Ramnarine optimistic about the future of Trinidad and Tobago
Trinidad and Tobago’s energy minister, Kevin Ramnarine, is revitalising his country’s gas sector. Anthea Pitt interviewed him in Port of Spain
Much rests on Kevin Ramnarine’s broad shoulders. Trinidad and Tobago’s energy minister, who has held the portfolio since mid-2011, is responsible for the Caribbean nation’s most important industry.
The responsibility is huge. Energy is the key driver of Trinidad and Tobago’s economy, accounting for almost half of the country’s GDP of $28 billion. In comparison, tourism - dominant elsewhere in the Caribbean - contributed just 1%.
Ramnarine has not had the easiest job. The shifts in the global industry over the past five years or so have proved challenging, at best. The emergence of the US shale sector has altered the industry’s dynamics, worrying even Saudi Arabia and Russia. But an issue that concerns a heavyweight can have greater ramifications for a smaller producer.
When Ramnarine was elevated to the front bench (he was appointed a junior energy minister by prime minister Kamla Persad-Bissessar in 2010), Trinidad and Tobago’s energy sector was stalling. The country’s reserves base was slowly declining; inward investment and exploration activity were sluggish. The country’s gas-based energy sector was troubled. Once almost 90% of its liquefied natural gas (LNG) output was exported to the US, but as shale gas production rose, demand for Trinidadian exports declined sharply. On top of this, operational difficulties often choked domestic gas supply.
Today, the prospects for Trinidad and Tobago’s energy industry are more promising. While the US still takes a large proportion of Trinidad’s LNG, it is no longer the country’s single major customer. Trinidad’s global customer base has expanded, with cargoes reaching buyers in lucrative Asian markets, as well as Latin America and Europe. With this diversification, Trinidad has started to mitigate against earlier structural vulnerabilities in its gas export chain.
Trinidad has made moves to tempt inward investment, too. The country’s fiscal regime has been substantially revised, attracting new entrants – and fresh funding – to the energy industry. Several licensing rounds, including a frontier deep-water tender opening up a new offshore frontier, have spurred plans for extensive seismic and drilling campaigns.
There is new momentum in infrastructure, too. The first phase of development of the port at Galeota, which will provide logistical and operational support for exploration and production in the eastern offshore, is complete. A second phase of development will start soon.
As oil prices fall, it is possible that gasfields straddling the country’s maritime border with Venezuela - notably the 10 trillion cubic feet Loran-Manatee field - could at last be developed. An agreement here would be a boon, delivering a crucial medium-term bump in output and extra reserves while initial exploration of the newly opened deep water gets under way.
For all this, Ramnarine appears under no illusion that much remains to be done, although he is visibly proud of all his ministry has achieved in such a short time. “We’ve made it easier to do business in Trinidad,” he tells Petroleum Economist>. “In the past four years, we’ve laid the platform for the industry to take off in the next decade. “The energy ministry has 30 active production sharing contracts (PSCs). Fourteen of these have been signed in the past four years,” he says, adding that the ministry has also agreed six onshore licences in the same time. “That gives you an idea of the level of activity — that’s how [fast] we’ve moved.”
Improved fiscal terms have no doubt helped stoke this renewed interest, but Ramnarine stresses that Trinidad and Tobago also has other, less tangible, benefits. “Here, BP, BG Group, BHP Billiton, Repsol and their peers don’t face the threats they face elsewhere in the world. There’s not the political risk,” he says. “One of the things we’ve been able to do is give the industry certainty. We’ve categorically said there will be no increase in taxes.” Ramnarine adds: “I think the industry is very pleased with the body language coming out of the government. The way [companies] interact with the government is very important. We see them more as partners.”
This approach applies not just to big international players, but to smaller companies. While the offshore upstream play has attracted big international players, smaller companies -- Trinity Exploration & Production, Range Resources and Touchstone Exploration -- have established themselves in the country’s onshore, with a particular focus on the oil potential of the Deep Herrera formation in Trinidad’s south.
Rekindling interest in the country’s upstream is one thing, but even if — as Ramnarine believes — there are significant reserves waiting to be found, development will take time. Trinidad and Tobago needs to maintain and increase gas production immediately.“We want the four Atlantic LNG trains, the methanol and ammonia businesses to continue,” Ramnarine says. “To grow these, we need more gas. Right now, we have some shortages of natural gas. What we need is big discoveries or cross-border gas [with Venezuela]. “It’s an opportune time to reignite the cross-border gas discussion,” he says. “Oil prices are falling, it’s a good time to re-engage the Venezuelans. Oil is no longer as valuable as it used to be. This resource is sitting in shallow water. It won’t cost a lot to develop and it’s very close to our infrastructure.”
Trinidad also needs a strategy to ensure it strikes the right balance between rising domestic demand and its current and future export commitments. Working with Poten & Partners, a consultancy, the ministry has started developing a 2014-24 Natural Gas Master Plan (NGMP). “Right now, 55% of our natural gas is exported, while 45% stays at home,” Ramnarine says. “They both create value, but what is the best scenario for the country? Should we export more? Should we export less? Do we build more ammonia and methanol plants? It’s a balance, and to me it’s a balance between jobs, revenue and indirect economic activity. That’s one of the big issues we are looking for guidance on.”
The NGMP will be presented to Ramnarine in May 2015, shortly before the country’s next general election. While he acknowledges there is a danger that the NGMP “could get lost in the politics”, he believes the plan will help direct the industry’s course, regardless of the election result. “Fundamentally, over the past 40 years, we have had discipline in energy policy. We’ve [striven] to get the best value for our gas. Whoever’s in government will have the NGMP as a tool. It is another element we have put in place for future of the energy sector’s future.”
He adds: “Demand for gas is growing faster than demand for coal and oil. There will be a need for more gas in the world. Trinidad will always have a place in that world.”