A week or so ago Robert Riley of bpTT warned that-all those reports you read in the newspapers about oil zooming past the US$100 mark have little relevance here. It is indeed noteworthy that Mr Riley did not enlighten us on what price bpTT got for its last oil shipment.

Recall that Minister of Finance, Christine Sahadeo, in the last parliamentary session, reported to the Senate that our government had given the commitment under the Extractive Industry Transparency Initiative (EITI), signed in the UK, to inform the country quarterly of all monies received from individual companies on their extractive activities with regard to the use/export of our petroleum resources. This surely has to include exports, price of exports and the rents received by the government, based on the legislation and the exploitation contracts between the government and the companies (the latter are unavailable to the public, though the format may be).

In my presentation in the last Budget debate in the Senate in 2007 I brought to the notice of the Minister of Finance that though it is possible to glean what taxes have been paid by the energy sector companies from the revenue documents presented in support of the Budget these documents were deficient in keeping with the EITI.

Anyone who has access to the Internet can quickly get information on spot and futures prices for, say, Brent crude or West Texas Intermediate (WTI) etc., and the same for natural gas at Henry Hub and the New York Mercantile Exchange (NYME) for natural gas futures.

Recently, the March 2008 country report for T&T by the Economist Intelligence Unit (EIU) estimated what prices we were getting for the sale of the T&T crude oil exports using the prices posted for WTI as a proxy for Trinidad and Tobago’s oil mix. Their forecast for average prices for WTI for 2008 and hence the estimate for Trinidad and Tobago’s oil mix for 2008 was US$81.1/bbl before moderating to a still strong US$73.4/bbl in 2009.

Assuming that the EIU knows what they are talking about then the spot price of T&T oil mix on 2008-06-05, is US$124.31/bbl, the price at which WTI is quoted on the NYME. What we need to know, though, is what is the contract price that bpTT is selling our crude oil, given that contract prices today are not fixed and depend on both spot and futures prices. But still we hear the Minister of Energy telling us that certain information ’as decided by (his) government’ is confidential to business competitiveness in spite of the EITI.

Mr Riley also complained that if bpTT were exporting only crude oil instead of an equivalent calorific mix of oil and gas then bpTT would be making a lot more money. Hence bpTT has decided to optimise its present production and has fired 103 people locally, in keeping with the statement by Lord Browne, then of BP, that BP has to focus on the bottom line and not on accumulating resources (reserves). BP last quarter profits were some US$3 billion, which would have been US$4 billion had it not paid out some US$1 billion in compensation for the deaths in 2005 at a Texas BP refinery. Some now refer to BP as Bloated Profits.

Prime Minister Manning boasts of the vision of his predecessor Dr Eric Williams to move the country into a natural gas economy. Until then gas was used as in-company fuel, for gas lift, and much of it was flared. But T&T had experienced Peak Oil and its production level was dropping to what it is today, 100,000 bbls/day. All of this happened before bpTT was on the scene. Surely then Riley’s bpTT must have made an efficient business decision to enter the mainly gas-based extractive economy of T&T.

So to comment that were bpTT producing only oil it would be more profitable is wishful thinking. Maybe with the price of premium refined molasses (1818 rum) now at US$20 per litre Riley’s bpTT should be in the alcohol business! If one were to compare buying calorific value via crude oil and natural gas, then 1 million Btu of gas at Henry Hub today costs US$12 while the same calorific content in WTI costs US$22.

What is interesting, though, is that the spot price of natural gas at Henry Hub has been increasing in step with the spot price of WTI. Thus the rents from gas exported should also be increasing generally in step with the prices of crude oil, to which Mr. Riley referred, as they zoom past US$100. Still, the people of T&T need to have access to the real information as provided for by the EITI.

-maryking@tstt.net.tt