Episode Transcript
[00:00:01] Speaker A: The best insight, instant feedback, accountability. The all new Talk Radio Freedom 106.5 welcome back.
[00:00:10] Speaker B: As I said to you, we have an interview for you at this point in time. He's been with us on numerous occasions, joins us again. Let's say welcome back to our program to former minister, Minister of Finance Mariana Brown. Good morning to you.
[00:00:21] Speaker A: Good morning.
[00:00:22] Speaker B: Nice to have you with us here this morning.
We've been hearing a lot, there's been a lot of discussion, people making pronouncements on what is taking place. Interestingly, the energy conference starts today and we're talking some energy stuff this morning, petro jam. And we've been hearing that we're going to be buying fuel from them and people making all kind of comment about it and all that kind of thing. I'd like you to explain to our listeners, as we say in local parlance, what's really going on so that people can have an idea of how they should feel, what they should think about this whole petrol jam thing.
[00:00:59] Speaker A: Well, I don't know that we should think anything. The reality is that we no longer refine fuel product so that we will buy fuel from wherever we could get it at a good price.
So if Jamaica has fuel that we need, we need. We don't know why we bought from them. And petrogen used to buy from us all the time, by the way.
So in circumstances, if they have something that we want that we buy from them, we buy for them at a good price. I'm not certain what the problem is. I'm sure that there are a few egos which are brews who see us as a, what you call it, a hydrocarbon country, exporting hydrocarbons, buying it from Jamaica, which is deficient and an energy importer. But that's the reality. You don't have a refinery.
So if somebody has product which is surplus to their needs and they are willing to sell it, there you go, we buy it. I don't think there's anything more to it than that.
[00:01:57] Speaker B: Yeah, I thought it was as simple as that. But when you listen to some of the comments people making about this thing, you swear to God that this is probably the worst deal to ever happen in the history of the energy industry across the world. And people are making comments and making some kind of inferences about what's going on that colors the conversation in the minds of people and take the discussion down a road where it should never be going.
Because as I understand it, we're buying fuel from everybody else. If you're just buying From Jamaica, as the Prime Minister said, you're buying from Caricom. What's the problem?
Even though from the time Dr. Oli opened his mouth or anything, people find ways to criticize whatever it is he has to say.
That's just the reality. Sometimes him making a comment inflames a conversation much more than it does to treat with it. But it is.
But we're talking some energy related matters and the future of the energy industry in this country. And the energy conference starts today, runs for two days. And it comes at an interesting time when there is a lot of focus on us and where we stand, no longer being the producer that we once was and now finding ourselves in some situations where our future is not as clear as it might be to many. Let's get your opinion on the state of the energy sector at this point in time. Our continued reliance on the energy sector for our economy to remain where it is. And what are some of the things we should be looking to in the.
[00:03:38] Speaker A: Near future, well being? There are a couple of things that you have to point, you have to take stock. This is where we at.
In the first instance, we are producing 40% less natural gas than we were producing at our highest point as the first point.
The second point from that is that when you look at that, there's been a secular period of decline. In other words, secular means long term.
So 2011 to 2025, 14 years, we're looking at a decline in production, substantial decline in production.
In 2019, we had what was known as an infill failure. What is an infill drilling program? The infill drilling program you have to keep.
Oil and gas are depleting assets. They don't.
They don't. How shall we call it, Refill. The reservoirs don't refill themselves. The reservoirs are subject to natural change, natural decline. When you take out of it, nothing fills it. So that you're in a situation where you have to constantly be in an exploration mode. Now that exploration mode is determined by our two largest producers, Shell and bp, both of which are international producers of natural gas and other hydrocarbons. And when they make their production decisions, it's based upon cost and investment size and output or income relative to the amount of money that you put in the investment to basically get out your new product. Now, we did have two substantial wells known as Angelin and I forget the name of the other one now, which came into being on 2018 when our natural gas production was about 3.3 in 20.
Between 2013 and 2015. That's one of the reasons why the UNC gave a number of incentives to drill. And as a result, our production went back up to 3.6.
Right. Still 600 million cubic feet a day less than what it used to be. But when the infill drilling program failed in 2019, it just continued to decline and it seems to stabilize somewhere about 2.5.
So in the first instance, we have decline and we have decline, which is also in terms of oil producing.
50,000 barrels somewhere there, but somewhere between 50 and 60,000 barrels. That's maintainable. That's small, and that's small in relation to what Venezuela produces, for example, or could produce on a daily basis. Venezuela used to produce something just under 4 million barrels a day. Guyana is trending towards a million barrels a day. So if you look at 60,000 barrels in relation to a million barrels, that's a small figure. It's not big. It will give you some income, but you can't run a country on that. We did when we were running with 200,000 barrels of oil, which is about three and a half times what we're running at now. And in terms of natural gas, well, we are 40% below where we were before. So in terms of the energy industry as a dynamo, as a economy, because of the declines in production, we are not where we used to be before.
So that has caused certainly a fall off in terms of government revenue. And we've had two influences. We had a fall in price and we had a fall in quantity. Right. So you're getting it on both sides. Not only is price fall, but the quantity that we're producing as full.
So that means that management of your cash flow, because there's much less cash than you have. Like any business, if you can sell as much as you're selling before, then your revenue goes down, then your profits go down, then your ability to do all the things that you were doing before declines. And that's where Trinidad Tobago is at the moment. So two things. Filling the gap which is left by the fall off in production, by way of quantity and by value, that is pricing is difficult.
What are the prospects for increased drilling activity? Increased investment in our drilling activity? Well, we are what is known as a mature province. Mature meaning old. Mature meaning that the rate of return is not going to be as good. You have to spend more money, you have to drill deeper and you have to drill further, further out. Further out means that you're going into deeper water, means it's more expensive to drill. What is an international energy company looking for. I'm looking for cheaper sources. Is Trinidad a bigger, cheaper source relative to the others? Because remember, this is what you will call a capital investment decision. Capital investment decision have to take take place in competition with other projects. So if there's another project somewhere else in the world that is taking up the same amount of money but yielding more returns, then I will drill there and not here. And that's one of the reasons why the UNC gave fiscal incentives in the 2014 period, which ended in 2017.
Now, there is the likelihood that there is still undiscovered oil and undiscovered gas. But the point is you have to explore for it. The difficulty is that the only the two companies which are nationals, National Heritage and ngc, don't have that exploration capacity.
So that you will recall there was an agreement somewhere in 2019, somewhere between 2019 and 2022, between Shell and Heritage to explore its acreage. Now, we've not heard anything else about it since then. I think the reality is that deal never went any very far because they were looking to use and to direct Heritage's assets. And there's an integrity problem with Heritage assets, meaning that we are under invested the type of equipment that is required for that type of exploration and it hasn't gone anywhere.
So. And if you look at the bidded rungs, bid rounds, you will see that the bid rungs don't have new players. The players who are bidding and winning are the two largest multinationals and the ones for whom we depend on, who produce something about 75% of the gas that we use.
So you're stuck.
Either one, you buy drilling capacity and drilling capacity and exploration is not cheap.
A well could cost you anywhere between 50 and 60 million dollars US a well and it could be empty. So this is not. These are not small stakes. And that's one of the reasons why we've never really developed our own drilling capacity because it's expensive and the risks are great and we've dependent upon others to do it for us. Well, that's fine when natural gas and oil were easy to get at, not so fine if it's harder to get at. So we're in a difficult position where that is concerned.
And I noted the energy chambers indication that Trinidad ego needs investment. That's what he was saying and he was talking about investment in energy, in energy assets. What he's talking about, what I presume him to mean, is that you need to have more investment upstream, not downstream. You can't invest downstream if you have no Supply. So building another plant in Trinidad is not going to. Nobody can build another plant unless they could be a short of getting gas, and that's the difficulty. So you're not going to get any investment downstream. And that's what we call downstream. Only the petrochemical plants are downstream, refinery is downstream, all those things. What is upstream is exploration and development. Well, development. And that's where we need investment, and that needs big investment dollars. Now, to get those big investment dollars, you have two choices.
One, do it yourself and you take the risk, or two, give incentives to other parties for them to take the risk.
Now, we can be reasonably certain that after being in energy for about 100 years and having BP and Shell, they pretty well know what our province looks like and where you can or where you can't or was a good idea to go after. But they are not good. They're not sure that you could get it, but they understand that there's a good risk that you could get it. And that's one of the reasons why they've been bidding for, in some instances, joint bids. When you see two large multinationals bidding jointly on a project, there's a recognition that they both need new supply, but at the same token, they're minimizing their risks.
It means that both of us are joint parties. So if anything goes wrong, I lose half, you lose half. Well, it's much less than losing the whole thing.
So that's where we are and that's it in a nutshell.
So the energy sector is not the driver, hence the reason why we've heard statements from the Minister of Energy as well as from the Minister of. The Prime Minister.
Well, the Prime Minister, the Prime Minister designate that, you know, it's a difficult time and you have to wait until 2007. Sorry, 2027. Well, we only want one thing that's going to take place in 2027 and that's somewhere in the second quarter of 2027, which is Lauren Manatee.
But Lauren Manatee has been on the table for how long? 15 years? More than that.
So it took a long time to get at those resources, either by way of agreements or making the investment decision and so on.
So these things take time they don't have overnight. Yeah, if that's where we are. So the alternative is, how do you get the private sector to invest in new manufacturing in Trinidad? In. In that areas. In what areas?
Those are the questions. And at the other side of the fen, how does Trinidad diversify? And that's a private sec. Those are private Sector decisions. Governments make money on the basis of successful private sector investments and government's revenue sources, I think called taxation, royalties. And you can only have royalties on producing wealth and you can only tax them if they're making profits. So there you go. That's a difficulty for government.
[00:15:25] Speaker B: Yeah, well, I was about to ask that are we doing the things that we need to do so that we navigate these very, very trying times? Because we've had a number of discussions with energy experts and my understanding and our listeners, I'm sure understand that there's not an overnight thing.
You don't drill a well, hit oil and then tomorrow morning start to make money.
It takes a long from exploration to actually finding to production to where we can monetize. It takes a while.
And there obviously seems to be a gap that we have in between how much we have and how much we need and how we're going to get what we need to fill. Where we go, are we doing the things that we need to or are we falling short or do we need to do more? You spoke about the investments and getting the investments. Are we doing those things to encourage people to want to invest? Can we or are we, I don't want to say set out the pasture because of the length of time that we've been in this thing, it is no longer lucrative. What do we do?
[00:16:36] Speaker A: Well, that's the expensive question.
There are other countries that have been in this position. You know, Holland was a large natural gas producer. It doesn't produce natural gas anymore in Europe. So we don't hear about it. It was not one of the big time players, but it was a player. And for those of us who don't remember, Shell is, is Royal Dutch Shell, meaning that it's a company which is jointly owned by British and Dutch interests.
Right. So if they ran out of natural gas is not something that one.
But it can happen. That's the point. It can happen. And the only way that you solve that is that you have a bigger drilling province where you do more exploration to find new wells. It's a continuous horizon of additional investment. It's not something that you invest and you could sit back and say, okay, well it's going to produce for the next years and I don't have to do anything else. Again, the point is to stay in business and to stay with the level of output that you're looking for. You have to constantly drill and explore. Which is one of the reasons why Shell and MBP are still continuing to bid.
Recognize that they need to do so but they're not bidding in areas which they consider too expensive to explore, meaning that they can do it as an international company elsewhere. You have to remember that both Shell and BP were in Trinidad before they were in Trinidad with land drilling in the early parts of the 20th century. And they had a refinery where Atlantic LNG is, was, was Shell's refinery, which we took over and we called it Trintock.
And we have to remember that BP had a refinery in Labrea and they left because there wasn't this kind of oil required to run the refinery. Now Trinidad bigot refineries, with the exception of the Labrae refinery which was an early refinery. But if you look at Trin Tox refineries, if you look at what Petro Trin, which is your Texaco refinery, Texaco's refinery were not related to Trinidad Tobago's oil production, which is not anything that people remember northern. And the biggest production was at its highest, 220,000 barrels. When the Texaco refinery was in its heyday, it was refining something in the region of 400,000 barrels of oil.
When we did the refit in 1992, the total capacity came down to just about 200,000 barrels of oil a day, which is substantially higher than our production. So Trinidad was always importing more oil for refining purposes than we were producing. And that's something that many people, in terms of the conversation forget. The refineries won't get to Trinidad market, they will get to a North American market. And remember, Texaco is a large North American company or was a large North American company, so that it was producing on the basis of its oil which was extracted from the Far east and other places and exported to the North American market. Now the refinery entity business energy companies are vertically integrated companies.
Not at all times that the value chain make money. So you, there are different points in the value chain at which you raise money. Exploration and production is one of the, if you want highest yielding ends of it, but it's also one of the riskiest. Whereas refining is on built on low margins. Refining for market. So you're making cents, you're not making dollars off of every gallon that you refine. So it's a high value, high volume, high value business.
So if you're not efficient you will lose money. And there are times, and certainly that was evidenced by the period 2014 when the prices went down, that we were losing money on the refinery.
But you will be correcting long term. But remember, you have to remember as well that the refinery was never geared to producing Trinidad and Tobago oil.
That's one of the difficulties that exists in people's head. And part of that is because they really don't know the oil business and they don't understand it. As far as they know Trinidad Tobago has oil and therefore we should be self sufficient. The reality is Trinidad tended to export all of the oil that it produced because the sweet crude, whereas the refinery created blended product. That's the reason why, for example, that the US gave created OFAC licenses to Chevron and other companies because they needed heavy crude that came from Venezuela to keep their refineries growing going because they're producing a blended product to retrofit and most people don't retrofit. Your, your refinery is a very expensive process, which is the problem that Trinidad had. It was refitting and up dating and it, it, we did not do it. Well, that's also a reality. So this is not, it's not an easy business. And that's part of the issue with the Jamaica thing, right, the Trinidad refinery. So we should be producing. Well, the refinery was never geared to produce it for the Trinidad market. It was always geared to refining for export.
That's why we have such extensive assets. 400,000 barrels of oil a day is not a little bit of oil, you know, all right. It's still only about 40% of what Guyana's peak production is going to look like.
That's the difference. Guyana as a country basis is much larger than we are. So that their fields are going to be bigger and because they are new, the volume of production is also going to be larger.
There you go.
[00:23:05] Speaker B: Yeah. You brought up the OFAC licenses and I know there's a raging discussion about Dragon Gas and what's going to happen there and the new regime in Washington and some of the pronouncements already, prediction might be the wrong word, but what do you see happening with that entire deal?
[00:23:25] Speaker A: Well, I've never been. I understand why we need it and I understand why we have to negotiate, negotiate for it. But I have never been one of those who has been saying that, you know, jargon, gas will come tomorrow. I make the point that Lauren Manatee, you have to distinguish between two types of gas in this instance. Right. And not the quality gas is the geographical location of the gas. They have what is called cross border gas, meaning that there's a field which straddles the border. Some of it is on my side like a water tank on the fence.
I may have a smaller portion of it on my side and you have a bigger portion of it on your side. So we have to agree that I could get the portion that belongs to me and I'm not going to. I'm only going to take out as much the estimates, the amount that belongs to me. Now, that's Lauren Manatee and Cucina and those other fields, right, they are pockets of our fields of natural gas and or oil which are across the border. In other words, we share it. So we have to come to agreements in terms of how we're going to extract it as this thing from across the border. Gas across the border. Gas is gas which is in Venezuela waters. Now, Dragon is in Venezuela waters. And that's where the difficulty is. Because of the sanctions, you can't go and just say, well, you come sign a deal with Venezuela and you want to get gas tomorrow. It doesn't work that way because America has. Is a big. Is a big bully, right? It's a bullying region. And now that we have a senior bully in the White House and there are sanctions and we are what we've been able to do so far in terms of negotiating a deal.
And we make payments on this, by the way, on an ongoing basis because there are certain types of agreements and rights. Well, it's not for free. So we are paying Venezuela money. Now, we're not getting any revenue, but the presumption is that we can make the payments because at some stages, again, we'll be able to get to the gas. Now, to get to the gas requires us to have certain types of arrangements with the US which allows us to monetize the gas, in other words, lift it out and to sell it. The difficulty with that is that the sanctions against Venezuela prevent us from paying them in US Dollars. Right now, US Dollars is the currency of world trade.
And America takes the position that wherever US Dollars are being used, they are my US dollars. So you have to have my authority to go ahead. And that's what makes Dragon deal difficult at the moment. The license that we have expires in October of this year.
Now, as you pointed out early on, developing a field takes a long time between laying the pipelines, putting in the infrastructure and everything else.
That's at least three years.
At least three years if you have all those existing instruments in place. Because I'm a shorter time now, that's part of the issue with Dragon, right? It's going to take time, but so that even if you get a license for a year or two, you can't get oil, you can't get gas, and certainly can't get gas. I Think it's Dragon as a gas. We know the oil field, so forgive me for that. You can't get gas and until you have done all of those infrastructure works to make it happen and two years won't work and as you pointed out, there's a long lead time between three to four years, longer in, in other instances, depending upon the size of the field and how close it is to another production platform and so on. If it's a completely green field investment, that is a new investment in a new area, Dragon is closer and that's one of the attractiveness of Dragon and it can make a difference in terms of the volume which we can extract out of it. But the point is that whilst it's there, it's in touching distance. It's reasonably easy to develop relative to a new well, it's reasonably easy to develop. Our difficulty is getting around the sanctions.
Now, if we look at what is taking place, America has been, hasn't been beating up its enemies. If you say that China is not America's enemies, the tariff that the additional tariffs that have been levied on China is 10%. But if you say that Mexico and Canada, who are next door neighbors and you would say who have friendly relations with North America, retires are 25%, two and a half times the figure. So Mr. Trump is treating his allies worse than he's treating his enemies.
So given Venezuela is one of America's enemies from a point of view of liberal democracy and all that, what will happen? The answers we don't know. All right, he hasn't turned his attention around to that. But there, even if he has gotten rid of a lot of government employees, some of them will stay and it's not suited that the policy is going to be different.
So it's a very uncertain time. I don't think we can make any statement or decisions now about what is going to happen. I think it's a very iffy situation and we don't have. Well, Trinity I'm talking about does not have the negotiating clout.
What is it we're going to offer North America? It's a small country.
We are the largest exporter now that Russia is not exporting ammonia. But American sanctions can be really relaxed. I mean, for example, they relax their love Venezuela oil to come in. Why? Well, because as I said before, it's too expensive to refit the refineries. It's cheaper just simply to buy oil from Venezuela. So the relaxation of sanctions have been built. American needs now America is surplus in natural gas.
So do they need our exports of ammonia? Do they need our exports of methanol or urea?
Are they in short supply? Well, that. Those are the type of questions that we have to answer and those are the type of negotiations that we have to enter into. So I think we are a long way from finding out what's going to happen with rather.
[00:30:20] Speaker B: Yeah, I think this. We're going to have to leave our conversation this morning. What is definite is that there are some very uncertain times ahead for us on several levels as to how we navigate those and what measures we put in place to treat with them. That's going to be left to be seen by the people who are in charge election this year. We don't know how that's going to go. Some people say they don't know it's going already. But whoever's in charge, whoever wins this election, there are some tough times ahead for them, that's for sure.
[00:30:47] Speaker A: Yes. Yes. All right.
[00:30:50] Speaker B: I want to thank you for being with us here this morning and giving us your time.
[00:30:53] Speaker A: Thank you for your time as well.
[00:30:54] Speaker B: Yeah. And that's how we end our interview here this morning, ladies and gentlemen, with four more minutes in Ministry of Finance, Mariana Brown. So much, so much to consider as a nation about where we came from, where we are definitely where we're going.
[00:31:12] Speaker A: The best insight, instant feedback, accountability, the all new Talk Radio Freedom 106.5.
