Trinidad and Tobago Wednesday signed an agreement allowing for one of the largest natural gas developments to be undertaken in the country estimated at more than one billion US dollars.
The Manatee Production Sharing Contract with Shell Trinidad and Tobago Limited and Shell Trinidad and Tobago Resources SRL (Shell) is in respect to the shallow-water field that straddles the maritime boundary of Trinidad and Tobago and Venezuela.
The Manatee field has a surface area of 48.35 square kilometres with reserves of 2.712 trillion cubic feet of gas.
Addressing the signing ceremony, Prime Minister Dr. Keith Rowley said that the project will be one of the largest natural gas developments to be undertaken in the country. He said based on the development concept, the operating and capital expenditure is estimated at US$1.8 billion.
“The upstream activity that will be generated by the project will create opportunities for the domestic energy service industry and other service providers,” Rowley said, noting that the Manatee field, forms a part of the Loran- Manatee cross-border field, with Loran being located in the marine area of Venezuela.
He said the Loran-Manatee reservoir has an estimated resource of 10.04 trillion cubic feet (tcf) of which 2.712 tcf is within the Manatee field.
He said that on August 16, 2010, Trinidad and Tobago and Venezuela executed a Unitisation Agreement for the Exploitation and Development of the Loran-Manatee field.
“An absence of urgency and no definitive commitment to making the necessary investment among the various interested parties saw this proven resource remaining dormant as though stranded,” Rowley said, adding that two countries alter agreed to the independent development by each government of the field within the Loran-Manatee cross-border, that falls within its marine area.
He said by government to government agreement dated October 15, 2019, the Loran Manatee Unitisation Agreement was terminated, delinking the development of the Manatee field from the Loran field.
“While the imposition of United States sanctions may have temporarily derailed our cross-border initiative, this situation is not expected to last indefinitely,” Rowley said, adding that the decision to proceed independently on the development of the cross-border fields created the opportunity for both the government as resource owner and Shell as contractor to monetize what would be one of the country’s largest natural gas fields to date.
He said in an August 19, 2019 agreement with Shell for the extension of the term of Block 6, it was agreed that separate terms would apply for any petroleum production derived from the commercial development of any field in the Manatee)portion of the Contract Area, subject to mutual agreement of the parties.
Rowley said pursuant to the terms of the agreement, Shell was encouraged and requested the opportunity to initiate negotiations to continue its appraisal and pre-sanction activities which were necessary to progress the commercial development of the Manatee portion of Block 6.
“Today’s event is the culmination of the negotiations between the Ministry (Of Energy and Energy related industries) and Shell and the subsequent approval by government. It signifies this government’s ongoing commitment and action to meet domestic natural gas requirements and our resourcefulness in overcoming obstacles.”
Rowley said that the production sharing contract (PSC) for Manatee is for a period of 25 years.
“Preliminary estimates indicate that natural gas production could start as early as 2025, with an initial production of up to 350 mmscf per day, before ramping up to as much as 700 mmscf per day. In considering our current proven reserves of natural gas and the size of the many discoveries of new fields the significance of this development will be fully appreciated in Trinidad and Tobago,” Rowley said.
But he told the ceremony that the parties do not have to wait until 2025 before we see the financial benefits accruing from the PSC.
“A suite of annual charges are payable within 10 days of the effective date of the contract and thereafter within the first 10 days of the contract year. These include an administrative charge of US$300,000 increasing at four per cent per annum, training and research, and development contributions of US$150,000 per annum increasing at six per cent annually until the start of production, when contributions will equal 0.25 per cent of the value of the contractor’s share of profit petroleum. “
Rowley said that there are also a one-time technical bonus of US$200,000 to the Ministry, an annual scholarship contribution of US$100,000 per annum increasing at six per cent per annum and a signature bonus of US$15 million.
He said in keeping with the terms of the PSC, Shell is required to comply with the government’s local content policy which requires the contractor to maximize to the satisfaction of the Minister the level of usage of local goods and services and employment of nationals.
“However, Shell needs no reminder as the company has demonstrated its commitment to local content and local value added through its community engagement initiatives and its close partnership with industry, government, and other local stakeholders. I expect that this custom will continue.”
Rowley said Shell has and continues to be an invaluable partner to Trinidad and Tobago in the development of the upstream sector and in cross-border initiatives with the government of Venezuela. He said while the latter has been temporarily suspended, “we are hopeful for re-engagement with the Venezuelan government when the environment permits and would welcome Shell’s renewed interest as a partner.
“Our relationship is a partnership which is based on equity, is mutually beneficial and has grown from strength to strength. Shell is a key player in the commercial restructuring of Atlantic LNG, and also in the development of the country’s first utility scale solar project.
“We look forward to your continued participation in the domestic energy sector and welcome your commitment to securing Trinidad and Tobago’s energy future as we transition to a low carbon economy.”
Rowley told the ceremony that the last two years in the domestic energy sector have been challenging but the country is slowly recovering.
“We had turned the corner when coronavirus (COVID-19) pandemic struck. This had the effect of dampening upstream activity which resulted in the delay in the implementation of new upstream projects and as a consequence a reduced gas supply. Both the downstream and LNG were impacted. “Overall gas supply and international market conditions saw a number of petrochemical plants being taken offline, and Train 1 was negatively impacted. The shareholders are engaged in discussions with a view to making a determination of the future of Train 1 by the end of the first quarter calendar year 2022.”
But he said in the interim there have been bright spots. The Canadian-based Touchstone Exploration Inc. has continued to make new discoveries of oil and gas and that BHP Block 3a Ruby/Delaware project came on stream in May 2021, followed by Shell’s Block 5c Barracuda project and bpTT’s Matapal field. Among other developments.
“On implementation, these gas projects will help in alleviating the current natural gas concerns of the domestic downstream industry and the LNG producers.
“However, the key to reducing or eliminating any gas shortfall in the medium term is the approval of the current unsanctioned projects. The government is engaging the upstream companies on the approval of the unsanctioned projects and we are prepared to facilitate the companies to achieve this objective”.
Rowley said that his recent meeting with oil executives in London “leave us very optimistic that more projects of current interest will be sanctioned as we go forward into the near and medium term”.
He said that natural gas projections show that gas production will steadily increase to 2024, then undergo a brief decline before rebounding in the 2026/2027 period, hence the need to accelerate the approval of unsanctioned projects.
“During the period 2026/2027, Shell’s Manatee and BHP deep-water projects are projected to come on stream. These projects together have the potential to supply in excess of 1.0 bcf per day of natural gas in the period beyond 2026, for the life of the projects,” Rowley said.
He said while the energy sector will continue to be the mainstay of the economy of Trinidad and Tobago, his administration is mindful of the need to transition to a low carbon economy.
“It is a journey that we intend to pursue and in alignment with goals and objectives of our energy stakeholders. As a valued stakeholder, the government looks forward to the collaboration with Shell and all others on the country’s energy transition.”
CMC
