New fiscal incentives announced in the 2014 budget statement for operators in T&T’s energy sector are now in place and reward oil and gas companies investing in exploration and production programs with a highly favorable economic environment. Included in the initiatives are various tax allowances and the ability for companies to recover 100% of their exploration costs in the first year between 2014 and 2017. Also, from 2018, operators can recover 50% of their first-year exploration costs, 30% in the second and 20% in the third. The fiscal reforms aim to attract greater investment and spark higher activity levels in the region to create a more competitive upstream sector.
The most mature oil province in the Caribbean, T&T has produced around 3.4 billion barrels of oil in more than 105 years of production. However, its deepwater oil reserves are still largely untested – exploration has been on land and in shallow water on the continental shelf – and they have piqued the attentions of some of the world’s biggest petroleum companies, especially as the government has optimistically predicted a major oil find will happen in T&T within the next five years. “BP took two blocks offshore and BHP Billiton has taken another four or five blocks. There is tremendous interest and potential for deepwater development of oil,” says Roger Packer, Chairman of the Energy Chamber of Trinidad and Tobago. “The fiscal regime and what’s in place is very well thought out and fair.”
Earlier this year, BHP Billiton announced plans to invest as much as $1 billion in exploring T&T’s reserves. Mr. Packer adds that there is a lot of interest by “a number of oil and gas industries in Guyana, Suriname and French Guyana to develop hydrocarbons, and Trinidad can provide the base to service the region.”
As of 2013, T&T had proven reserves of 728 million barrels of crude oil and 13.3 trillion cubic feet of natural gas. It is home one of the largest natural gas processing facilities in the Western hemisphere at the Point Lisas Industrial Estate. The complex has a processing capacity of almost 2 billion cubic feet per day and an output capacity of 70,000 barrels per day of natural liquid gas.
The country’s electricity sector is fueled entirely by natural gas. “Gas is one of the cleanest burning natural hydrocarbons, so it makes sense to switch from nuclear or coal to gas,” comments Mr. Packer. “Gas is the energy of the future.”
Lennox Petroleum Services Ltd. (LPSL) is one enterprise that is adapting well to T&T leading the energy charge in the region. With more than 40 years of experience as a leading provider of land and offshore oilfield contracting services, its strategy has been realigned in the expanding non-energy sector to meet a wider range of industry needs.
“Whether it’s coiled tubing, drilling, production well servicing, fabrication, welding, machine shop services, brokerage, heavy transportation, transport logistics or equipment rental, LPSL has met every industry need,” says LPSL’s Managing Director, Wayne Persad.
“It is expected that activity in both the energy and non-energy sectors will expand. Given the Central Bank’s estimates for growth and government policy positions, LPSL sees a positive, favorable environment within which to continue its expansionary and diversification efforts.”
The company sees huge potential for expansion in the region, particularly in Cuba, the smaller Caribbean islands and T&T’s Latin American neighbors. Its reputation for quality work has spread beyond T&T as it has already completed projects in Cuba, Suriname and Guyana. “Consequently, LPSL has the expertise and mobility to quickly pull together the necessary resources to put forward a proposal in these markets,” says Mr. Persad, adding that in view of T&T’s push into natural gas and the 2013 signing of an agreement with Venezuela to monetize the gas resources in the Loran-Manatee field, “natural gas and its downstream prospects will feature in our plans.”
Although oil and gas accounted for around 40% of T&T’s $27.14 billion GDP last year and its hydrocarbon resources have consistently fueled the country’s economic growth, the government is not resting on its laurels: the new opportunities that it is exploring not only include deepwater explorations and gas activity, but also motivating a shift toward a greater use of renewable sources of energy.
“I am of the view that as a species we are at a critical moment in history as we seek to build a bridge from an unsustainable relationship with energy to a sustainable relationship,” says Minister of Energy and Energy Affairs Kevin Ramnarine. “That bridge is being built through an emphasis on policies aimed at energy efficiency, energy conservation and renewable energy. These technologies are taking root in Trinidad and Tobago.”
One successful incentive is the government’s decision not to increase taxes on companies in the energy sector for the last four years. “This has allowed them to, for the first time in many years, operate in an environment of certainty,” says Mr. Ramnarine. “Companies like certainty and don’t like having the rug pulled from under them.”
Pioneering renewable energy company Solaris Energy is just one of a number of businesses to take advantage of these reforms, with revenues increasing by 85% in 2013 compared to the previous year. A subsidiary of Mora Ven Holdings Ltd., one of the main players in T&T’s energy industry, Solaris Energy is one of the largest providers of renewable energy products in the Caribbean, with more than three decades of experience in designing, manufacturing and installing renewable energy products.
“Solaris Energy is the largest manufacturer of solar products which produce hot water, and photovoltaic products which in turn produce power for all uses, whether in homes or in public buildings. We have supplied and fitted out almost every hotel in Barbados,” says George Nicholas III, Chairman of Mora Ven Holdings.
“Renewable energy has taken off much faster than we could ever have hoped. We have grown throughout the Caribbean and are now looking for partners to develop extra-regionally. Renewable energy is a US$1.5 trillion industry, and we are focused on being a large part of that growth.”
T&T’s sole locally owned renewable energy company, Solaris Energy also has a presence in the U.S. with its base in Miami, Florida. “We have implemented a comprehensive solar product line which we are currently commercializing with an emphasis on California and New Jersey, and soon in New York,” explains Mr. Nicholas. “We are constantly analyzing new opportunities and we are expanding rapidly across the USA.”
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