ten years of drill- which often cannot afford the more economic diversification—and for lo- ing the horizontal wells and using expensive SCADA technologies to cal companies to spread the ‘Trinidad’ injectors, we found the reservoirs to monitor their wells. name across the globe, local banks will be very compartmentalized, and that Hydrocarb TT, a family- have to themselves invest in develop- the highly viscous, heavy crude, was owned lease operator and service ing teams dedicated to oil and gas re- very difficult to produce. If specific provider, has seen a similar demand search and risk capital finance. fluid levels are not maintained dur- in the arena of enhanced recovery January 2013 - OilandGasInvestor.com T-25 optimization. Hydrocarb TT recently stricter intellectual property rules in the greatest potential we have.” launched a tar-sands patent for order to protect local innovations. If companies like New Horizon, a similar technology that aids in He also sees technology as a way for PetroCom and Hydrocarb are able extracting oil from sand grains in Hydrocarb TT and other local to dedicate resources to research an economically viable manner, companies to compete on a global and development pursuits, they without producing any environmen- scale. “Gaining respect in the global will be setting yet another tal waste. Anton Paul, Hydrocarb arena by multinationals is an ongoing example of how Trinidad and TT‘s Managing Director, wishes challenge,” says Paul. “The develop- Tobago can focus on remaining to see Trinidad and Tobago pursue ment of these technologies shows a key player.

TRINIDAD AND TOBAGO’s OIL & GAS INDUSTRY Looking Forward A renaissance.

t the height of the down- energy sector. While comments Tobago is set to experience con- turn Trinidad and Tobago on the industry’s complacency tinued growth in the coming Ais currently experiencing, are not unfounded, there is every years, both domestically and over- when shale gas discoveries in the indication that both the government seas. Although the outlook for U.S. dominated headlines, there and key players are aware of the the sector is generally positive, was a sense of worry that the coun- need to reexamine the current it is important to maintain an edge try’s long-standing oil and gas structures and relationships that of caution when projecting Trinidad sector would not recover. This fear define Trinidad and Tobago’s and Tobago’s future. As with any has since dissipated and turned into energy sector. Being at the crossroads global industry, trends are not iso- a more cautious optimism for the that it is, even with its mature oil lated to any one market, even in an future of Trinidad and Tobago’s and gas sector, Trinidad and island economy.

T-26 January 2013 - OilandGasInvestor.com