Trinidad and Tobago Oil and Gas Report Q4 2012

BMI View: Times are tough for Trinidad & Tobago’s oil and gas industry, with 2011 oil output havingslumped, and US demand for the country’s gas exports on the slide. The government expects an upturn in2012 drilling activity and, with several new smaller international oil companies (IOCs) now involved aswell as a 2012 deepwater bidding round, there is some scope to slow the rate of decline in oil production.The main trends and developments we highlight in the Trinidad & Tobago (T&T) oil and gas sector are:

Upstream companies operating in T&T will invest US$3bn in oil and gas exploration activities over2012, Energy Minister Kevin Ramnarine said in February 2012. Some 15 exploration wells will bedrilled, mainly by Canada-based companies Parex Resources and Niko Resources and by BP, hesaid. Five drilling rigs are currently operating in the country, with six seismic programmes continuingor starting in 2012.

BP Trinidad and Tobago (BPTT) plans to spend US$1.1bn in 2012, which will include seismicsurveys of its existing acreage, its president said at an energy conference in T&T in February.

Bayfield Energy made a discovery in T&T’s Galeota block in March 2012. Preliminary estimatesextrapolated from the first well indicate that the area could hold 32mn bbl of recoverable oil, withpotential for production of greater than 1,000 barrels per day (b/d).

In April 2012, national oil company (NOC) Petrotrin confirmed that cluster six of the onshoreSouthwest Soldado field could hold at least 48mn bbl of both light and heavy varieties of oil.Petrotrin will embark on a forward drilling programme in 2013.

The 2012 deepwater licensing round, which was launched in April 2012, ended on September 4 2012after a month-long extension. Six offshore oil and gas blocks in north-eastern and eastern Trinidadwere put on offer. In order to increase interest, more seismic information on its deepwater acreageswere made available while it also increased cost recovery rate to 80% to make it more competitive.Results are expected to be announced in October 2012.

We estimate that crude oil and gas liquids production fell by almost 24% in 2011, largely due tomaintenance activity and unexpected field disruptions. There should be some recovery in 2012, butthe overall trend is one of falling output unless substantial investment can unlock new volumes. Weare forecasting supply of 132,380b/d in 2012, easing to 126,500b/d by 2016. Output could be nomore than 111,500b/d by 2021. Given demand is set to rise from an estimated 43,710b/d to 53,130b/dover the period, net exports by 2021 are set to be just 50,000b/d.

We have revised our forecast for T&T's gas production. We now expect the fall in output experiencedin 2011 to last through 2014, declining from an estimate of 40.0bcm in 2012 to 38.8bcm in 2014.This trend will reverse as the return of BPTT's capacity, together with new projects, pushesproduction back up. In 2016, production is forecast to have returned to 40.7bcm and will continue torise to 45.8bcm by the end of our forecast period in 2021.

In 2012, T&T’s oil and gas exports are set to yield US$13.2bn – falling towards US$8.25bn by 2021as oil export volumes are reduced and gas sales volumes remain fairly constant.At the time of writing we assume an OPEC basket oil price of US$107.05/bbl for 2012, falling toUS$99.10/bbl in 2013 and US$93.25/bbl in 2016. Global GDP in 2012 is forecast at 2.17%, reflecting afaltering recovery in the US and uncertainty with regard to the eurozone debt crisis. For 2013, growth isestimated at 2.46%.