Confidence down but pick up in the horizon for TT energy sector
Price swings in energy exports, modest growth in Latin American and Caribbean markets and risk adverse investors all had impact on Trinidad and Tobago energy sector this year.
PORT OF SPAIN, Thursday, August 16, 2012 - In the first half of 2012, Trinidad and Tobago's energy sector performance was characterised by a minor recovery in downstream petrochemical production, more vigorous exploratory drilling, a continued delay/lag in the start-up of new downstream project construction and waning energy services sector optimism.
This characterisation of the sector came from the Energy Chamber of Trinidad and Tobago in its recently released mid-year review of the twin-island republic’s energy sector.
The review stated that, in 2012, continued global economic uncertainty, price swings in major energy commodity exports, modest growth projections for Latin American and Caribbean countries as well as enduring risk aversion by investors have all weighed on Trinidad and Tobago's energy sector, either positively or negatively.
The energy chamber noted that the leading indicators of buoyancy in the upstream oil sector are drilling activity and rig mobilisation rates and in 2012 drilling activity and rig rates continued to be at their highest levels since 2008. While development drilling has been modest compared to 2011 with just over 160,000 feet drilled, in contrast stated the reviewers, exploratory drilling has skyrocketed, achieving 34,155 feet drilled for the first six months of 2012 as compared to a total of 36,334 feet drilled in all of 2011.
Rig activity was also reportedly strong in the first half of 2012 as, up to June this year, there were four offshore rigs operating and three on land. Rigs mobilisation rates are now near to pre-2008 levels.
However the chamber representatives noted that while these indicators sent positive signals, they did not translate into a significant increase in oil production as, up to June, crude oil production had averaged 82,885 barrels of oil per day and condensate production had averaged 14,337 barrels per day, a 20% production decline compared to 2010.
Since mid-2011, stated the review, there had been significant production constraints in the upstream gas sector, which were especially pronounced in October and November 2011. This decline in production was as a result of maintenance work and safety upgrades of natural gas production platforms, which resulted in cutbacks in natural gas supply - feedstock for these products. However, the shortfall in petrochemical production has continued (to a lesser degree) through the first four months of 2012.
The first five months of 2012 (January to May) saw a marked improvement in the production of the country’s major petrochemicals, when compared to the last five months of 2011 (August to December). The production of ammonia and urea improved by approximately 3% and 4% respectively, where methanol recorded the highest increase in production of 10%.
Citing a recent energy services sector survey, the reviewers noted that over the first two quarters of 2012, optimism continuously declined. This drop in the level of optimism was attributed to the fact that many of the projects that were expected in the downstream sector had not yet materialised, a marginal drop in the rig rate in the second quarter, and general concerns about the state of the global and local economy.
Moreover, most respondents indicated that their value and volume of business was down the past three months. Also, more than half of the survey respondents stated that they did not expect an increase in the value or volume of business in the third quarter of this year.
The chamber publication stressed that the energy services sector grows best when there is a constant stream of projects, but a hiatus in the pipeline of energy projects causes the energy services sector to either baselines or shrink. With this in mind, it was noted that with questions still hanging over planned downstream projects, levels of optimism in the energy services sector would continue to be affected.
In concluding, the review highlighted several important energy sector developments expected before the end of 2012, which the energy chamber promised to monitor, including the release of the annual Ryder Scott audit report on the country’s natural gas reserves, the unveiling of the country's national energy policy and energy efficiency policy, the results of this year's deep water bid round as well as any new developments surrounding the start of construction at the MHTL AUM 2 site and the Carisal calcium chloride plant site.