LNG, GTL, gas conversion key to search renewal off Trinidad-Tobago

Producers watching deepwater action

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While BP, through BP's acquisition of Amoco, has become the lead producer offshore Trinidad-Tobago (with estimated 70% of production), the market is opening up to new players and deeper waters. The key to this expansion in exploration and development is an aggressive program by the government and its partners to expand existing LNG facilities and attract other gas-consuming industries to the island.

Along with BP, offshore players in Trinidad-Tobago include Shell, British Gas, BHP Petroleum, Exxon Mobil, Repsol, Petrobras, EOG, Petrotrin, Veba, and Agip. British Gas, Petrotrin, Veba, and Agip are active off the North Coast, with British Gas and the remainder of the companies having a stake in blocks off the island's East Coast.

BP has a long-standing relationship with Trinidad-Tobago (via Amoco), other operators have moved in recently to take advantage of a benign environment with good exploration data. Negotiations Manager for the Caribbean Robert Silverman with BHP Petroleum (BHP) said his company picked up its first blocks offshore Trinidad-Tobago in 1996.

In addition to dry gas discoveries, which make up the bulk of the recent finds off Trinidad, Silverman said that the country continues to produce approximately 120,000 b/d of oil. Traditionally, Trinidad-Tobago was considered an oil play. Only recently, following major gas discoveries, has this focus changed. BHP is exploring two blocks; both plays are in about 120-ft water depths and are prospective for both oil and gas.

LNG trains

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As a result of major gas finds offshore Trinidad-Tobago, there is a need for additional onshore gas conversion and export capabilities. To handle the export volumes, the Atlantic LNG project is bringing on two additional LNG trains, each in the neighborhood of 450 MMcf/day. The shareholders in Atlantic LNG include BP, British Gas, Repsol, Tractebel, and the National Gas Company of Trinidad and Tobago. The first of these trains came on line in 1999. The second and third, which will be aproximately the same size, recently received government approval and should come on line in early-2003 and mid-2003 respectively.

Coupled with other gas conversion industries such as methanol and ammonia facilities, this LNG capacity is important, Silverman explained, because there is very modest demand for gas and oil used solely for domestic consumption in Trinidad. Virtually all gas production from this region is used to produce methanol, ammonia and reduced iron, or is exported to other markets as LNG. Trinidad gas is a less expensive feedstock for gas-consuming industries than the higher priced supplies in the US and Europe. Despite the cost of LNG conversion, gas delivered from Trinidad to the US, as LNG, is still cheaper than feedstock from the US Gulf of Mexico, which is approximately $4/Mcf.

In addition to expansion of the LNG business, Trinidad would like to attract other gas-consuming industries such as gas-to-liquids (GTL), ammonia, ethylene and methanol plants. To this end, there have been aggressive programs developed to foster local industries. Gas is key to future growth in Trinidad-Tobago, which has seen its production of crude oil/condensate drop over the last 10 years.

Driving exploration and development of gas resources are open competitive production-sharing contracts and 3D seismic data covering deepwater acreage. The local work force is educated with a reasonably strong work ethic, Silverman said. Because there has been an oil industry on the island since the 1930s, there is a healthy infrastructure with all the major service companies represented. Silverman said rig availability issues are manageable. If necessary, rigs can be mobilized from the Gulf of Mexico to execute drilling programs in Trinidad.

Currently, BHP is the operator and 50% partner with Talisman on a prospect in Block 2(ab), and holds a 45% stake and is operator on a Block 2(c) with TotalFinaElf, 30%; and Talisman, 25%. Silverman said the company has drilled two wells on 2(c) and one well on 2(ab), and made two gas discoveries. The company recently bid on two new blocks in a round just completed and is awaiting word on the results.


Shell holds a deepwater block, Block 25(a), offshore and about 50 miles east of Trinidad. To the south of this block are Blocks 25(b) and 26, operated by ExxonMobil, and Block 27, operated by ARCO (now BP). Block 25(a) is operated by Shell, 55%, with partners Agip, 40%, and Petrotrin, 5%. These deepwater blocks were awarded by Trinidad in February 1998 and the water depth ranges from 1,200 ft to 4,300 ft.

Shell has drilled one well on Block 25(a). Haydn-1 was drilled as a tight hole in October 1999, by the Stena Tay, in 3,533 ft of water, which set a water depth record for Trinidad. This was the first well of a three well commitment on the block. Steve Wade, Commercial Advisor, Latin America, for Shell International E&P, said 3D seismic has been shot over essentially the whole area of the four deepwater blocks, and that this forms the basis for the operating companies' drilling programs. Wade said ExxonMobil has a seven well commitment on its two deepwater blocks, and BP has a two well commitment on Block 27. Both ExxonMobil and BP are yet to drill their first well.

Recent developments

Although the well recently drilled by Shell was in the greatest water depth yet drilled off Trinidad, BP has the record for the deepest announced discovery. The Manakin well, in 730 ft water depths, was completed in Block 5(b) in May this year and has estimated reserves of around 2 tcf. BP is operator with 70%, while Repsol-YPF holds 30%.

This find is in an extension of the Cocuina discovery in Venezuelan waters about 80 miles southeast of Trinidad, and as such, would require inter-governmental agreements for development to proceed. This is the latest in a series of large gas discoveries in recent years.

Wade said that the onshore and shallow water of Trinidad is a long-established oil play. It is the recent large gas discoveries by Amoco (now BP), BG, and others that now have people thinking of Trinidad as primarily a gas play. These discoveries have led to the construction of Train 1 of Atlantic LNG, which exports gas to USA and Spain, and to agreements to build two further trains.


Gas is key to the immediate future of the energy business in Trinidad. As liquids prod-uction has leveled off over the last 10 years to around 125,000 b/d, gas sales have skyrocketed from 430 MMcf/d to over 1 Bcf/d, with projections of 2.7 Bcf/d by 2007. This is driving the Atlantic LNG project, which is central to Trinidad-Tobago's future energy exports, Wade said.

Because of the recent gas finds, Wade says the biggest question for Trinidad-Tobago now is the timing of the development of these discoveries. The growth in the gas reserves of the country, beyond a level that can be used merely by a growth in domestic demand, has driven the construction of the LNG export facility and its planned expansion.

Wade said the existing gas discoveries have the potential to supply the existing LNG train and the two further trains that are planned. To accommodate future gas discoveries, further trains would be needed. According to Wade, any expansion beyond Train 3 would require additional land reclamation as Trains 2 and 3 will essentially fill the existing site. The development of new finds will be phased to coincide with the construction of new LNG trains, and this will encourage further exploration for gas.

East of the four deepwater blocks lies the ultra-deepwater, where water depths extend to 10,000 ft. Wade said this is potentially the next area of interest for the majors, but activity there will depend on the terms offered and on the results of the exploration of the existing deepwater blocks. There are plans by the Energy Ministry of Trinidad to shoot 3D seismic over these blocks, prior to hosting a licensing round. Wade said the ministry hopes for participation in financing this shoot from the current operators and other interested companies.

For interest in ultra-deepwater to be maximized, there need to be favorable terms for the operators, Wade said. The current deepwater terms are not the most attractive, compared to other global deepwater areas. With the high cost of ultra-deepwater exploration and development, operators will require improved terms in order to justify committing exploration expenditures off Trinidad, rather than elsewhere.

A key issue is to assess the chance of oil rather than gas in the ultra-deepwater. This is because the economic threshold volumes in deepwater are typically lower for oil than for gas, since oil is easier to process and transport.

The next few years will be a critical watershed for deepwater Trinidad, as the drilling programs progress on the deepwater blocks in advance of the expiration of the first exploration phases. Because the proposed ultra-deepwater acreage adjoins the existing deepwater blocks, the exploration results of Shell, ExxonMobil, and BP will impact the perception of the prospectivity of the ultra deepwater, and hence the level of industry interest.

As an emerging deepwater arena, Wade said Trinidad-Tobago has a lot going for it geologically, and it is also advantaged as a politically stable country with a long-established oil and gas industry.

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