We have been examining in the last few 'Energy Insiders' those activities in the local petroleum industry that Finance and Economy Minister Larry Howai, chose to encourage through fiscal concessions in his 2012-2013 budget – more crude oil production from pre-1988 exploration and production (E and P) licensed acreage, new small oil pool development offshore and deep horizon exploration – and those he did not: enhanced recovery methods for oil left behind in existing fields, heavy oil development and the retrieval of oil embedded in a tar-like state in sands at relatively shallow depths.
Virtually everything on that list relates to crude oil, as, indeed, it should, since the inexorable decline in such production in Trinidad between 1978, when it averaged 229,589 b/d and today, when it is averaging 69,174 b/d, is a matter of huge concern, if only because oil provides Howai with more revenue, on a per-barrel energy equivalency basis, than natural gas, the other main source of petroleum revenue, does.
One can only hope that the incentives bestowed by the finance minister, presumably in consultation with the Minister of Energy and Energy Affairs Kevin Ramnarine will have the desired effect and MEEA should certainly be following up to ensure that they do.
After all, the country is now well past the "nightmare scenario" invoked by former energy minister Conrad Enill in 2009 of crude production collapsing to 80,000 b/d. But while fiscal and ministerial attention is focussing on how to halt, and reverse, the fall in crude output, we should not overlook the continuing importance of natural gas and the need to maintain and increase the production of that key hydrocarbon as well.
Natural gas retrieval has actually been bowling along nicely, despite the temporary shortfall in deliveries to the Point Lisas industrial customers of which you will have heard. Natural gas production has averaged 4.2 billion standard cubic feet a day (bn cfd) so far in 2012, a level that has more or less been held for the last few years.
But the reservoirs from which that gas comes are naturally depleting, though less fast than the oil reservoirs, and even if major new gas discoveries are made in the future, particularly in North Coast Marine Area (NCMA) acreage and in BG Trinidad and Tobago's newly-acquired block 5d, it would be wise not to overlook the small gas discoveries that have already been made.
You could call this "stranded gas" and put it in the same category as the "stranded oil", represented by left-behind crude in existing producing fields, heavy oil and tar sands, the retrieval of which the finance minister made no effort to encourage in his budget.
Any additional crude, from any source, is worth exploiting and so is any additional gas from any source.
So what, and where, are these small gas accumulations?
As with the small oil pools selected for development by Howai, there is no formal definition, as far as I am aware, of a small gas reserve, but it is generally regarded as one of between 300 and 400 billion cubic feet (bcf), compared with the giant fields of one to two trillion cubic feet (tcf) that have been identified in Trinidad's East Coast and North Coast Marine Areas in the past.
EOG Resources Trinidad has one or two in its ECMA blocks but the vast majority are under the control of bpTT, which has identified a number of "thin-bed gas pays", as it prefers to call them, in its 904,000 acre E and P licensed area in the Columbus Basin.
As bpTT's former chairman and chief executive officer Robert Riley, once remarked to me: "We struggle to make gas discoveries economic at 300 bncf or below. We know they are there but we need to figure ways of accessing them most economically."
He made the point that Howai clearly did not pay any attention to in his budget: "To make small gas plays economically recoverable, the tax regime has to be attractive. If you shift the sharing of the pie in a company's favour, then we can continue to keep the Columbus Basin alive."
The finance minister did attempt to "shift the sharing of the pie" in the case of the aligning of SPT rates on marine fields, new small marine oil field development and deep horizon exploratory drilling but not in the case of small inactive marine gas discoveries.
Norman Christie, who took over from Riley as bpTT's bossman, fully endorses the view that small gas accumulations are a valuable asset that needs to be monetised.
The majority of the 20 or more undeveloped gas discoveries in bpTT's acreage can be classified as small (the 1 tcf discovery in new horizons in the existing Savonette field, announced last week, is an aberration these days) and Christie is convinced that number will rise, as its 1,000 sq km 3D seismic survey, phase two of which was to have commenced in October, "identifies yet more small pool gas resources".
Such resources are uneconomic primarily because the cost of bringing them on stream has escalated, as the bpTT president points out.
"Development costs have gone up significantly," he stresses. "What might have passed an economic hurdle five years ago would not pass the economic hurdle today, which makes it much more difficult to say, I am going to get all of these pool sizes to an investment decision."
These costs reflect the higher rates contractors can charge because of the attractive price of oil in the global marketplace.
"The costs we are experiencing are tied to crude oil and not to gas pricing (which, as is well known, has plummeted in the North American market). We have this phenomenon that, as crude prices increase, we see the cost of doing business increasing but our prices relate to gas and they have fallen. This is a very important phenomenon and a major challenge.
Christie wants to confront this challenge first by bringing cost reduction measures to bear. "We will be applying all the technology, all the skills and capability of our people to work on the cost structure to ensure small pool resources can be developed."
However, if the economics "still don't work", then Christie says he'll go for the Riley option – fiscal incentives for small gas pools.
Apparently, "exploratory discussions" on the matter have been held with MEEA but although the bpTT president did tell me some months ago that "there's a recognition within the ministry that something has to be done to ensure all gas resources get developed," that was not translated into action in the 2012-2013 budget.
Of course, unlike crude production, which attracts SPT under E and P contracts like bpTT's, gas output is not subject to SPT, so there is nothing to adjust to achieve a more favourable tax regime.
But there are surely other inducements that can be offered for the commercialisation of small gas resources and both ministers Howai and Ramnarine may want to put their thinking caps on to work out what those could conceivably be.
was awarded the Hummingbird Medal (Gold) in 2008 for the development of energy journalism in Trinidad and Tobago.