The natural gas industry in Trinidad and Tobago began with the discovery of gas on land at Mahaica in 1955 by Dominion Oil, however the first major natural gas discovery (One Trillion Cubic Feet (Tcf)) was off the East coast of Trinidad by Amoco in 1968 in the Teak offshore field. This was followed up in 1973 by a 2 Tcf find in the South East Galeota acreage.
There was however production and utilization of gas before this date. Although the dates referred to mark the first large finds of natural gas (i.e. > 0.5 tcf), prior to 1955, gas was utilized as fuel to power machines in the oilfields they were found associated with and was then known as casing head gas. During the 1930s three absorption and one adsorption plant for the recovery of gasoline from natural gas began operation in the country1. During this period as well (1933) the first small scale experimentation on natural gas for secondary oil recovery began, which blossomed into the first large scale gas injection program in the Forest Reserve field in 1945. But the general policy of the oil operators, then as it is now when an oil field is produced which has associated gas, was to minimize its production in order to maintain pressure levels in the reservoir to maximize primary recovery.
There was also no use for the excess gas beyond what could used in the field itself for fuel and gas lift and in any case, the gas lift volumes were blown to the atmosphere (vented). By 1950, 40% of Trinidad and Tobago’s 32.3 bcf (88.5 MMscf/d) of natural gas produced in that year was wasted in this way, rising to 61 % of 97.7 bcf (267 MMscf/d) in 19602. In that year, the Petroleum Department had this to say about the sector: “The under utilization of our natural gas is a problem that has long plagued both the oil industry and the economy. In any associated gas economy such as ours, a market must exist for the gas or else it goes to waste. At present some 61% of produced gas is flared despite the existence of two large refineries a cement factory, power plant petrochemical plant all of which are gas consumers.
The Petroleum Division has been actively concerned with this problem from a conservation viewpoint and several safeguards have been instituted by the Industry to avoid waste. In addition, many large scale injection projects are being studied and plans are now being drawn for the construction of a gas pipeline from Penal to Port of Spain. If these several projects come to fruition, it will not be long before full utilization of Trinidad annual gas production is assured”. As former Prime Minister, Patrick Manning, remarked to veteran energy journalist, David Renwick, “Unlike the evolutionary-type development of the crude oil and refining sub-sectors, a deliberate policy approach was adopted by the state for the development of the natural gas sub-sector.”
1959 was a momentous year for the industry because the first manufacturing plant based on natural gas since the natural gasoline plants constructed in the 1930s (which utilized less than 1% of Trinidad’s total production through most of the 1950s) was commissioned. This was the Federation Chemicals Ammonia Plant (Fedchem) built, owned and operated by W R Grace, which by 1960 consumed 1.4% of Trinidad gas production. When by 1977, the Tringen Plant was added a stone’s throw away from the Fedchem site, the ownership pattern had changed compared to the inaugural Point Lisas facility. The Government owned 51% of the plant, owned the natural gas and the facilities transmitting it and had secured a more favourable natural gas price of $1.68 per thousand standard cubic feet (Mscf) compared to the 27cents per Mscf that was negotiated in 1959 between W R Grace and a transnational company with little involvement by the government.4 The Government’s approach was facilitated by the provisions of existing Exploration and Production (E&P) Licences which said that the Government of the Republic of Trinidad and Tobago (GoRTT) was entitled to a producer’s gas if he did not have a use for it as defined in the regulations. The only catch was that the GoRTT had to erect its own infrastructure.
Enter the National Gas Company (NGC), a 100% state-owned company which was established in 1975 with exclusive rights to transport and sell natural gas to domestic consumers through an integrated pipeline system. By 1979, the major projects which put the NGC in possession of a complete gas transmission system from offshore Galeota to Port-of-Spain and Point Lisas capable of transporting in excess of 400 million cubic feet per day, were commissioned. The projects were three-fold – the offshore 24-inch diameter pipeline from the Teak/Poui compression platforms (which compressed associated gas from Amoco’s 1968 Teak oil and gas field) to Galeota; a 14 mile, 20-inch gas pipeline from Picton to Point Lisas and finally a two mile section of 24-inch pipline from Guayaguayare to Beachfield.
These, together with the only major existing gas pipelines prior to 1977; the first, built in 1953 to supply the Penal power station and the second built in 1956 to supply the FedChem plant in Point Lisas; would become the backbone that made possible the development of what Trinidad’s first prime minister hailed as “the symbol of the fundamental reorientation of the international economy”. Trinidad had now planted, at the very zenith of its oil economy (the country’s highest ever oil production rate of 83.7 million barrels of oil (230 000 bbl/d) was achieved in 1978), the seeds for the exploitation of a new growth pole for the economy.
By the late 1980’s the Federal Research Division of the United States Library of Congress in a Country Study on the Caribbean Islands had this to say about the twin island republic5: “Trinidad and Tobago possessed an industrial base that was unmatched in the Caribbean and for a country of about 1.2 million people, perhaps in the world. As new heavy industries came on-stream in the early 1980s, Trinidad and Tobago was a producer of oil, asphalt, natural gas, ammonia and urea fertilizers, methanol and iron and steel. Petrochemicals based on natural gas became the centre of the industrial strategy envisioned in the 1970s to diversify away from oil and export agriculture.”
Since those heady days, a confluence of factors enabled Trinidad and Tobago to maintain its natural gas development momentum, not the least of all was the fall in United States’ natural gas domestic production during the late 1990’s straight up to 2008, before the widespread exploitation of shale gas. A large share of the U.S.s’ domestic production of ammonia was virtually transplanted from that country to create Trinidad’s eleven ammonia plants (5.2 million metric tonnes per year capacity), due to the volatile and upward trend in natural gas prices which led to a 44 percent decline in production and a 115 percent increase in imports of ammonia in that country during the period 2000 – 20066. In a similar manner, the United States’ annual methanol production capacity peaked in 1998, and then fell to less than 1 million tonnes, due to aging plants, MTBE phase-out and high natural gas prices7, facilitating the establishment of an anual production capacity of 6 million metric tonnes of methanol at Point Lisas. The question which must now be asked is whether, as Trinidad’s older ammonia and methanol plants come to the end of their gas contracts, the pattern be reversed; meaning that methanol and ammonia plants could be constructed closer to the centres of major production, especially if natural gas prices continue to fall in the U.S.
Just as 1977 marked a shift in the ownership pattern of large natural gas based plants, so too did 2010 portend the beginning of a new type of petrochemical development, namely the multi-product diversified petrochemical complex. This is best illustrated by the Methanol Holdings Trinidad Limited (MHTL) Ammonia, Urea Ammonium Nitrate and Melamine (AUM) US$ 1.7 billion mega project consisting of seven plants8 which manufacture Urea Ammonium Nitrate (UAN) 32% solution and Melamine using feedstock from integrated urea and ammonia plants. Again, to confirm Manning’s words, the project was guided by a Government policy which did not permit future petrochemical projects that did not diversify the economy away from ammonia and methanol, two commodities which the twin-island republic was heavily invested in.
Mr. Rampersad Motilal, the CEO of MHTL had this to say about the future of the gas industry “…….netbacks from gas exports will remain low. In such a scenario, projects such as AUM, located within Trinidad and Tobago, which utilise small amounts of gas [87mmscf/d] but leverage significant capital, highly trained manpower and provides opportunities for local business activity must be a top priority.”
His optimism about local business activity is based on the nature of one of the products made by this plant – melamine – which is used to make amino-formaldehyde resins which are processed and used in laminates, wood adhesives, paper and textiles, kitchen and tableware, to name a few. This dynamic local company even partnered with the Ministry of Energy and Energy Affairs in November to host a conference targeted at encouraging local manufacturers to invest in the use of melamine. In Mr. Motilal’s words; “ the benefits to the local economy of using our limited natural gas resource for the manufacture of value-added downstream products far outweigh any short-term benefits that may be derived from the export of our resources to external energy markets.”
This leads us to the largest consumer of gas in the country, the Atlantic LNG (ALNG) company of Trinidad and Tobago, which is a joint venture company, consisting of the largest producers of gas in the country, the NGC and a major marketer of gas internationally. The daily requirement of the facility is 2.4 Bcf, which is 60 percent of Trinidad and Tobago’s average production of 4 Bcf per day in 201010. Despite Mr. Motilal’s flippancy about the benefits of LNG export, the natural gas earnings paid in taxes to the government, contribute a large part of the US$ 2.9 Billion in energy revenues the GoRTT earned in 200911. But the start-up of Train 1 in 1998, followed by Trains 2 and 3 in 2002 and 2003 respectively and Train 4 in 2005 has lowered the country’s Reserve to Production ratio from a comfortable 38.1 years in 2001 to a more disconcerting 10.3 in 2009 (see Table 1). This means that the country must drill ever faster, further and deeper just to stay on an even keel.
The reserve to production ratio spoken of is the outcome of the accounting for the state of the twin islands’ gas reserves performed on behalf of the GoRTT by independent reserve certification agency Ryder Scott of Houston, and is called the Trinidad and Tobago Natural Gas Audit. Recently it has revealed a continuing trend of decreasing proven reserves and increasing production levels (see Table 1). A likely cause for this – the National Energy Corporation’s (NEC) success in attracting some of the largest and most state of art natural gas consuming industries in the world, which lead to increased production (see Table 1). Another is the failed 2006 Gas Acreage Bid Round, practically boycotted by the industry, which meant that exploration in the deep water Atlantic blocks offshore the east of the island (which are not included in the Ryder Scott audit) and the shallower blocks of the east and north coast, was delayed while the Government technocrats attempted to create an attractive tax environment. As a consequence of this, the Ministry of Energy’s 100% reserve replacement target of nine exploration wells a year has not been met.