NGC on Dragon Gas Deal and removal of US sanctions

January 25th , 2023

Yesterday’s announcement made by Prime Minister, Dr. the Honouarble Keith Rowley, that the Government of the Republic of Trinidad and Tobago (GORTT) has received a licence to resume the development of the Dragon Gas Field in Venezuela is welcomed by The National Gas Company of Trinidad and Tobago Limited (NGC).

These recent developments are viewed as a positive step in the overall efforts to secure future gas supply for the local energy sector which augurs well for the benefit of the people of Trinidad and Tobago.

NGC notes that the Prime Minister has indicated the terms of the licence are still being finalised and the company anticipates discussion with GORTT and the Ministry of Energy and Energy Industries (MEEI) on the next steps for the development and commercialisation of the Dragon Field. As such, NGC will refrain from making any premature statements on the resumption of the Dragon Project or pre-empt such terms.

NGC stands prepared to play its part in supporting GORTT in the resumption of the Dragon Project and is excited to work together with both Shell and GORTT to bring gas from the Dragon Field to Trinidad and Tobago in the shortest possible timeframe. The company reaffirms its commitment to work closely with GORTT and other stakeholders in the pursuit of maximising and leveraging opportunities for the resilience and sustainability of Trinidad and Tobago’s energy sector that will ultimately serve the national interest.

 

ECO HAILS DRAGON DEAL WITH OPERATOR SHELL

Jan 24 2023

A landmark United States decision to waive sanctions against Venezuela, clears the way for Trinidad and Tobago to import natural gas from its OPEC neighbour, “a significant and happy day” for Trinidad and Tobago and Caricom.

Prime Minister Dr Keith Rowley, responding to a question from media about what the opportunity to develop the Dragon Gasfield would mean for the country financially. said T&T could benefit to the tune of around US$450 million with

…“a decent profit on the margin. The United States Government has today approved Trinidad and Tobago’s development of the Dragon Field via an OFAC Waiver from sanctions with specific terms to be finalised, What this means is that the restrictions on the Dragon Gasfield development are now relieved and all relevant parties can progress the plans to result in natural gas from Venezuela.”

, During the Trump administration in 2019 , the USA imposed strict economic sanctions on the Nicolas Maduro-led Venezuelan regime for suppressing human rights.

The start date of the licence and terms of the waiver are not yet confirmed, as significant work remains to be done, but it is a giant step forward. The licence has been granted for two years with the option to extend, although the T&T government originally asked for a ten-year licence.

The US can easily update its sanctions against Venezuela which could impact the deal. However, the Prime Minister is optimistic as there is nothing in the terms so far that the Government could not meet.

The US, imports $231 million worth of urea ammonium nitrate fertilisers from T&T and stands to benefit from clean fuel and fertilisers if the deal proceeds. Energy Minister Stuart Young said the licence was granted for the Dragon Field. NGC will transact the deal working along with Shell.

Numerous terms will be finalised between T&T, Venezuela and Shell but the highest hurdle has been crossed and development can be accelerated. Shell will be the operator in the PDVSA field and Venezuela will be involved in the licence from Venezuela to operate the field, owned and run by SOC Petróleos de Venezuela. .

Rowley said development will not be immediate , as a time frame for first gas awaits advice by Shell and the Venezuela government but will be soon because the market needs the products.

“We’ll be going full speed ahead to get it to market at the earliest opportunity. It’s not going to be tomorrow. It’s not going to be 2023 because there’s a lot of work to be done, a lot of lead time, and a lot of engineering work.”

One of the major caveats of the deal is the requirement T&T shares the spoils with Caricom states.
“One of the main conditions is that we give priority to supplying our Caribbean neighbours who need it.”

He thanked the USA and all in Trinidad and Tobago’s corner pushing to this point of encouraging the United States to do this.

President Luis Rodolfo Abinader of the Dominican Republic which relies on T&T for energy was instrumental in the discussion of regional energy security.   Jamaica will be a major beneficiary under the agreement.  He thanked Guyana President Irfaan Ali, Suriname President Chan Santokhi, Barbados Prime Minister Mia Mottley, Antigua and Barbuda Prime Minister Gaston Browne and The Bahamas Prime Minister Phillip Davis..
Cost to the country would be minimal, “very small” legal fees, in comparison to revenues.
Venezuela could receive payments as before, paid in ways such as barter.

Having warned of “difficult days” ahead in the energy sector, he said the deal changed his mood a little bit.

“The infrastructure to handle these kinds of resources to bring to the world market usually needs a horizon of 20-25 years if you’re going to make new investment. So, if your reserves are only dribbling along with a five or ten-year horizon, you can’t look to any new investment. So, having access to gas fields outside of our border, this is a seminal development because it’s the first time we have had this opportunity.

The waiver includes development of the Loran-Manatee gas field on the TT/Venezuela maritime border. Now that we’ve got the giant step towards exploiting gas from a Venezuelan field across the border, it opens all kinds of possibilities for business between two neighbours. One has world class infrastructure like Point Lisas and a neighbour that has a large amount of unproduced natural gas.”

He was expected to meet Venezuelan ambassador Alvaro Sanchez Cordero to discuss the development.

US Ambassador to T&T Candace Bond said the announcement reinforced the relationship with the US.

“Today, we reinforce the closeness, strength, and depth of our over 200 years of friendship and cooperation. Upon my arrival, I promised to work to further strengthen our countries’ unique bond, to deepen and grow our already close relationship, and to ensure that our cooperation continues to yield positive results for both of our countries.

We share Trinidad and Tobago’s urgency in contributing to global energy and food security. We have listened to the Government .. message that it has the capacity and willingness to ameliorate economic and humanitarian crises around the region and the world.”

Trinidad was producing about 1 billion cubic feet of gas a day from old maturing fields and hopes to reach approximately four billion cubic feet from current production of 2.8 billion cubic feet a day.

ALNG shareholders and government have agreed to the unitisation of all four trains. Once there is enough gas, Train One will become operational and the first hurdle is to sustain consumption. As a shareholder in Trains Two, Three and Four, the country is in a better position, instead of having to find enough gas to satisfy Train one.

TT is advancing towards producing its 27 per cent from the joint gasfield and there is great economic benefit to continuing and in investment in the pipeline from Venezuela to TT. Opposition MP and shadow energy minister David Lee remains guarded on the details of the waiver.

“I don’t know the details, but at this point in time, it cannot be as straightforward as the original agreement that Trinidad had with (Nicolas) Maduro. I hope that the Prime Minister will make a comprehensive statement in Parliament of the details of this licence between the US government dependency and modern trade.”

 

Dragon step in the right direction

Managing Director of Gas Energy Latin America, Anero Alvarado said the allowance for access to gas from the Dragon Gas field is a step in the right direction for this country and the region but there will be some challenges in the early stages of producing that gas.

Alvarado was on the panel discussing the role of the Southern Caribbean in meeting global demand for natural gas, on the first day at the TT Energy Chamber’s three-day Energy Conference.

Hours after it was announced that TT would have access to the Dragon gas field, Alvarado said that Venezuela has an excess of gas, most of which is flared (burnt off) on the eastern side of the country, because the gas market in Venezuela is well-supplied. Any gas deal between TT and Venezuela infrastructure may be a challenge in the first instance.

“There are a couple options to bring gas to TT. We will need to build different pipelines from different locations to bring that gas.”

He said depending on the size and the distance that the pipelines would have to go, connecting TT to the dragon fields could cost millions.

“For example, from Point Lisas to Guiria in Venezuela. It would cost around $250 to $300 million US dollars. If you connect from Dragon field which is smaller, it would be around 30 to 40 million US dollars.”

Alvarado said now that TT has access it would have to deal with the Venezuelan authorities to determine the owner of the field and then deal with them. At the moment the field is still in the hands of PDVSA, but with access being granted to the field that could change.

“Maybe a private company can jump on this block and can have access,” he said.

The Dragon Gas deal, signed in a government to government agreement between TT and Venezuela in 2018, stalled because of US sanctions against Venezuela. The agreement would have seen a steady flow of gas from the Dragon Field to the tune of 150 million standard cubic feet a day, which would be imported through a billion-dollar pipeline to the Hibiscus Gas Platform off the Northwest coast of TT.

 

BEWARE BOLIVARIAN BLINDSIDE IN DRAGON DEAL

Jan 25 2023

TT Foreign Affairs Minister Dr Amery Browne and Venezuela’s Minister of Foreign Affairs Yvan Gil Pinto discussed the Dragon Gas Field deal on the sidelines CELAC Summit in Buenos Aires, Argentina,

The announcement that T&T will be licensed to develop Venezuela’s Dragon Gas Field won’t magically fix T&T’s decimated energy sector, as first gas from this project is years away, says the Opposition UNC.
However, Venezuela’s Foreign Affairs Minister, the T&T Chamber of Industry and Commerce, Heliconia Foundation and former UNC stalwart Dr Devant Maharaj, all welcomed the announcement that T&T received the US approval (via OFAC waiver) to develop the gas field.

Various quarters responded, following the announcement of the breakthrough development, which allows T&T to resume doing business concerning the Dragon Field with Venezuela’s sanctioned state PDVSA company.

The licence, issued at T&T’s request, is geared to enhance Caribbean regional energy security. It marked further easing of energy sanctions on Venezuela.

Establishing and develoing sustainable energy security for the Caribbean region will be the main focus of the assignment for a proposed CARICOM /US team to be chaired by Vice-President Kamala Harris and co-chaired by CARICOM leader and Prime Minister Keith Rowley of Trinidad and Tobago, with over 100 years of oil and gas knowledge and experience in global conversations.

The Financial Post stated the decision was the result of “extensive diplomacy” between US Vice President Kamala Harris and Caribbean leaders who sought assistance with higher energy prices, following invasion of Ukraine. Harris, whose father is Jamaican and who identifies as African-American, was praised as a careful and committed listener.

Jamaica boasts two fully operational liquefied natural gas (LNG) receiving facilities addressing the need for modern energy infrastructure by supplying clean, affordable natural gas. In 2015, New Fortress Energy invested in Montego Bay to developed the first liquefied natural gas (LNG) facility. The 145-megawatt Bogue power plant and local industrial customers draw LNG from the  state-of-the-art facility, which features landed storage, truck loading facilities, a regasification plant, and natural gas pipelines .

NFE unveiled a second n liquefied natural gas (LNG) facility, in Old Harbour Bay in the south. Commissioned in 2019 and docked 3.6 miles out at sea, our offshore Old Harbour Facility features a Floating Storage & Regasification Unit (FSRU) and underwater natural gas pipeline. The 125,000-cubic-meter ship serves as an import facility and regional energy hub, supplying environmentally friendly, lower-cost liquefied natural gas (LNG) to Jamaica Public Service Company’s 190-megawatt power plant in Old Harbour and our 150-megawatt co-generation power plant at Jamalco in Clarendon.

NFE funded and completed a pilot project at UWI Jamaica to convert absorption chillers from LPG to LNG. UWI financed the construction of an onsite combined heat and power (CHP) plant. NFE identified suitable land to minimize any impact and provided financial modelling, cost-saving and lifecycle cost analysis.

Today, NFE supplies the CHP plant with liquefied natural gas (LNG). The new CHP plant has reduced total electricity and cooling costs by more than 40 percent, saving over $2MM per year. The conversion resulted in a 22 percent reduction in CO2 emissions–the equivalent of planting over 95,000 trees per year. UWI reported reduced downtime for maintenance, which increases reliability for students and staff in pursuit of higher education goals. In partnership with NFE, the UWI is now providing a healthier campus while setting an example to other local institutions.

As a major rum producer Jamaica can distil ethanol for biofuel for transport.

Eastern Caricom states can exploit hydropower, cane ethanol and geothermal energy from seven volcanoes to address energy needs.

The Maduro regime will not be permitted to receive cash payments from the project and this could make it difficult for T&T to “craft a deal with Caracas.” Experts say it could take years “for investment and development to bring Venezuelan gas to T&T and boost LNG to Europe.”

Opposition UNC Whip and Energy spokesman David Lee said, “The UNC has never criticised the Dragon Gas deal. We’ve always raised questions on the timeline of implementation back in 2017/2018 because this Government highlighted it as the key to ending the gas shortage, which we knew fully well was not possible.

The UNC was vindicated in its questions for the national interest, as the project was indeed delayed. The recent announcement will not magically fix T&T’s decimated energy sector, as first gas from this project is years away.

This announcement, while offering potential in years to come, doesn’t change the vulnerable grim energy reality that this Government has driven T&T’s oil and gas production to its lowest in 18 years because they’ve failed to innovate the sector outside of this Dragon Field.

The announcement offers little comfort when exploration and monetising of gas within our own borders continue to be a problem. The licence for Dragon cannot take away that the Government has suppressed and decimated other avenues for increased gas production, through its lack of innovation by failing to implement proper fiscal incentives which would drive production up.

“T&T needs average 4.1 bcf of gas per day to meet its proper demand, yet we are only producing 2.8 bcf. Dragon was not the key to meeting this demand. The key ..was increased innovation and creating an environment that encouraged more exploration. There’s also cause for further concern, as even with Washington’s granting of Trinidad’s request, they haven’t authorised payments to Venezuela, which could make it difficult for Trinidad to craft a deal with Caracas. So, we’re years away from first gas.”

The UNC highlighted the reality that “…This Government still doesn’t have an answer for more gas in the short/medium term, as the Dragon Field and all other major gas projects listed by them are years from first gas.”

Observers believe that divestment of energy assets is overdue, after the scandalous squandermania by NGC with TTD 224 million sunk to turnaround Train 1 in the absence of a gas supply. With over a century of experience in the region supermajor Shell is perfectly capable of negotiating and developing the Dragon project without state intervention in granular detail. Divesting all state energy assets will benefit private investors, create jobs, spark growth and curb crime, now an existential threat to security.

If NGC bought ALNG shares with public funds, other unanswered questions mean corruption will be rife.

 

Atlantic LNG restructuring could expand Trinidad & Tobago’s gas sector

14 December 2022 By Gareth Chetwynd in London

Unitised trains could facilitate investment and provide third party access to boost feedstock.

Partners in the Atlantic LNG project restructured ownership, creating a single commercial structure and state-owned National Gas Company (NGC) increased its equity across the liquefaction trains. NGC took shares in all of the facility’s four trains, allowing for a unitised business model and, crucially, opening the door to third party access. Previously NGC had shares in just two of Atlantic LNG’s trains. Only three of the four trains are currently active as operation of Train 1 was suspended in late 2020 due to a shortfall in natural gas reserves in Trinidad & Tobago. UK supermajors BP and Shell remain as owners of the three active liquefaction trains, but reduced their equity in two of them to make way for NGC.

“After years of discussions, negotiations and dialogue we are here to sign agreements that will create a simplified commercial structure for the Atlantic LNG venture,” said Shell’s country chair Eugene Okpere at a signing ceremony .

Prime Minister Keith Rowley welcomed the simplified structure to the Atlantic LNG business and said it would help unlock about $5 billion of upstream investment in the country through 2026. The new structure would allow the government to take a more active role in the commercial arrangements for marketing LNG, especially on new fields such as Manatee.

“At present, we have several upstream projects either with the (Atlantic LNG) shareholders or third parties which are awaiting final investment decision. If we are to make this project a success we need to bring these upstream projects on stream and accessible to the restructured (Atlantic LNG) facility.”

Shell and BP have been investing steadily in Trinidad & Tobago’s upstream sector in recent years. BP recently started up gas production from its Cassia C offshore compression platform, its biggest offshore facility in the country, facilitating the exploitation of low pressure gas resources from the Greater Cassia Area.

BP’s Trinidad president David Campbell said the restructuring agreement will make the pricing of Atlantic LNG more responsive to markets and make investments more efficient. BP’s plans for 2023 include a seven-well subsea tie-back for the Cypre development and, over the longer term, it is interested in sanctioning development of the Ginger and Coconut discoveries. Also, the company is in ongoing negotiations over acquiring new deep-water acreage following a bid round earlier this year.

The provisions on third party access, although lacking in detail, could help bring in new gas reserves to the Atlantic LNG facility. Possible sources include offshore gas straddling the maritime border with Venezuela or reserves entirely within Venezuelan territory, should both sides want to opt for a monetisation route through Atlantic LNG.

The two countries in 2019 signed a binational agreement, agreeing to export gas from the shallow-water Dragon field across the maritime border to the Shell-operated Hibiscus field, about 23 kilometres away. Dragon, which has completed subsea wells in place, was expected to send initial volumes of between 200 million and 300 million cubic feet of gas per day to Hibiscus, from where it could be help replenish feedstocks for Atlantic LNG.

However, the scheme was paused when the US stepped up its sanctions against Venezuela over disputed elections there.

Similarly, the Loran field, which straddles the maritime border with the Shell-operated Manatee field in Trinidad waters, is a prime candidate for fast-tracking via an export system to Trinidad & Tobago. Trinidad last year granted a 25-year production sharing contract for the Manatee field as a result of the government-to-government agreement to allow development and marketing arrangements in which gas to the domestic market would be via NGC and exports via the Atlantic LNG facilities.

 

“Venezuela delighted”

Trinidad and Tobago’s Foreign Affairs Minister Dr Amery Browne, said Venezuela’s new Foreign Affair Minister, Yvan Gil Pinto, during the CELAC summit in Argentina, “expressed his delight at the announcement”.

Energy Minister Stuart Young did not reply to queries on feedback from regional colleagues on the development, when T&T and Venezuela will meet to craft the way forward and how it will work if Venezuela is denied payment and what arrangement T&T would use.

The T&T Chamber of Industry and Commerce stated, “We view this information released on the possibility of participating in access to explore the opportunities which Dragon Field provides, as good news for T&T. This will provide opportunities along the value chain from the upstream producers of LNG to the downstream petrochemical industries. It should lead to enhanced economic activity and enhance the country’s values in the global energy sector.”

 

 

Possible buffer to T&T

Former UNC MP Dr Devant Maharaj said, “With an anticipated price rise in electricity, which follows hikes in petrol and diesel, along with increasing food prices, the Dragon Field deal may just be the lifeline T&T needs to buffer the possible economic hardships that lurk on the horizon.

With the present global economic climate anticipating a worldwide recession, T&Ts population must congratulate the Government with the waiver to explore the Dragon natural gas field. With those sanctions, however, now lifted, it clears the way for T&T to substantially benefit from the arrangements. The Government must be commended and supported in ensuring that this effort materialises in the fastest possible time to benefit the population.”

The Heliconia Foundation for Young Professionals hailed the news and congratulated the Government “on its remarkable achievement” of the US government’s approval. “This is a significant development for energy security in the Caribbean and Europe, particularly in light of the war in Ukraine, and is testimony to the diligence and dedication of this administration. This momentous achievement will bring invaluable benefits to the people of T&T, including economic growth, job opportunities and other prosperous outcomes. It’s a positive step forward for our country and a stellar example of diplomacy at work. This administration has been careful to preserve long-standing relationships with the USA and Venezuela, even when in the case of the latter, it was deemed unpopular to do so.”

 

 

A ‘perfect relationship’

Jan 26 2023

Minister of Energy Stuart Young said T&T and Venezuela make a perfect pair on the global energy stage.  Young discussed removal of United States sanctions in Washington DC.

“I made six or eight trips last year and they were at various levels throughout Washington DC including at the highest levels. We in T&T have taken a position and we have always held the position to follow the UN charter on the principle of non-intervention, non-interference. We have maintained very good relationships with the government in Venezuela. President Maduro is still the president of Venezuela which is what we have been saying from day one.”

The United States, during the Trump administration, had placed strict economic sanctions on the Maduro government in 2019 because it claimed the government was suppressing human rights in the country.

While many other countries adopted similar positions to the US, the T&T government held steadfast in its handling of the situation.  “We continue to have that relationship because whether people want to open their eyes to it or not Venezuela has the largest oil reserves in the world and they have significant gas reserves. T&T has significant assets and infrastructure here at Pt Lisas and in Pt Fortin that convert gas to global commodities that you can monetise, ammonia, methanol, urea, UAN, LNG so we have that capacity. So it is a perfect relationship.”

T&T and Venezuela have been friends for years because of where we are positioned.
“So there is that continuing relationship. As the population would have seen I made a number of trips last year to Caracas as well meeting President Maduro, on some of those occasions and we continue to be in constant contact as we are in Washington DC at the highest levels.”

Those visits seemed to have paid off. he United States Government approved T&T’s development of the Dragon Field via an OFAC Waiver from sanctions with specific terms to be finalised. Restrictions on the Dragon Field development are now relieved and all relevant parties can progress the plans to result in natural gas from Venezuela.

“2023 is going to be an exciting year. My focus with the Ministry of Energy is to get the negotiations of the deepwater bids done with BP and Shell who have put in some bids on the deepwater because that is the next province for us.”

Young said his goal is also to ensure that the ongoing bid round is handled smoothly. On July 8 last year the Petroleum Regulations (Onshore and Nearshore Bidding) Order was published in the Gazette, signalling the start of the 2022 Onshore and Nearshore Competitive Bid Round.

11 blocks were available for bidding including Aripero, Buenos Ayres, Charuma, Cipero, Cory D, Cory F, Guayaguayare, South West Peninsula Onshore, South West Peninsula Offshore, St. Mary’s and Tulsa.  Earlier this month 16 bids were received. The successful bids will be announced in three months.

The ministry is planning to launch its Shallow Water Competitive Bid Round, within the first quarter of this year. Over twenty blocks are available for inclusion in this bid round.

Young said he also intends to “continue pushing Heritage and other onshore producers on the oil side” to continue working with the National Gas Company.  “We are going to have to have conversations this year with the downstreamers, meaning the petchem companies, to make sure that there are gas contracts going forward in the future so there is a lot still going on. And also to continue to promote T&T. So 2023 is going to continue to have a lot of activity, a lot of what we worked on will start coming in but we just have to keep pushing and I am also going to be looking at the fiscal for, in particular oil and gas production to tweak it to improve it to get more investment.”

He was confident that the decision to shut refinery operations of Petrotrin was the right one.  “I personally am a hard taskmaster so we are always pushing to get the best for the people of T&T, there are always improvements to be made. I do think the restructuring of Petrotrin was a success as you have Heritage completely focused on the Exploration and Production.”

The gas formula

To counteract high volatility in global energy prices in recent times, T&T instituted a new pricing formula for gas that will help spread risk.

“The energy sector is very volatile and you saw prices years ago as low as US$180 per metric tonne  for ammonia, last year it went up to US$1500 a metric tonne. Today it is hovering around US$1,000 a metric tonne.

You are seeing the same thing with the Henry Hub Price of gas. We are particularly proud that we negotiated a formula for our gas so we have a mixture of JKM (Japan/Korea Marker) so that gives us Asian market exposure and we have just negotiated between NBP (National Balancing Point) and TTF (Title Transfer Facility) which are two European markers.

That is an excellent formula for us because you get the benefits of spreading your risk and people will see that all of those have brought higher prices for our gas in T&T than just being pegged on Henry Hub.”

April 19 marks two years since Young was appointed Minister of Energy and Energy Industries following the untimely death of Franklin Khan who had held the position since 2016. Young said having worked with Khan during that period he feels his transition to the Energy Ministry had been seamless.

“It’s been seamless because I was assisting the previous ministers of energy since 2016 and had a particularly close working relationship with minister Khan and all of the big negotiations in the Energy sector that the government has been involved in since 2016, I have also been involved so it was a very seamless transition.”

While he declined to rate his own performance as Energy Minister, he believes he has done well so far.

“Of course being the substantive minister of energy you focus a lot more on energy and getting things done but I think it has gone well certainly from my perspective but I guess if you ask the energy stakeholders they will give you their views. I never grade myself, that is really for the stakeholders to do. I have done the best that I can and I have worked very closely, with the relationships in the sector but also spent a lot of time last year outside promoting T&T globally and hopefully the benefits will come home to roost.”

“I think the biggest thing we have achieved as the government of T&T since 2015 is the renegotiation of the price formula and structures both on the LNG side as well as standing with NGC, in how they price and the price formulas that they use for their sale of gas because I can say without fear of contradiction that all of those have lead to material and tangible benefits for the people of T&T.

“My strong belief is the resources are ours, meaning as citizens of T&T the prime minister mandated let us get better, more favourable and more equitable returns for T&T whilst balancing it with keeping foreign investment in T&T and I think we have successfully achieved that despite a lot of naysayers telling us at different times that we are going to destroy the industry, that foreign investment is going to dry up we have seen the exact opposite over the passage of time and we were always just focused on it,”

Young hailed the separation of the Loran-Manatee gas field and T&T being fertile for investment.

“We’ve pulled off a new PSC (production sharing contract) for Manatee, we’ve delinked the Loran side from Loran-Manatee, we’ve gotten bp to continue investing in T&T, Shell is invested heavily in T&T, we’ve kept EOG here, we’ve just managed the Woodside transition when they bought over BHP because Trinidadians have to understand when that takes place, new management, new owners look at their asset base, their global asset base and they can decide okay well T&T is no longer going to be a part of this asset base that we have purchased and they sell it off or they just drop it.”

The renewables balancing act

T&T needs to strike the right balance with the energy transition.

“A hydrocarbon-based economy is going to continue using hydrocarbons and we did not want the use of hydrocarbons to be drowned out in the conversation of the energy transition. Gas is going to be around for decades to come, gas is the cleanest source of fossil fuel so we made sure to get out there speak to the right audiences, and that has worked and people are focused on the continued production of oil and gas in particular for energy security.

“Of course, you have to have renewables so I am balancing that because we also are aware of the deleterious effects of the global climate change and I am particularly focused on that but you must have a balance because nobody can depend solely on renewables.”

T&T will therefore be focused on decarbonisation.

“We have already signed the methane pledge so we are trying to clean up methane which is actually more harmful than carbon dioxide and these are things we are doing but we are doing renewables as well . I am particularly proud that by the end of last year after a long set of negotiation, we signed the agreement for the largest solar farms in the English-speaking Caricom 112.2 megawatts, project Lara.”

 

 

Venezuela

January 17, 2023

PDVSA freezes most oil exports for contract reviews

HOUSTON, Jan 17 (Reuters) – The new head of Venezuelan SOC PDVSA suspended most oil exports while his team reviews contracts in a move to avoid payment defaults.

Since U.S. trading sanctions were imposed on PDVSA in 2019, the company has increasingly resorted to little known middlemen to allocate its oil exports, leading to big price discounts and problems with payments affecting its cashflow.

The freeze order is leading to port delays, as vessels that were loading have been sent away and are waiting for new directions.

PDVSA’s new Chief Executive Pedro Rafael Tellechea last week wrote to the heads of the company’s divisions of supply and trade, domestic market, international market, finances and foreign affairs and notified them of the contract suspensions. The letter did not specify how long the freeze would last.

Tellechea, an engineer graduated from a military academy who is also running state petrochemical company Pequiven since 2019, was appointed on Jan. 6 to PDVSA by President Nicolas Maduro along with eight new vice presidents.

The suspension so far has affected little known firms that act as middlemen in PDVSA’s sales to Asian refiners. Cargoes chartered by U.S. oil firm Chevron Corp (CVX.N) and Cuba’s Cubametales have not been affected by the contract revision, according to separate documents and the sources.

As of Jan. 17, most berths at Venezuela’s main oil terminal, Jose port, were empty and over a dozen vessels were at the anchorage area waiting for instructions. At other terminals, ship-to-ship transfers were interrupted and some customers were instructed to prepay cargoes entirely before delivery.

PDVSA’s previous administration last year imposed new contract terms to spot customers, demanding prepayment of a least half of the cargoes’ value, a strategy to avoid tankers setting sail without proper payment, a situation that hit its finances in recent years amid U.S. sanctions.

Less than a handful of customers are currently authorized by Washington to trade Venezuela-origin cargoes, including Chevron, Italy’s Eni (ENI.MI) and Spain’s Repsol (REP.MC); so the lion’s share of PDVSA clients are firms with no track record of trading and no credit guarantees. The U.S. government has identified many of these firms as shell companies.

Venezuela’s oil exports last year declined 2.5% to 616,540 barrels per day due to infrastructure outages, U.S. sanctions and rising competition in its key Asia market despite assistance from ally Iran, according to shipping data and documents.

Reporting by Marianna Parraga Editing by Marguerita Choy

 

 

 

PDVSA suspends exports

January 19th 2023 –

The suspension takes place just weeks after PDVSA restarted deliveries of oil to the US, and Washington gave Chevron the green light to return to its operations in the country

Venezuelan SOC PDVSA announced it was suspending most crude oil exports to review the contractual terms. The review aims to ensure there will be no payment defaults. During U.S. sanctions on the Venezuelan trade, PDVSA has to resort to middlemen to market its oil which created complications with payments.

The reviews will be taking place under the new head of the Venezuelan oil giant. Sanctions on Venezuelan oil trade were introduced in 2019 by the Trump administration, and the Biden administration’s decision to ease some sanctions followed resumption of talks last year between the government of Nicolas Maduro and the Venezuelan opposition. This led to the signing of a U.S.-brokered accord between the government and the opposition to resolve political turmoil.

The suspension takes place just weeks after PDVSA restarted deliveries of oil to the United States and Washington gave Chevron the green light to return to its operations in the country provided the oil produced from these operations goes to the U.S. Venezuela’s oil industry, crippled by U.S. sanctions, remains a big earner. Caracas said it expected income from oil exports to finance as much as 65% of the national budget for this year.

The Venezuelan government stipulated a budget of US$ 14.7 billion for this year, of which US$ 9.34 billion should come from PDVSA—up 14% on 2022. This means that PDVSA will either have to boost production or pray for another surge in international oil prices. Last year, production averaged 600,000 bpd to 700,000 bpd, significantly lower than the target of 1 million bpd President Maduro had announced. It is also anticipated that the contract review will likely also affect both production and, consequently, exports of crude oil.

 

Geoex MCG signs MoU for Multi-client seismic project

18 Jan 2023

Geoex MCG has announced the signature of a Memorandum of Understanding with The People’s Ministry of Petroleum of Venezuela (MPPP). The MoU’s objective is to support the country’s strategy to open the offshore domain for the exploration of liquid and gaseous hydrocarbons and attract international investors.

The MoU is structured in 3 parts:

1. 1. 1. Multiclient Project for 2D Regional Seismic,
      2. Reprocessing of 2D and 3D Historical Data and
      3. Geochemical Analysis

Venezuela is known to have the largest hydrocarbon reserves in the world and this project is designed to re-evaluate its offshore hydrocarbon potential.

Source: Geoex MCG

 

 

Will Venezuela Make an Oil Market Comeback in 2023?

by Andreas Exarheas, January 18, 2023

Venezuela will not be making a big comeback in the oil market this year.

That’s what thinks, according to Francisco Gonçalves, a senior analyst and energy economist at FGE , who noted that “without further sanctions relief, we expect Venezuela’s production gains in 2023 will be limited”.

“Chevron joint venture production aside, Venezuela’s output for most of 2022 was stuck at around 650,000 barrels per day – albeit some 150,000 barrels per day higher year on year due mainly to more frequent imports of Iranian condensate – showing that the country has limited capacity for production growth.

“With regards to the output from Chevron’s four Venezuelan joint ventures over the next months, growth is likely to be minimal, given Chevron has said it is not planning on making any significant investment there in the short term.”

Although the three main JVs could “in theory” produce around 200,000 barrels per day, compared to around 50,000 barrels per day in November 2022, the partners would need to make “big investments” over the next two to three years to ramp-up their production by another 80-100,000 barrels per day overall.

“Even if there are some small synergies – e.g., the new licence allows Chevron to use imported diluent at its Venezuelan JVs, therefore freeing PDVSA to use up Iranian condensate for its other non-Chevron heavy oil ventures – we would highlight the various problems with the country’s ageing storage and offloading infrastructure which have and will most likely to continue hampering any further sustained recovery in Venezuelan oil production and/or exports.

“Therefore, we could see a potential boost to Venezuela’s output, but by just 50,000 barrels per day by 1H 2023 and not much thereafter,.”

Vikas Dwivedi, at Macquarie Group, said that Venezuela is unlikely to make a “significant” comeback in 2023.

“The political gap is still too large for a full normalization of Venezuela’s ability to export their full volumes. Even more importantly, the mechanical gap is probably even larger as the Venezuelan oil industry would need significant upgrades and repairs to ramp up production. Finally, if the oil market remains oversupplied for most of 2023 as we expect, the U.S. and other countries will be less motivated to work with Venezuela to increase their oil production.”

Macquarie Group is expecting a modest production increase from Venezuela this year – “on the order of a ~75,000 barrel per day increase for the full-year, rising through the year”.

Paul Horsnell, at Standard Chartered Bank, thinks any output comeback for the country will likely be limited.

“Were sanctions to be significantly eased immediately, [it] would put the potential upside this year at 250-300,000 barrels per day, i.e. taking crude output to 900-950,000 barrels per day. That comes from fixing some of the immediate and most obvious problems and easing a few bottlenecks.

“Beyond that, the timescale for a return to, say, two million barrels per day is likely to be long, perhaps three to five years, and returning to the three million barrel per day of crude oil hit in the late-90s is completely off the table with the current structure of the industry and petroleum laws.”

In the mid-1990s, PdVSA talked of getting to five million barrels per day.

“The trouble was that they tried to get there by de facto operating independently of the Venezuelan government, and they provoked the rest of OPEC into a price war that was not called off until well after the Acción Democrática government had been voted out and President Chavez voted in. The scope for such aggressive production planning to happen again is considerably less now, but Venezuela’s experience is perhaps an object lesson in the dangers of a national oil company acting as a state within a state and it explains why the regulatory re-opening of the Venezuelan oil sector will likely be fairly cautious regardless of who is in power.”

email andreas.exarheas@rigzone.com

GeoPark Q4 2022 operational update

20 Jan 2023

GeoPark, a leading independent Latin American oil and gas explorer, operator and consolidator, has announced its operational update for the three-month period ended December 31, 2022.

All figures are expressed in US Dollars. Growth comparisons refer to the same period of the prior year, except when otherwise specified.

Growing Production in Core Assets and Achieving Guidance

1. Consolidated average oil and gas production up 7% to 38,433 boepd(1)
2. Annual 2022 average production of 38,620 boepd, within guidance
   2022 exit production of 37,700 boepd, with approximately 1,700 boepd of net
3. production being deferred due to temporary shut-ins in the CPO-5 block (GeoPark non-operated, 30% WI) in Colombia and lower gas demand in the Manati gas field (GeoPark non-operated, 10% WI) in Brazil
4. Llanos 34 block (GeoPark operated, 45% WI) 2022 annual average gross production up 2% to 57,016 bopd
5. CPO-5 block 2022 annual average gross production up 50% to 18,600 bopd (up 64% to 20,235 boepd gross average production in 4Q2022)
6. GeoPark’s full-year 2022 work program included drilling of 50 gross wells(2) (40 operated), a record for GeoPark

Llanos Basin: Finding More Oil & Extending Production Growth in the CPO-5 Block

Llanos 34 block:

1. Three drilling and three workover rigs in operation
2. Average gross production down 6% to 54,610 bopd
3. Production and operations were partially affected for 15 days in 4Q2022 due to blockades
4. Guaco Sur 1 exploration well was spudded and reached total depth in December 2022
   Preliminary logging information indicated hydrocarbons in the Guadalupe formation
5. Testing activities are expected to start in late January 2023

CPO-5 block:

1. Average gross production up 64% to 20,235 bopd
2. Two new development wells, Indico 6 and Indico 7, together tested over 11,000 bopd gross, and are expected to continue producing at a restricted rate of approximately 8,000 bopd gross, to continue testing overall reservoir conditions
3. These new wells are temporarily shut-in (Indico 6 since mid-December 2022 and Indico 7 since early January 2023) as the operator is obtaining customary regulatory approvals, and are expected to resume production within the next few weeks
4. Pre-drilling activities currently underway in the Yarico exploration prospect, located adjacent to the Mariposa field, targeting to spud the Yarico 1 exploration well in January 2023

Llanos 87 block (GeoPark operated, 50% WI):

1. Two drilling rigs in operation
2. Tororoi 1 exploration well was spudded in October 2022 and reached total depth in December 2022
3. Preliminary logging information indicated hydrocarbons in the Ubaque, Guadalupe (Barco) and Mirador formations
4. Initial testing activities carried out in the Ubaque formation with further testing planned to continue in 1Q2023
5. Currently drilling two exploration wells (Picabuey 1 and Zorzal 1), targeting to reach total depth in 1Q2023

Oriente Basin: New Exploration Success

Espejo block (GeoPark operated, 50% WI):

1. Pashuri 1 exploration well was spudded in September 2022 and reached total depth in October 2022
2. Preliminary logging information indicated hydrocarbons in the Napo formation
   The well is currently producing 400 bopd gross

Putumayo Basin: Drilling Attractive Short-Cycle Prospects

Platanillo block (GeoPark operated, 100% WI):

1. Average gross production up 37% to 2,292 bopd
2. Alea NW 1 exploration well was spudded in September 2022
3. Preliminary logging information indicated hydrocarbons in the U and N formations
4. The well has been producing 225 bopd from the U formation
5. Currently testing the N formation, with initial production rates of 245 bopd
6. Fast, Immediate and Aggressive Actions to Minimize Emissions

Solar photovoltaic plant in the Llanos 34 block fully operational since November 2022
The solar plant and the interconnection of the Llanos 34 block to Colombia’s national power grid in July 2022 are key drivers to continue improving the Llanos 34 block’s industry-leading cost and carbon footprint

Powerful Safety Culture

• 2022 annual Lost Time Injury Rate (LTIR) of 0.35(3) (15% lower than last 5-year average)
• 2022 annual Total Recordable Injury Rate (TRIR) of 0.70(4) (36% lower than last 5-year average)

Balance Sheet Strengthening and Accelerated Shareholder Returns

1. Quarterly dividend of $0.127 per share, or $7.5 million, paid on December 7, 2022 (or an annualized dividend of approximately $30 million, a 3.5% dividend yield(5)
2. Acquired 2.7 million shares (or over 4.5% of shares outstanding) for $36.2 million in 2022 (0.9 million shares acquired for $13.1 million in 4Q2022)
3. Renewed discretionary share buyback program for up to 10% of shares outstanding until December 2023
4. Cash-in-hand of $122 million(6) as of December 31, 2022 ($93 million as of September 30, 2022)

2023 Work Program: Growing Production, Drilling More Wells and Giving Back to Shareholders

1. 2023 production guidance of 39,500-41,500 boepd (assuming no production from the exploration drilling program)
2. Self-funded 2023 capital expenditures program of $200-220 million to drill 50-55 gross wells (including 10-15 low-risk high-potential exploration and appraisal wells)
3. At $80-90 per bbl Brent, GeoPark expects to generate an Adjusted EBITDA of $510-580 million and a free cash flow of $120-140 million(7)
4. Targeting to return approximately 40-50% of free cash flow after taxes to shareholders

Upcoming Catalysts

• Drilling 10-13 gross wells in 1Q2023, targeting development and exploration projects in the Llanos and Putumayo basins in Colombia
• Exploration drilling includes 3-4 new gross wells in the Llanos basin (CPO-5 and Llanos 87 blocks)

Breakdown of Quarterly Production by Country

The following table shows production figures for 4Q2022, as compared to 4Q2021:

a) Includes royalties paid in kind in Colombia for approximately 759 bopd in 4Q2022. No royalties were paid in kind in Ecuador, Chile or Brazil. Production in Ecuador is reported before the Government’s production share of approximately 431 bopd.

b) Argentina blocks were divested on January 31, 2022.

c) Pro forma production in 4Q2021 excludes production from divested blocks in Argentina (completed in January 2022).

Quarterly Production

Oil and Gas Production Update

Consolidated:

Oil and gas production in 4Q2022 was 38,433 boepd. Adjusting for divestments in Argentina (completed on January 31, 2022), consolidated oil and gas production increased by 7% compared to 4Q2021, due to higher production in Colombia, Chile and Ecuador, partially offset by lower production in Brazil. Oil represented 92% and 88% of total reported production in 4Q2022 and 4Q2021, respectively.

Colombia:

Average net oil and gas production in Colombia increased by 5% to 33,749 boepd in 4Q2022 compared to 32,002 boepd in 4Q2021, resulting from increased production in the CPO-5 and Platanillo blocks, partially offset by lower production in the Llanos 34 block.

Oil and gas production highlights in GeoPark’s main blocks in Colombia:

• Llanos 34 block net average production decreased by 6% to 24,574 bopd (or 54,610 bopd gross) in 4Q2022 compared to 4Q2021. Production in 4Q2022 was affected by 15 days of localized blockades that impacted production and operations in the Llanos basin, combined with failures in electric submersible pumps in 12 wells since September 2022. These events reduced overall existing production and caused delays in completing and testing new wells, which are being gradually normalized
• CPO-5 block net average production increased by 64% to 6,070 bopd (or 20,235 bopd gross) in 4Q2022 compared to 4Q2021
• Platanillo block average production increased by 37% to 2,292 bopd in 4Q2022 compared to 4Q2021

Recent Activity in the Llanos and Putumayo Basins

Llanos 34 Block

1. Guaco Sur 1 exploration well was spudded in December 2022 and reached total depth of 12,178 feet in late December 2022
2. Preliminary logging information indicated hydrocarbons in the Guadalupe formation
3. Testing activities are expected to start in late January 2023
4. The solar photovoltaic plant became fully operational in November 2022, which jointly with the interconnection of the block to Colombia’s national power grid in July 2022 are key drivers to continue improving the block’s industry-leading cost and carbon footprint, allowing GeoPark to replace a significant portion of its gas and diesel consumption with renewable energy

CPO-5 Block

1. Two new development wells, Indico 6 and Indico 7, together tested over 11,000 bopd gross, and are expected to continue producing at a restricted rate of approximately 8,000 bopd gross, to continue testing overall reservoir conditions
2. Indico 6 development well was spudded in September 2022 and reached total depth of 10,446 feet in October 2022
3. Preliminary logging information indicated 201 feet of net pay in the Ubaque formation
4. The well tested up to 6,270 bopd of 35 degrees API with a 0.1% water cut (on a restricted 48/64 inch choke)
5. The well started testing in October 2022 and has been closed since mid-December 2022 as the operator is obtaining customary regulatory approvals, and is expected to resume production within the next few weeks
6. Indico 7 development well was spudded in October 2022 and reached total depth of 10,251 feet in December 2022
7. Preliminary logging information indicated 185 feet of net pay in the Ubaque formation
8. The well tested up to 5,245 bopd of 35 degrees API with a 0.25% water cut (on a restricted 48/64 inch choke)
9. The well started testing in late December and has been closed since early January 2023 as the operator is obtaining customary regulatory approvals, and is expected to resume production within the next few weeks
10. Pre-drilling activities currently underway in the Yarico exploration prospect, located adjacent to the Mariposa field, targeting to spud the Yarico 1 exploration well in January 2023

Llanos 87 Block

1. Two drilling rigs currently in operation
2. Tororoi 1 exploration well was spudded in October 2022 and reached total depth of 13,650 feet in December 2022
3. Preliminary logging information indicated hydrocarbons in the Ubaque, Guadalupe (Barco) and Mirador formations
4. Initial testing activities after three days of testing in the Ubaque formation showed a production rate of up to 780 mcfpd of natural gas (or 130 boepd) and light oil shows, with the well significantly increasing its water cut through the initial testing. Further testing activities are planned to continue in 1Q2023
5. Currently drilling two exploration wells (Picabuey 1 and Zorzal 1), targeting to reach total depth in 1Q2023

Llanos 94 Block (GeoPark non-operated, 50% WI)

1. Humea 1 exploration well was spudded in October 2022 and reached a total depth of 11,350 feet.
2. According to petrophysical logging interpretation, the well encountered reservoir in the Gacheta formation with no evidence of hydrocarbons and it was abandoned by the operator

Llanos 123 Block (GeoPark operated, 50% WI)

Pre-drilling activities currently underway, targeting to spud the first exploration well in 2Q2023

Platanillo Block

1. Alea NW 1 exploration well was spudded in September 2022 and reached total depth of 8,560 feet
2. Preliminary logging information indicated hydrocarbons in the U and N formations
3. The well has been producing 225 bopd from the U formation
4. Currently testing the N formation, with initial production rates of 245 bopd
5. Libelula Sur 1 exploration well was spudded in November 2022 and reached total depth of 10,647 feet in December 2022. According to petrophysical logging interpretation, the well encountered reservoir in the U and T formations with no evidence of hydrocarbons and the well was abandoned

Ecuador:

• Average net oil production in Ecuador before the Government’s share reached 1,259 bopd in 4Q2022 (828 bopd after the Government’s share).
• The Government’s production share varies with oil prices and is approximately 30-40% considering an Oriente crude oil price of $70-100 per bbl.

Espejo block

1. Pashuri 1 exploration well was spudded in September 2022 and reached total depth of 10,414 feet in October 2022
2. Preliminary logging information indicated the presence of hydrocarbons in the M1 and U sandstones in the Napo formation
3. The well is currently producing approximately 400 bopd of 19 degrees API with 3% water cut from the U sandstone in the Napo formation
4. Caracara 1 exploration well was spudded in November 2022 and reached total depth of 10,090 feet in late November 2022
5. Preliminary logging information indicated the presence of hydrocarbons in the M1 sandstone in the Napo formation
6. Initial production tests after six days of testing showed traces of heavy and viscous oil and further analyses are being carried out to define next steps

Chile:

• Average net production in Chile increased by 6% to 2,291 boepd in 4Q2022 compared to 2,162 boepd in 4Q2021, resulting from higher oil and flat gas production levels.
• The production mix was 79% natural gas (vs 83% in 4Q2021) and 21% light oil (vs 17% in 4Q2021).

Brazil:

• Average net production in the Manati field in Brazil decreased by 38% to 1,134 boepd in 4Q2022 compared to 1,822 boepd in 4Q2021 due to limited gas demand, combined with the natural decline of the field.
• Since late December 2022, net gas production in the Manati gas field has been reduced to 600-1,000 boepd.
• The production mix was 99% natural gas and 1% oil and condensate in both 4Q2022 and 4Q2021.

2022 Year-end Reserves Release Date

GeoPark plans to release its 2022 year-end independent reserves certification by the end of January 2023 or early February 2023.

Source: GeoPark

 

ECLAC

January 19th 2023

The Economic Commission for Latin America and the Caribbean (ECLAC) foresees “great stress” and a “cascade of crises” including rampant inflation and increasing climate change that will affect the livelihoods of people in the region.

“If we make the list of shocks, they have all hit Latin America very hard,” ECLAC Executive Secretary José Manuel Salazar-Xirinachs said. “There is a debt shock, an interest rate shock, an inflationary shock, the health shock, the value chain shock. And the longer-term climate change shock, which is there.”

The consequence will be ”a year of great stress on governments, on societies with many demands, with great impatience on the part of the population, both the vulnerable and the poor and the middle classes.“

ECLAC estimates Latin America will grow by 1.3% this year, less than half of 2022 figures. Hence, the agency fears another ”lost decade“ like that of the 1980s, with growth too weak, entailing ”loss of opportunities and increased poverty” with already 32.1% of the region’s population (201 million people) living in that condition as per ECLAC’s assessments, and 13% in extreme poverty(82 million).

Inflation stood at between 8 and 10% in most countries and there were also “extreme cases such as Argentina, which closed the year at almost 100 %. The only good news is that we can already see that the prices of foodstuffs and oil are already at their turning point. Much of the productive capacity that was in China is moving to other regions and Latin America is very well positioned, close to the United States,” which benefits countries such as Mexico, Guatemala and Costa Rica.

Salazar-Xirinachs mentioned “great areas of opportunity” such as the biodiversity economy or digital service centers (call centers), which in countries like Uruguay and Costa Rica are generating an increasing number of jobs. He foresees a decline in basic interest rates by the first or second quarter of 2023.

Costa Rican Salazar-Xirinachs took over as head of ECLAC in October of 2022 from Mexico’s Alicia Bárcena.