(Energy Analytics Institute, 6.Aug.2021) — Trinidad and Tobago’s former energy minister Kevin Ramnarine commented on the recent downgrade by Standard and Poor’s rating agency.
What follows below are his comments from a recent LinkedIn post:
“T&T has been downgraded by S&P four times in the last six years. When we were downgraded last year by S&P, the Minister of Finance dismissed the downgrade saying we are still investment grade with a stable outlook. This year we have had our BBB minus affirmed with a negative outlook but predictably, the Ministry of Finance chose to ignore the negative outlook in its upbeat press release. We are now just a hair breath away from slipping into non investment grade which is sometimes referred to as Junk.
The negative outlook comes in the face of the fact that natural gas production will increase in 2022. S&P knows that although gas production will increase in 2022 it won’t get us back to where we were in lets say 2014, 2015 or even 2018. That is why Juniper was a big deal. It brought on a huge increment of natural gas which is difficult to match. All is clearly not well with the T&T economy and anyone saying otherwise is playing politics. Our debt to GDP ratio is 85% as at Q1 2021 and our economy has shed $30 billion of real GDP since 2015.
Even with new gas projects delivering supply from mid 2021 to mid 2022, the natural gas supply hole that we have fallen into is so deep that these projects, while no doubt helpful, will only be “backfilling” for declines in both BP and Shell’s production. BP for example last produced over 2.0 billion cubic feet of natural gas / day (Bcf/d) in March 2020. It’s production is now around 1.3 to 1.4 Bcf/d. That is its lowest production in 19 years.
Added production from Cassia C and Matapal ( formerly the 2017 Savannah discovery) will not take BP‘s production back to 2.0 Bcf/d. In fact their production may never again get back there. As for Shell, it’s production is currently just over 0.5 Bcfd. It last produced over 1.0 Bcf/d in December 2014. The recently completed Barracuda project and the Colibri project will help its production position but will not take production at Shell back to the December 2014 position. I don’t expect much to change in the short to medium term with EOG, BHP and DeNovo in terms of their natural gas production. Touchstone will bring in some volumes in 2022 which helps but in the grand scheme of things this is small.
The hope on the horizon resides with BHP’s deepwater finds. Should BHP be successful in its commercialization of natural gas from its Calypso project the tail of the natural gas economy will be lengthened. This does not however preclude the reality that the process of economic transformation must be accelerated.”
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