Trinidad and Tobago Hydrocarbon Development Process-
OLADE First Latin American and Caribbean Oil and Gas Workshop, Quito
Penelope Bradshaw-NilesJuly 13, 2011
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Trinidad and Tobago- Overview of Energy Sector
• Country Hydrocarbon Objectives
• Petroleum Legislative Framework
• Bid Round Procedures
Contents
2
Trinidad and Tobago Strategic LocationTrinidad and Tobago Strategic Location
Population - 1.3M
Labor Force - 0.5M
Literacy Rate - 88% LOCATION
Northeast of VenezuelaSouthernmost of Caribbean Total Area – 1,820 sq. miles
Latitude 10 1/2°N, Longitude 61 1/2° W
Overview of Energy SectorOverview of Energy Sector
1974 First PSC
1996 Model PSC1998 Deep Water Blocks
• 1867 First Well Drilled
• 1908 Commercial Oil Production
•1954 First Offshore Well
•1969 East Coast Discovery
Petroleum Industry - Highlights
The Energy Sector:
• 3% of global energy business
• Energy sector employment - 6%
Trinidad & Tobago’s Oil and Gas Fields
Gulf ofParia
Point Fortin-Atlantic LNG Plant
GRANDERAVINE
SOLDADOFIELDS
PALOSECO
VENEZUELA
Caribbean Sea
Mejillones/Patao
Dragón
CHACONIA
BRIGHTONMARINE
Arima
PORT-OF-SPAIN
Cocorite
Frederick
BARRACKPORE/PENAL
FORESTRESERVE
HIBISCUS
PoinsettiaOrchid
Poinsettia-SW
Point Lisas
Longdenville
San Fernando
Phoenix Park
Pointe-a-Pierre
BEACH
GOUDRON
GaleotaPoint
Km
0 20 40
TRINIDAD
BALATA
MORA
POUI
Iris
TOBAGO
Angostura
TEAK
PELICAN
KISKADEE
OSPREY
KAPOK
CASSIA
IMMORTELLE
Starfish
Dolphin Deep
DOLPHIN
MAHOGANY
Manakin
Loran
Coralita
Cocuina
Atlantic Ocean
Tajali
T&T Gas Reserves(TCF)
1993(TCF)
1996(TCF)
2005(TCF)2009
Proved Reserves 8.2 12.3 18.8 14.4
Probable Reserves 4.6 3.7 9.0 7.8
Possible Reserves 1.1 2.0 7.1 5.9
Total 13.9 18.0 34.9 28.1
7
Identified Exploratory Resources 25.9 Tcf
**Based on Revised Audit by Ryder Scott Co. – January 1 2010
Historical Hydrocarbon Production
Country Objectives
9
Effective and optimal monetizing of the natural resourcesEffective and optimal monetizing of the natural resources
Security of country’s energy suppliesSecurity of country’s energy supplies
Protection and preservation of the environmentProtection and preservation of the environment
Establishment of research initiativeEstablishment of research initiative
Training and development of nationalsTraining and development of nationals
What does Trinidad Offer?
10
Substantial petroleum reserve baseSubstantial petroleum reserve base
Competitive gas pricing regimeCompetitive gas pricing regime
Equitable taxation systemEquitable taxation system
Strategically located in the Atlantic Basin with strong markets Strategically located in the Atlantic Basin with strong markets
close byclose by
Highly skilled labor forceHighly skilled labor force
Well developed land and harbor infrastructureWell developed land and harbor infrastructure
The Cabinet of The Cabinet of Government of the Republic of Trinidad and Tobago Government of the Republic of Trinidad and Tobago
Ministry of Energy & Energy Affairs
State Enterprises
Petrotrin
National Energy Corporation
Standing Committee on EnergyChairman: Prime Minister
National Gas Company
Government’s Decision-Making Model
Legislative Framework
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• The Petroleum Industry is governed principally by (i) the Petroleum Act (1969),and its amendments, the Regulations (1970) , and (ii) the Petroleum Taxes Act (1974).
• The Petroleum Act establishes a framework for the grant of licenses/contracts for the conduct of petroleum operations.
Petroleum Legislation
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• The Minister is responsible for determining areas to be made available for petroleum operations.
• He/She may elect to invite applications for the rights to explore and produce hydrocarbons
• Competitive Bidding Process is the preferred option:• The element of Competition• Transparency of process
– Policy has been in existence since 1987 and no change is contemplated
Legislative Framework
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
Legislative Framework
• The following type of licences/contracts may be issued by the Minister :
- An Exploration Licence grants a non-exclusive right to carry out petroleum operations
- An Exploration and Production Licence grants an exclusive right to explore for, produce and dispose of petroleum
- A Production Sharing Contract grants the contractor the right to conduct petroleum operations within the prescribed contract area.
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
Government’s Policy
• Pre 1995 – few PSCs
• Post 1995, the Government’s policy has been to issue Production Sharing Contracts for the conduct of Petroleum Exploration.
• This does not preclude the option of utilising the licensing regime
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
PSC Highlights
• Phased exploration period • 9 years for deep water• 6 years for shallow and average water depths
• Biddable minimum exploration programme. • Term of Contract
• 25 years for shallow • 30 years for deep water.
• Flexible relinquishment provisions tied to the phased exploration work programme.
• Exploration acreage can be retained
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
PSC Gas Provisions
• Attractive Gas Provisions– A prescribed natural gas market development
phase of up to five (5) years – seven (7) years deep water.
• Extension of the term of the contract,• subject to the execution of a gas sales contract for a period
which will allow for the supply of natural gas under the terms of the gas sales contract.
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Technical review of open acreage• Nomination process • Blocks to be offered chosen based on nominations and
T&T’s strategic interests.• Recommendations made to Cabinet on the areas to be
offered and the terms and conditions of the bid.There is a prequalification process for the right to be operator.
It can be done at any time and lasts three years
Competitive Bidding Process
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
TERM OF CONTRACT Shallow Water/Deep Water
1st Phase - seismic option – 2/3 years 1st Phase - seismic and exploration drilling - seismic and 1 well – 3/41/2 years - seismic and 2 wells – 4/6 years - seismic and 3 wells – 5 years
2nd Phase - exploration drilling
3rd Phase - exploration drillingDrilling of exploration wells is a requirement in the second and third phases of the exploration period.
Summary Tender Form for 2010 Bid Rounds (1)
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
MINIMUM WORK PROGRAMME WORK UNITS (US$1MN equivalent to one work unit)Geophysical SEISMIC 3D Seismic ____________ Other Geophysical ____________ Geological Studies Drilling:
Wells Depth _____________ SIGNATURE BONUS US$_____________
Summary Tender Form for 2010 Bid Round (2)
Crude OilCrude Oil
Price
MBOPD
A B C D
< $50.00
$50.00 -$75.00
$75.00 -$100.00 > $100.00
%
< 75 X X X X
75 - 100 X X X X
100 - 150 X X X X
150 – 200 X X X X
> 200 X X X X
Profit Share Matrices
Windfall Feature: BR + 70%*[(P – US$100.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price
Cost Recovery: 60%
Price
MMCFD
A B C D
< $4.00 $4.00 - $6.50
$6.50 -$9.00 > $9.00
% < 200 X X X X
200 - 350 X X X X350 - 500 X X X X500 - 750 X X X X
750 – 1,000 X X X X > 1,000 X X X X
Natural Gas
Windfall Feature: BR + 70%*[(P – US$9.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price
Example of Bid Evaluation Criteria
Geophysical 30pts Seismic 3D seismic 20ptsOther Geophysical 10pts2D seismic,Gravity, Magnetics etc
Geological Studies
Bidders are asked to provide details of named studies proposed and illustrate their value in contributing to improving the understanding of the petroleum system.
Drilling 70ptsWells - Depth
The work programme is totally self assessable
Each Element of the bid attracts a certain number of points
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO• Sharing of Production – 100pts
– Minister’s Share of Profit Oil- 50pts– Minister’s Share of Profit Gas - 50pts
• Signature Bonus (where applicable) – one point per million dollars (open ended)
• Currently being utilised as a tie breaker in the deep water
• All other bonuses contributions are no longer biddable
Bid Evaluation Criteria
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Evaluation of bids and announcement of results within a two months from the date of bid submission.
• There are two Cabinet appointed committees which perform the evaluations:– A Technical Evaluation Committee comprised of staff of the
Ministry of Energy, Finance and the Attorney General.
– An Overview Committee chaired by the Permanent Secretary, Ministry of Energy.
Bid Evaluation
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• The Overview Committee makes recommendations on the awardees to the Cabinet.
• Cabinet forwards the recommendations to the Standing Committee of Energy
• Committee makes recommendations to Cabinet
• Cabinet then acts on the recommendations of the SCE
Evaluation cont’d
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
Control– At the mercy of a dynamic/volatile global
environment
– To complete the process in the project time frame - 9 months
– Not in control of the entire process
Challenge
Results of the Last Two Bid Rounds
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
Shallow Water•Production Sharing Contracts signed with four companies
– NCMA 4 – Centrica– NCMA 2 – Niko/RWE DEA Ag– NCMA 3 – Voyager/Niko– Block 4(b) – Niko
Deep Water•Three blocks received bids
– 23 (a) – BP, Niko, BHP/Total/Repsol– 23(b) - BHPB/Repsol– Block TTDAA 14 - BP
Results
Upstream Activity
Niko/RWE
Centrica
Voyager/Niko
Niko
23(a)TTDAA 14
23(b)
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Mixed Experience - by and large successful– Depends on the global environment (price, supply-demand,
energy security)– Perceptions of prospectivity of the acreage
• Obligations contained in the CBO are varied to suit the operating environment (carried participation)– Fiscal incentives where necessary
• New fiscal regime for deep water enacted into legislation• Incentives built into the PSC
Trinidad and Tobago’s Experiences
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• 28 PSCs in various stages of their operations
• 20 (BP has 120 but will be counted as one) licences in various stages– Productive oil and Gas areas– Acquisition of Seismic– Drilling– Deep Water round undertaken and bids received
• Should have deep water drilling soon
• Shallow Water and Land acreage being almost exhausted
Achievements
Future Developments: Upstream
Blocks for nomination are coloured light
blue.
There are currently 36 deep water
blocks available.
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO• Current Focus is on Deep water
• Expected to climax in September, 2011 with the next Competitive Bid Round
• Shallow water and land acreage are not readily available
• The MOE will be reviewing all remaining acreage – Operators will not be encouraged to keep acreage
inactive
Investment Opportunities via Bid rounds
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO• Legislation allows for application to be made for State acreage
– This would involve blocks less than 100sqkm minimum size
– Where there is 1 interested party
– Company already has tenure and good exploration /exploitation record
Other Avenues for Access to State Acreage
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Ongoing Licence Negotiations for Blocks in the Western Offshore Gulf of Paria – Pt Ligoure/ Brighton Marine/Guapo, East Brighton
• Will result in new exploration work programmes• Seismic and wells
• Streamlining/optimisation of acreage– Impending Data Policy important part of this thrust
Other Activities
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO • Complete the entire bid process in 9months
• Offer more deep water acreage– Needs more technical work
• Vibrant industry focused on deep water exploration and production and the optimisation of production from shallow water and land areas
• Generation of business opportunities for all companies providing services to the industry and its spin-offs
Aspirations and Way Forward
Thank you
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Petroleum Profits Tax reduced from 50% to 35%
• Uplift of 40% on capex for exploration drilling• SPT of 18% up to US$90, >US$90 – 0.2% for
every dollar increase• Royalty
Legislation
THE GOVERNMENT OFTHE REPUBLIC OF
TRINIDAD AND TOBAGO
• Profit Share matrices opened
• Price and Production Bands widened
• Windfall profit feature
• Profit Shares and work programmes are biddable
• Abandonment Provision • Escrow Account from time of development
• Financial Obligations fixed in PSC
• Cost Recovery fixed at 60%
•
Incentives in the PSC
40