Episode Transcript
[00:00:01] Speaker A: The best insight, instant feedback, accountability the.
[00:00:04] Speaker B: All new Talk Radio Freedom 106.5 Turn our attention this morning to the former Energy and Energies Affairs Minister, Attorney at Law, Ms. Carolyn Sipasad Beachan as we welcome her to Freedom 106.5 FM. This morning we say good morning to you, ma'am. Good morning.
I think you are muted, you just have to unmute.
[00:00:31] Speaker A: Good morning. My apologies. Good morning to to you and to all your listeners.
[00:00:35] Speaker B: Good morning to you and I thank you very much for joining us this early this morning.
The country has awoken to a very, very startling, startling discovery this morning. Something that many persons would have said it, we could have seen it coming. It was on the horizon.
Let's break down the science of what is happening in our nation this morning. Let's start off with people talking. There was talk around the area even this morning when I was on my way to work, persons were asking me, Davy, why is it that we as an independent nation, why is it that another country has to pass license in order for us to do business with another entity on the other side of the spectrum? When you look at where Venezuela is located to where the US Is located, it's on total opposite sides of the globe. So persons are asking that question and who better to answer it than you as we kick things off this morning? So I would like you to start off with that question to explain the OFAC license, right. What it means for Trinidad and Tobago and why it is so crucial for us to have to depend on this as an independent nation.
[00:01:45] Speaker A: Well, good morning again. I think it's important to understand, but first of all, let me just say this is not good news.
It's not news to celebrate because the government was relying on this natural gas from the Dragon gas and the Coquina mannequin to be able to continue to support Trinidad and Tobago, especially with respect to our petrochemical sector and Atlantic lng in terms of the exposure support of LNG and petrochemicals. That means therefore, you know, this is the engine of growth. This is where most of our foreign exchange is derived from. So obviously, you know, there are some serious consequences.
I was on this program about a couple of months ago and sometime before this, before that, I think this was around in and around the time that Donald Trump had won the elections. And you know, everyone was asked and you know, when what are the implications for the new administration and the impact on TNT's future in terms of these very same OFAC license? And we would recall that since then we will get in the signals.
Just based on Mr. Trump's energy policy in making the United States number one again as an energy exporter, an exporter of LNG, it is clear that, you know, Mr. Trump will not be interested in energy security for the region for Trinidad and Tobago unless that is negotiated. So having said all of that, I think we could put that now.
But getting back to your question in terms of why we need these OFAC license to be able to do business with other countries.
So let's understand what the OFAC license was doing. The OFAC license was permitting, gave permission to Trinidad and Tobago and other entities operating in Trinidad and Tobago, including our local state owned company, National Gas Company and the international oil companies such as Shell and BP, which in this case Shell was a partner of 70% in the Dragon Gas deal and the NGC 30%. And similarly, as we move to the Coquina mannequin, you would have the same situation.
You know, now realizing as well, I just want to give a quick background. Coking a mannequin was across border field compared to Dragon Gas, which is an across the border field. Right. And we had secured an exploration and production license for The Dragon Gas a 30 year with the government of Venezuela, which meant that we had access through the NGC and Shell to make investments to be able to extract natural gas from that field, that being totally in Venezuelan waters. The Coquina mannequin field is a cross border field. It's a joint operation. It would have been, you know, whenever a reservoir straddled the maritime boundary or the border between two countries. We unitize because we want to be able to exploit the efficiencies because it is more cost efficient, it is less damage to the reservoir, we unitize the feature. So there are a number of unitized fields, one of them being Coquina Manikin, the other being Laura Manatee. However, since all these issues arose, and I'll come back to the OFAC license, since all these issues arose with Venezuela, where there were these sanctions, the international investors, you know, through the government of Trinidad and Tobago and in collaboration with Venezuela, took the time out to de unitize Laura and Manatee and de unitize Coquina Mannequin. So just to be very clear, bp, who is the investor in Coquina Manikin, will continue to develop the Trinidad side of that field, as is the case with Manatee, the Trinidad side of that field. So that gas is still there to be exploited. However, these OFAC license would have allowed us now to do business with Venezuela in the sense that we would have been able to develop the Venezuelan side side of the field, both in Coquina Mannequin and there were moves to do the same thing with lower Ad Manatee. Now that the OFAC license and let's just speak a little bit toward the OPAC license represented and why they are needed. We know the importance of the United States to the world in the global economy. We understand they use sanctions to be able to force certain types of behaviors. In this case, the issue with Venezuela started off with the whole issue of what they deem to be the undemocratic process for the election of a president and therefore whether or not the democratically elected president was there. So they put on sanctions as they have done with other countries such as Iran and others. And these sanctions will mean that you cannot do business with that country, otherwise you face risk of facing sanctions yourself. So for example, now that these OFAC license, the OFAC license would have given permission to these entities such as Shell, bp, the national gas company, Trinidad and Tobago government to do business with Venezuela and therefore to continue to exploit, make investments and extract from those fields natural gas, so that they will not face sanctions. And what are these sanctions that you could face? Your products itself will not be allowed entry into the United States. You can face issues such as banking, but international banking agencies will look at you because you will no longer have. So in the case of investment companies like NGC and Shell and bp, they will not have access to United States dollars. So therefore they will be in this situation and know that a lot of the international banking and to get into that details, you know, it'll take us a little time, but you know, they would start de risking and therefore removing them off the list. So they cannot continue with international banking practices which is required by international investors throughout the world. So these are the issues that they would face. And if they continue force OFA to continue to operate in Venezuela, they will face what we call secondary. This is a risk they will face the secondary sector. So that's the issue that we are dealing with respect to these OFAC license. Just to clarify, I remember recently I was called by the media when the tariffs were imposed. So I want to distinguish between the tariffs, the imposition of tariffs and these OFAC license. We were not facing the tariffs because we were not extracting and buying oil and gas from Venezuela. We were developing a field and therefore what we were doing was paying royalty payments to the government of Venezuela. When we start extracting, we were not buying oil and gas which would have faced those sanctions. So I just Wanted to put that on the record.
[00:08:33] Speaker B: You know, I appreciate you explaining that in such detail because a lot of persons did not understand. They hear the rhetoric and the narrative being spewed by both political entities saying we in bed with the devil. We need to pay attention now the importance of understanding why we need those license and these sanctions. I think when it comes to the sanctions, maybe we can delve a little clearer on those matters. Now we understand the tariffs, the sanctions. Just take a minute or two and just delve a little deeper. One texter is now asking me if you can explain that aspect of sanctioning because to them it still seems that as though we can still forget the US how dangerous is it if we abandon the US policies for how they feel against the Maduro regime? Because I remember when Prime Minister Steucho went across to Jamaica to meet with Secretary of State Rubio, he reiterated the point that Trinidad and Tobago should.
It would be nice if you all can see it our way.
Even though. Right. He wanted. He never said that. You all have to. He said it would be nice. We are not interested in harming Trinidad and Tobago. The Prime Minister felt a bit secured when he explained the benefits of taking this gas and what it means for the region. Now coming out of those talks, persons felt a bit. There was mixed a mixture in the population of, you know, whether we as being mama guyed by. By Secretary of State or if the Prime Minister took that to heart. So I'm saying that was just a mama guy because once he reached back to Washington, Trump vetoes everything. So at the end of the day, if we abandon any thought of siding with the U.S. could you just take a minute or two to explain how severe it can affect us in Trinidad and Tobago?
[00:10:22] Speaker A: So what are the potential consequences consequences of that risk of continuing post the revocation of the license if we continue.
[00:10:30] Speaker B: How would the geopolitics affect us?
[00:10:33] Speaker A: Yeah. So the potential consequences would include, for example, you would have prohibition, you would be prohibited from access to US Financial systems. So companies such as ngc, the PP and including Trinidad and Tobago government will be prohibited from access to the financial systems there. So understand the impact of credit cards, etc. Etc. You can have asset freezes as well. So some of these international players, because they have assets all over the world, they can end up with freezing of assets in the US because of those sanctions, visa and travel bans. I think you would have heard that recently. Even when we were, I don't know if you recall the Caricom region, you know, there were some Issues coming out from instructions coming out from, you know, Secretary of State Rubio, that if we continue to support Cuba and Venezuela, you know, a lot of these persons, you know, like ministers and so on, and even executives, let's say board of directors, members of national gas company or the senior management members for both companies, bp, Shell, all of them, they could face visa and travel bans, you know, going into the United States. And all of this leads to what we call reputational damage from, you know, when you are disengaged from the, from these financial systems. So these, these risks discourage both local and international investments. Because if we continue to do business with Venezuela for Trinidad and Tobago now, our reputation could suffer where investor confidence is concerned. So investors who are likely to come to Trinidad and Tobago will not come because they too do not want to face those sanctions. Right. So I don't know. Any questions?
[00:12:21] Speaker B: No, no, no, that's, that's clear. I mean, I mean, if anybody wants one text is now messaging me and asking me, would individuals be impacted by the visa bans? Talking about regular citizens, I would imagine, yes. One other person is asking if you can explain, the financial sector will also face the sanctions and if you can clarify how that will affect us, how much money was wasted on this project. But before we get to those texts, we appreciate all those messages coming in via our text board this morning at 3061065. Now we have put all, as it was said in the layman term, all our eggs in one basket. As a former energy minister, would you say much was done by this government over the last nine and a half years to diversify the economy or was everything placed on this? We would have known that this election was coming. We would have seen the candidates going up, we would have heard the talks. Did the government do everything in its power to remove us from just depending on this Dragon Gas deal?
[00:13:19] Speaker A: Well, I think that has been, I've seen it a lot now in the public domain.
Many years ago I raised that issue because there was always this issue about us being able to develop our own acreage here in Trinidad and Tobago, what I would call our deep water acreage, where we do have some prospects there, but we have not taken the time to develop it because I suppose because of the high risk involved, the high capital investments required compared to the shallow water areas. And you know that even when I was there as Minister of Energy that pursued the one that we opened up, we opened up the deep water acreage to be able to allow forbidden wrongs. I had always maintained so Let me just, I hate to sound like a broken record, but I had always maintained that in order for us to continue to keep up with our usage. I don't know if you remember, many, many years ago, even when I was in the Senate, I always spoke about the gas reserve position, our gas to what we call our production to, you know, our reserve to production ratio. And that meant that we needed to keep proving up new reserves every time we use. And my arguments even started in The Senate in 2002 was when we signed off on LNG string three and four. Two, three and four members would recall that since then, you see, this is not a business that is shortened.
Let me start by saying that I think sometimes we get confused with, you know, business models that operate in other sectors of the economy. When we are dealing with the energy sector, we're talking 10, 20 years, 30 years of a license. We're talking about 10 years to develop to even see first class, right from the time you award the whole issue of your bidding rounds, then negotiating what we call those production sharing contracts or expiration and production license, those things take time and therefore this business is long term and it's beyond any election cycle, the five year cycle. And all governments have to understand that. And it's one thing that I do want to say about Trinidad and Tobago in my experience over the years, is that, you know, one of the reasons why there's still high investor confidence once we have the gas, you know, there's high investor confidence, there's a low risk to doing business in Trinidad and Tobago for investors is because we have business continuity beyond, you know, from one government to the other. We honor contracts, we honor agreements and therefore investors are comforted by that. And I think that's something that we have to be mindful about when we are making our statements on the political platforms that we ensure that we continue to maintain investor confidence in Trinidad and Tobago through it all, including during this time when, you know, we do have OFAC license being revoked. However, going back to my point, it is always important for us and if we had maintained two bidding rounds per year, we would have not been in this situation today. This is not today. This has been since back of 2002. We have been talking about proving up our reserves beyond 10 years. Because if you have a gas reserve position of just 10 years, that is not enough to support any project coming in, including in your downstream sector, the petrochemical sector, because what is the payback time for a plant? It's 20 years, sometimes 30 years. And therefore we need to ensure that we have proven up our reserve now. Venezuela Truck and Gas, Coquina, Mannequin, Laura, Manatee, all great projects I was part of Laura and Manatee. You know, I signed off on that unitization agreement when we came into government. And we will always maintain those cross border fields. They are, cross border fields are good projects. However, because of the high geopolitical risk involved, you needed to balance it. You needed to make sure your supply is diversified and as you said, not, you know, and we have always been saying you cannot put all your eggs in one basket, especially all your eggs going into a very high risk basket with high geopolitical risk. Because we knew that this could be a possibility for a long time. Therefore, I always try to, I have asked this question over and over, is it really necessary? And I think, you know, strategies change, political between different governments and you know, we had tried in our time to what we call fiscalize, incentivize the whole upstream, recognizing that we were going into the deep water acreage, we gave a lot of incentives for that deep water acreage to encourage investment, to encourage exploration because we understand the high cost. Whereas you might be talking about 10 million, this is now 100 million, we are talking about investment for a particular expiration, you know, exploration work. So it is quite a big difference. So when you are attracting investors with that level of capital expenditure, you have to incentivize it. And the reason I'm saying this is treat your product, your proving up of your reserves, whether gas or oil, but in particular natural gas, like a bank because we need that reserve to support downstream. And downstream is where we have the economic benefits for Trinidad and Tobago. I've maintained this, I've probably said this several times on this program. That's where you get the knock on effect. That's where you are able to gain your foreign exchange. That's where you get all your employment because this is where you get training, development, technology and you know, important to Trinidad. This is where you have all of your off street, what we call, you know, your suit service industries being stimulated to support the downstream. So therefore, this is why we always talk about going down the value chain. And therefore if it meant incentivizing upstream to be able to get that gas reserve, you know, a comfortable gas reserve that would support your downstream, then the investments will not be as difficult because now you face further risk downstream by not having adequate gas reserve. You know, investors will see it as a high risk to the payback for their plans as they are seeing right now with the curtailment of the shortage of natural gas for the downstream sector.
[00:19:40] Speaker B: Now, I thank you very much for that prolific explanation there. Now, looking at the production cost to develop, I think it was Shell, if you can correct me if I'm wrong, to get this dragon out. I mean, we at the taxpayers would have been paying for this to be done. They would have been saying time and time again, listen, this is a geopolitical high risk deal. However, we were hoping that the Biden administration would have regained governance. That didn't happen. All right, so we are now seeing where the Trump administration is. Here. We have right here in Trinidad and Tobago some of our economists talking about how much gas that we need to produce per day. So I'll ask you, during your tenure as the Minister of Energy, what was the gas producing production like per day here in Trinidad and Tobago? And there's a reason I'm asking you that.
[00:20:27] Speaker A: Yeah, well, I mean, we have had a constant decline. And at the time, and I was, we were close to, you know, so where are we right now?
[00:20:37] Speaker B: About 2.5, 2.5 to 2.7 billion, which is nowhere near because we need anywhere between 3.5 to 4 billion.
[00:20:44] Speaker A: And we were still above the 3.5 threshold. But we did see, you know, I mean, again too, this business is not about today. So even when we were there, when I was there, the whole issue was projected into the future. We saw this, I think I said this on this program on the fourth of around the time when, you know, Mr. Trump was, you know, Donald Trump was elected and elected into office. And I was on this program and I mentioned that during that time, you know, all of this we predicted, it's not today, we predicted that there would have been this continued decline. Always remember, in natural gas, you know, compared to oil, as soon as you start producing from a field, there's a natural decline in that field, which you have to supplement, you have to supplement by new, by what we call new work obligations to prove up more results. And that did not.
This is why we took an aggressive approach towards exploration. We incentivize, even enhancing production in terms of, even onshore, offshore, even our existing blocks, even exploring what we call deep horizons, even in the shallow water area, looking at deeper, what we call going even deeper into the subsoil. So there were a lot of initiatives to be able to prove this up because we saw this decline. What we are seeing today is not today. We predicted this 20, 30 years ago. And therefore you started planning for that process. Now, having said that, I want to Say, I mean, I did say on this program, on the last time, there has been no annual bidding rounds. I've seen that there was the last one, I think in 2023. There was one in 2021, 24 as well.
[00:22:29] Speaker B: That's correct. Right in here.
[00:22:31] Speaker A: So we have been seeing, the government did institute, probably when they started seeing what was happening with drag and gas and cooking a mannequin, the risk involved and the possibility, the possible outcomes, they started going forward with what we call these bidding rounds, but it started a bit too late. And this wasn't something that I would say, this was something that I always had with this particular administration, the People's National Movement administration, that they were always slow in getting their bidding rounds off the ground. And therefore, when. No, I mean, having said that, I want to be fair, I started with two bidding rounds. I mean, we didn't continue after 2011 with two bidding rounds per year. But I had said from the start that there must be two bidding rounds per year because not until you do bidding rounds are you going to understand more about your geology through your seismic surveys. As we get more information, we will understand more about our geological structures. And that information, sometimes even if you don't have a very successful bid round. And for example, when we did open the deepwater acreage, it was supposed to close at the end of December So of 2010, did it by one month. And many wanted me to extend it even further. And I said, no, we need to close it because even though we don't get as many successful bits, and we did have uptakes in that bid, that bid round, we did end up awarding blocks to two or three, you know, two or three blocks. But the issue is that the information that you are able to get from it will help you, assist you with moving forward in your next bid round. So, you know it. More and more data that you have, it's better, there's more certainty that develops for investors as they start, you know, making their submissions in those bid rounds. So therefore, I think that people misunderstand the purpose sometimes of these bid rounds. I mean, it's one of the reasons that right after that bid round we were able to move forward with what we commissioned, a 3D seismic for the deep water acreage because we wanted better quality data, geological data that could inform these bid rounds. So having said that, I think that's one of the problems that we have had.
I recall when I was in the Senate, going back to, even to the whole discussion, discussions on LNG negotiations, that one of the things is recognizing the kind of consumption which we expected LNG will cause a decline in our reserve because of the high consumption of natural gas. The more. It was even more important then to get from the suppliers who were linked to LNG, such as BP etc. To prove up more reserves and therefore get more commitments to what we call work obligations on some of their existing acreage. So that was part of the whole agreement with the investors into LNG at the time, even back to the first train one, so that we can ensure that we continue to prove up reserves as we use. So you see, the strategies sometimes vary in my humble view, and this is my view, this is why when we move forward in that very first budget debate in 2010, we put in so many incentives because we wanted to prove up, to start the process of proving up the results and therefore which we know will start boosting investor confidence in downstream sector where all, as I just explained, our benefits.
[00:25:53] Speaker B: I have two questions because as we get closer to the hour, we'll have to wrap the interview shortly. I have two questions that I think is very important that our listeners understand. One, I mean we with the energy sectors, which contributes between 30 and 40% of our gross GDP per year as it stands. Let's talk a little bit about this deal that is now off the table. What it means for citizens immediately for us right now. We were told by the former Prime Minister, Dr. Rowley, that in 2027, late 2027, we would start to be able to loosen our belts. Is it that we now have to tighten our belts even tighter? Do we have to make budget cuts because we are no longer able to sustain ourselves as an economy because of the failure of this Dragon Gas deal?
[00:26:38] Speaker A: Yes, and I think that is an important question that you're raising because, you know, I would imagine that there were a lot of projects that were projected into the future based on the expectation that we would have had this supply. Now, bear in mind, just to be factual, don't forget we still have manatee that will be coming on board. That was at the unit now that you mentioned.
[00:26:59] Speaker B: The manatee. Right, the manatee. As you're answering this question, the manatee and the. And the. And the mannequin fields. Those fields, right. What is happening with those fields is shared reservoirs.
[00:27:07] Speaker A: Those will continue those.
[00:27:08] Speaker B: But would we face secondary tariffs because secondary sanctions, as it's shared between a nation and we have our side. Does it work?
[00:27:16] Speaker A: So good questions. Let me just say you remember what happened is those fields were de unitized, right. So we went into unitization, right, because there were better efficiencies, less damage to the reservoirs, et cetera. So it would have been more cost effective with a unitized reservoir because they were straddling the border. So what happened now is that since all of this started and so on, for example, Laura and Manatee was de unitized and the investors continue to develop Manatee side, which is the Trinidad and Tobago side, we don't face sanctions on our side. So that is still expected. However, when these OFAK license side started coming out in 2023, the government, you know, this government decided to move forward again with looking at developing the Venezuelan side. And they were looking for an old fat license to get that done.
[00:28:09] Speaker B: Right.
[00:28:10] Speaker A: In this particular case, Coquina Mannequin, the Trinidad side is under development. What the OFAC license was granted for was to develop the Venezuelan side.
[00:28:21] Speaker B: Noted.
[00:28:22] Speaker A: That is what has been cancelled. But you, sorry again, what was your question? The other one is what does it mean for citizens?
[00:28:29] Speaker B: Very quickly, because I have one more question before we wrap, right, so what.
[00:28:33] Speaker A: Does it mean for citizens of Trinidad and Tobago? And just by the way, just to finish off the point that you were making about the executive orders, right, that could be issued, that's how they will face the secondary sanction. And just to finish off the question about what are the implications for the investments that have been made? Well, those are not some investments. What we will have to determine now as a government, you know, whichever government, what will be some of the contractual claims? Because this can lead to some disputes between the various entities as we try to come out while we face the sanctions. Remember now we have an agreement with pdvsa. These are two entities, legal entities, that have a contractual arrangement. PD Visa, ngc, PD Visa, Shell. And therefore, what will happen now going forward with those contractual arrangements? Will that be going into arbitration? Because there may be disputes? Will there be contractual claims? Will there be contractual claims against the government of Trinidad? So we have all those implications to look at, you know, going forward. And therefore I hope to see in the coming days what would be some of those issues. Probably we will hear more from ngc. You know, in being open and transparent and telling us what are some of the risks they face in terms of this, you know, revocation of the OFAC license, what was some of the contractual commitments? The second issue I want to raise very quickly before I go to the impact on citizens of Trinidad. My concern is one of the things that I didn't understand with the Dragon Gas Field in particular is that in this particular deal I know that you would have done a signing bonus which would have been money paid to the government of. For the signing of this expiration and production license. We do it here in Trinidad and Tobago. It's no different. But what I didn't understand I. You know, in listening to some of the press conferences and so on by the government it is my understanding that there were some payments, I don't know if to call them royalty payments that were made to the government of Trinidad and Tobago, which I didn't understand because those payments would have only be activated upon extraction of gas. So I don't know why there would have been these prepayments. I understand the signing bonuses and so on, but where were there. So that's a question that's still in my mind as to whether there were prepayments of royalties to the government of Pyrabes, the government of Venezuela, which to me is lost money without ever receiving any gas. That's easy.
[00:30:57] Speaker B: We quickly running out of time. So for citizens and then is it feasible for us to take gas from Guyana and Suriname?
[00:31:05] Speaker A: Well, you remember they have a to very quickly the citizens issues. Yes, we will be looking at tougher times. Foreign exchange earnings. We can't spend foreign exchange as we would love to as the way we did before. That's something I better look at. Projections for growth is going to be, you know, lower than what was pretty projected. So we don't have the kind of economic. The benefits from the energy sector that we were looking for. Coming to the issue of the Guyana gas, Guyana oil. We must remember that right now Guyana is in the development of their. Now they are into the deepwater acreage and they are ExxonMobil. And we have to remember that that is already contracted out whatever sales that has already been contracted out through ExxonMobil because they pick up theirs by batch. They don't bring it here. They pick up sorry by shipments large cargo. Large cargo from leaving from right there offshore. It doesn't come to shore in Guyana. So it leaves from offshore from where they are from their floating. From their floating operations straight to wherever their markets are. So they have markets here, refineries, etc that they have sale agreements for. That's for their oil production right now in terms of gas. Guyana still have to work out their whole natural gas. Remember they're still flaring their natural gas what they're going to do. I do know that there are projects on stream for them to bring some of that natural gas onshore to Guyana to start developing their own sort of local. You know, electricity generation, et cetera, et cetera. So I'm not sure that gas could come from Guyana at this point to Trinidad and to be able to supplement. But it's word, you know, some opportunity for having discussions with Guyana on this. And not only Guyana, Suriname. Indeed Suriname is developing.
[00:32:53] Speaker B: Ms. Beach. And I want to thank you very much for chatting with me this morning. I know we are out of time and so much more we can discuss on these matters. I do want to invite you again maybe as early as next week as we continue dialogue here. We'll pay attention to what's happening on the economic sectors. We'd listen to whether the Prime Minister comes out and issues any more statements via press conferences and we can have some more holistic and animated discussions on this Dragon gas and what it means for Trinidad and Tobago. I thank you very much for this early morning interview. Do have yourself a safe and productive day.
[00:33:25] Speaker A: A pleasant morning to you and God bless to you and all your listeners. Thank you very much.
[00:33:30] Speaker B: Have a great day for having me.
[00:33:32] Speaker A: The best insight, instant feedback, accountability the.
[00:33:36] Speaker B: All new Talk Radio Freedom 106.5.
