Reformed SPT can make south Trinidad great again

FORMER Energy Ministry Kevin Ramnarine is calling on government to fix the Supplemental Petroleum Tax (SPT) to make “south Trinidad great again.”

Ramnarine said for years the industry has been lobbying government to “fix” the SPT which he said makes no sense. With the closure of Petrotrin and the slump in employment and oil production,he suggested government make SPT zero per cent for incremental crude oil produced above base production level for a period of three years.

“That is going to make south Trinidad great again. It is going to get all idle resources off the ground. There would be a lot of drilling. Every rig employs 100 people. You are going to have contractors engaged and you are going to have the economy in south pumping again.”

Addressing a breakfast meeting on The State of TT Energy Sector, Threats and Opportunities Ramnarine, on Friday, Ramnarine said the competitiveness of the local energy industry is under threat by the United States which is becoming the largest producer and exporter of LNG and its shale gas is making it cheaper to manufacture ammonia and methanol.

He said already the impact is being felt at the flagship state enterprise, the Point Lisas Industrial Estate..

Parallel to the threats, he said there are opportunities the country can take advantage of, including developing the port maritime sector to support the Guyana/Suriname basin as that country does not have deepwater ports. He said deepwater holds great potential for new natural gas production.

Ramnarine said there is also an opportunity “to do something better, commercially” with the Atlantic Trains 2 and 3 contracts which expires in 2022/23.

Focusing on the threat to Pt Lisas, Ramnarine said as the curtailment of natural gas supply adds to the landscape, plants at Point Lisas are not running at their full capacity.

“So, we are losing the shine from Pt Lisas.” He explained this is due to the fact that the 10 ammonia plants make up half of the industries on the estate.

“Because of the new contracts NGC signed with bpTT and EOG in 2017 and which have become effective in 2019, natural gas prices have increased by 20 to 30 per cent depending who you speak to.”

“With the decreasing price of ammonia, buying raw material is now more expensive and you are getting less money for output, so the profit margin for the ammonia plants are under tremendous pressure.”

He foresees NGC experiencing a negative cash flow in 2019.

“By the admission of the Energy Minister Franklin Khan, NGC is now buying gas at a more expensive rate and selling it to a portfolio of customers, some with legacy contracts at a cheaper rate. Compounded with low ammonia prices the NGC, financially, is under a lot of stress this year.”

Saying he read reports that NGC was not taking the all of the contracted gas from bpTT, he asked Khan to explain why.

In his presentation, Ramnarine also forecasted that TT will find it difficult to return to peak natural gas production of 2010.

However, he pointed out that the country still has a future in natural gas but cautioned there is a catch as it involves deepwater drilling which is very expensive.

He said BHP Billiton, which was granted deepwater exploration licences between 2012 and 2014, is sitting on between 10 to 11 tcf of gas in the northern catchment of blocks which includes the Bongos-2 offshore area but the challenge is to make the discovery “economically work.”

“If we can make that work, the country’s gas economy and the plant in Point Fortin (Atlantic LNG) would have life beyond 2025 and 2026.”

Addressing the “precipitous decline” of oil production, he said the last time it was so low, averaging below 60,000 bopd, “was when movies were in black and white.”

He attributed the decline in production to failure by Petrotrin, especially at Trinmar which did no drilling in the last three years.

He said the farm out and lease operators have been holding steady but there is need to increase production which can be restored with the reformation of the SPT.