With crude prices averaging around US$100 a barrel, T&T is unlikely to fully benefit because of continued declining production. On Monday last, the Central Bank presented its sustainability report for December 2011. During the presentation, both the Governor of the Central Bank Ewart Williams and his deputy Dr Shelton Nicholls, predicted further declines in crude production in 2012. Nicholls said: “While it is difficult to predict what crude prices will be like over the next year, it is fair to expect that production will continue to fall.” According to the Central Bank report, the decline in output from the energy sector was two-fold in that oil production was down due to maintenance challenges that affected condensate production, while, at the same time, natural gas production was down affecting the downstream manufacturers. The combined effect was a negative impact on the economy last year.

 

The report read: “Output in the energy sector slipped in the context of heightened maintenance operations and maturing oil fields.” Energy Minister Kevin Ramnarine has insisted that his mission is to increase domestic crude production. He has consistently said that Petrotrin holds the key to increase crude production and that the state-owned company had plans in place. He has set an initial target of increasing domestic production to more than 120,000 barrels of oil a day. Ramnarine said that while Petrotrin remains the key to increasing crude production, Bayfield Energy is likely to play an important role. Governor Williams told the Business Guardian: “The decline in crude production has been happening for a number of years now. That is our problem. We are faced with ageing fields and, as a result, we expect for 2012 production will continue to decline.” On Tuesday, energy consultant Anthony Paul told the Business Guardian that additional fiscal incentives is not the answer for increased crude production unless it is tied to concrete measures for increase production.

 

Paul said T&T has in the past given away its patrimony by giving fiscal incentives to companies and all they do it take profit. “Our biggest challenge is crude production. We have in the past given fiscal incentives, but we have not said if we give you this fiscal incentives, then you have to drill these number of wells or do this number of workovers. So unless you tie the incentives to concrete action, then all you will have on the part of the companies will be profit taking. He said too often, T&T has a knee-jerk reaction and rather than looking at the exploration potential of the acreage. T&T gets suckered into old arguments of fiscal incentives. Paul said it was also necessary to look at increasing production and efficiency in the wider energy sector if T&T is to get the kind of returns from the energy sector. He also agreed that crude prices were likely to continue strong for the rest of the fiscal year and that government’s 2012 budget price of US$75 a barrel was likely to hold true.

 

“While there has been a decrease in demand, particularly in the developed economies, there is still strong demand for energy in China and India, and I think that the prices will in the next nine months remain fairly strong. So the US$75 on which the Finance Minister has based his projections is likely to hold, even if you factor in T&T earning less money per barrel of oil because of the quality of the crude.”

Thursday, January 26, 2012