Overview

Commercial oil production in Trinidad & Tobago (T&T) began 105 years ago. T&T are the southernmost islands in the Caribbean, located northeast of Venezuela and strategically located for access to major markets. At the end of 2012, oil production stood at 78,846 bopd and over 4 billion barrels had been produced since production began.

Last year’s deepwater bid round, out of which Australia’s BHP Billiton emerged the sole winner, was hailed by the Ministry of Energy and Energy Affairs (the Ministry) as the most successful bid round for 14 years.

The 2013 onshore-based bid round is the first dedicated, land-based bid round launched by the Ministry since the late 1990s. That last such bid round led to the Carapal Ridge discovery, now operated by BG.

International companies already active in the exploration and production (E&P) sector in T&T include: BHP Billiton, BP, Centrica, Chevron, and Shell.

What’s on offer?

T&T put up nine blocks for bids from oil and gas companies seeking licences for E&P: three onshore blocks and six offshore, deepwater blocks off Trinidad’s east coast.

The three onshore blocks (Rio Claro, Ottawa and St Mary’s) cover over 150,000 acres of land, with the Rio Claro block the biggest at 73,000 acres. One of the primary reservoirs to be targeted in the bid lies near to the Penal / Barrackpore field, an established prolific production area. Extensive information on the blocks is already apparently available which should shorten the time frame to commerciality. Bids were expected to be submitted on 14 June 2013 after a four-month period of evaluation. A US$40,000 participation fee must be paid entitling the bidder to access a data package for all the blocks for bidding following the execution of a confidentiality agreement.

The onshore bid round is expected to be awarded on 6 September 2013. The licensee will undertake exploration, drilling and development at its sole risk and cost, whilst the revenue to the host government will be paid via rentals, taxes and royalties.

The offshore bid round comprising six blocks is at preliminary stages. Nominations for preferred blocks are being requested by the Ministry by November 2013.

Legislation, contractual and fiscal terms

The successful bidder(s) will be issued with E&P licences and will enter into a joint operating agreement (JOA) with state-owned oil company Petroleum Company of Trinidad and Tobago (Petrotrin). Petrotrin will also have a 20 per cent carried interest in all three blocks on offer.

JOA key terms

The joint venture companies will carry Petrotrin 100 per cent for certain costs, including:

  1. all Minimum Work Obligations under the Licence during the Exploration Period and all work and expenditures ancillary to such work obligations;
  2. all financial obligations under the Licence during the Exploration Period, and thereafter all financial obligations under the Licence apportioned between the Parties in accordance with their Participating Interest; and
  3. the cost of engagement of a Petrotrin Secondee during the Exploration Period; thereafter, such cost will be apportioned between the Parties in accordance with their Participating Interest.

Each Party's rights to tax benefits and any other benefits and/or advantages related to expenditures on the Carried Obligations shall be in accordance with their respective Paying Interest.

Each Party shall appoint one representative and one alternative representative to serve on the Operating Committee.

Within 60 Days after the Effective Date, the Operator shall deliver to the Parties a proposed Work Programme and Budget detailing the Joint Operations to be performed for the remainder of the current Calendar Year and, if appropriate, for the following Calendar Year. Within 30 Days of such delivery, the Operating Committee shall meet to consider and endeavour to approve a Work Programme and Budget.

Comment

T&T has been an established region for oil and gas production for over 100 years. Its most successful bid in 14 years came last year with BHP Billiton's win of four blocks. T&T is no doubt looking to capitalise on this recent success.