Trinidad PM Keith Rowley Gives Keynote Address at TTEC 2022

(OPMTT, 31.May.2022) — Trinidad and Tobago’s Prime Minister Dr the Honourable Keith Rowley gave the keynote speech at the Trinidad and Tobago Energy Conference (TTEC) 2022 held at the Port of Spain Hyatt Regency. What follows is his speech titled “Leveraging the industry’s strengths for the energy transition.”

A very good morning to you, ladies and gentlemen.

It is my pleasure to deliver this address at the Energy Chamber Annual Conference, which is one of the premier energy conferences in the Western Hemisphere. It is an event that I look forward to and which provides me with an opportunity to provide an update of the Government’s policies and initiatives in the energy sector.

The theme for the Conference, as always, is very topical and relevant; Leveraging the industry’s strengths for the energy transition. The genesis of the current activities toward energy transition can be attributed to the 2015 Paris Climate Change Conference where the global community was made aware of the stark reality of the negative impacts of global warming. Arising from that Conference, Trinidad and Tobago, as well as 195 other countries, made a commitment in the form of National Determined Contributions to lower their greenhouse gas emissions.

The ribbon cutting ceremony at the opening of the Trinidad and Tobago Energy Conference (TTEC). Source: The Office of the Prime Minister of Trinidad and Tobago.

This commitment has been interpreted in some quarters as a commitment to immediately eliminate all fossil fuels. We do not share this view. Energy security is a priority for Trinidad and Tobago.  Accordingly, we have set in train steps to optimize the exploitation of our oil and gas resources while mitigating the emission of greenhouse gases and adopting low carbon solutions. To meet our climate change  commitment we have adopted  a range of policies which include electrification of the transportation system, the adaptation of renewable energy projects, carbon capture, utilization and storage,  carbon offsets and we are actively exploring the promotion of a hydrogen economy.

To ensure a successful long-term energy transition it is important to pursue policies that engender affordable and sustainable energy and serve as a foundation for operationalization and prosperity. The expansion of renewable energy is critical as this will engender diversity in the energy mix which is vital to long term energy security and sustainability of supply. In keeping with its policy, Government has increased its target for renewables in power generation from 10% to 30% of the country’s power generation capacity.

Hydrogen is being labelled as the new oil and is reported to contain more energy per ton than any fossil fuel. It is clean, almost infinite, universally available energy from the sun, wind and water, climatic conditions which Trinidad and Tobago as an archipelagic state possesses in abundance. A global survey undertaken by industry consultants has indicated that two-thirds of oil and gas companies, including companies operating in Trinidad and Tobago are currently investing in green hydrogen.

In Trinidad and Tobago, hydrogen is an important input in petrochemical production and it is currently derived from natural gas. Hydrogen produced from natural gas has a competitive advantage to other sources, with the exception of coal, which is a major emitter of greenhouse gases.  Our hydrogen policy envisages the movement to hydrogen from renewable sources not only as a decarbonization tool but also as feedstock for industry and a form of alternative energy, once the economics pan out.

In September 2021, National Energy and the Inter-American Development Bank in association with the Ministry of Energy and Energy Industries, commenced a feasibility study on the “Establishment of a Green Hydrogen Market in Trinidad and Tobago”. The report, which is currently being finalized, will provide a road map for the decarbonization of the energy-based industries in Trinidad and Tobago.

The movement to the global energy transition is not without its challenges. A testament to this is the current energy crisis which is the result of a convergence of several forces such as under-investment in the energy sector, un-favourable weather events and insufficient buffers. The situation has been further aggravated by the strong COVID-related demand recovery, a mismatch in the global energy markets and geopolitical issues.

The energy crisis has highlighted the current limitations of green energy and the realization that fossil fuels will continue to play a major part in the energy supply chain, for still some considerable time, as the world innovates and transitions to low carbon energy sources. The lesson learnt from this realization is that we need to build our energy future on a foundation of realism. In short, we need to strengthen our current energy systems as we transform into one that relies increasingly on renewable energy sources. As we embrace this transition it is important that going green is not only reliable but affordable. Greenflation or associated higher inflation has become a major concern as climate and social sustainability issues rise to the top of the global climate change agenda. Accordingly, prudent climate change policies are required in order to avoid or mitigate inflation propelled by the greening effort.

Going green is not inexpensive. BloombergNEF, Blomberg’s primary research provider determined that in 2021 global investment in the low-carbon energy transition totaled US$755 billion. By its estimates, total energy transition expenditure will need to triple in the coming years to get on track for net zero by 2050. From a national perspective, the cost of just meeting Trinidad and Tobago’s Nationally Determined Contribution is approximately US$2 billion. As is the case for many developing countries Trinidad and Tobago cannot achieve carbon neutrality without significant international financial assistance.

The UN has acknowledged the fact that the achievement of targets by several developing countries is conditional on foreign financial assistance. The United Nations Environment Programme has projected that developing countries require US$300 billion a year by 2030, and US$500 billion by 2050 to adapt to the effects of climate change. However, finance for mitigation and adaptation has been a major issue. In 2009 developed nations agreed to provide US $100 billion per year to help developing countries mitigate and adapt to climate change. However, this target has not been met and to the extent that funds were made available they did not find their way, in any volume, to small island developing states. As regards our own situation, it is expected that the Central Bank of Trinidad and Tobago, through its membership in the Network for Greening the Financial System and other international arrangements for collaboration, will play a key role in the financing of the country’s energy transition to a low carbon economy.

As a Government, we have taken a pragmatic approach to energy transition. We have undertaken the dual responsibility to optimize our hydrocarbon resources for the benefit of our citizens as well as taking action to reduce our carbon footprint.  In our estimation, there is no conflict between investing in renewables and in hydrocarbons as over time renewables can liberate oil and gas for export markets, and also create a diversified energy mix.

However, for the foreseeable future, hydrocarbons and in particular natural gas, the clean energy, will continue to drive the economy of Trinidad and Tobago. The current outlook due to geopolitical events and energy security issues, suggest that natural gas is increasingly being considered not only as a low carbon alternative but as the fuel of choice. This is evidenced by the growth in natural gas. The GECF in its Global Gas Outlook 2050 has projected that for the period 2020 to 2050 natural gas demand will increase by 46% and its share in the energy mix will increase from 23% to 27%.  By 2050, total global upstream and midstream investments in natural gas are projected to reach $8.7 trillion in response to the increase in the global gas trade and particularly the growth of LNG trade, from 365 million tons in 2020 to 800 million tons in 2050.

Our upstream stakeholders are aligned with our choice of natural gas as the transition fuel of choice in the lowering of our carbon footprint and diversification of our energy mix. As a consequence, there is a commitment to bring onstream at the earliest instance a number of gas projects both in the shallow marine area and the deep-water marine area. These include the Shell Manatee Field, and the Calypso project that is being developed by BHP and bpTT. Welcome back, Joe Douglas!

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The relationship with Shell and bpTT goes beyond the regulation of upstream activity but includes a partnership through NGC in the restructuring of the LNG business in Trinidad and Tobago. At present a Team appointed by Government is in negotiation with Atlantic LNG shareholders on the restructuring of the facility and the grant of a long term liquefaction licence. The new arrangement will not only extend the life of the facility but will also ensure that Trinidad and Tobago benefits from market reflective LNG prices in a growing export market.

The association with energy stakeholders is not limited to the oil and gas sector. In 2020, as part of Government’s transitioning to green energy, a letter of award was issued to a consortium comprising of Lightsource Renewable Global Development Limited, Shell Trinidad and Tobago Limited, and BP Alternative Energy Trinidad and Tobago Limited for the establishment of a 112.22 MW Solar Project. The Project Agreements are currently being finalised and it is anticipated that construction could commence by year end, with completion in twelve months. The Project will increase the country’s installed generating capacity from 2093 mega watts to 2205.2 mega watts and the margin of available capacity over demand  from 53% to 61%. The Trinidad Electricity Commission has projected that peak demand will increase from 1371 MW in 2022 to 1741 MW by 2032, with an accompanying increase in gas consumption. Accordingly, the transition to increased power generation from renewables is critical.

By incorporating renewables in power generation, Trinidad and Tobago is following the global trend.  The U.S. Energy Information Administration (EIA) projects that renewables will collectively increase from 28% in 2020 to 49% of global electricity generation by 2050. The growth in electricity generation of renewables has been due to rapid technology improvements and decreasing costs of renewable energy resources, along with the increased competitiveness of battery storage.

These technologies provide not only zero-carbon electricity but are a major driving force behind the rise of green hydrogen. In this regard, Government has identified the development of green hydrogen as an important element in its strategy to create a sustainable energy sector and in establishing of a low carbon economy. In addition to its potential as feedstock in petrochemical production, green hydrogen can be blended with natural gas and be combusted with it in a power station. By introducing hydrogen in gas supplied to domestic power plants we could reduce not only our carbon footprint but also lower the demand for natural gas for local power generation, which currently amounts to approximately 231 mmscf per day.

Given the leading role that hydrogen is poised to play in the energy transition, there is opportunity by industry players to embrace hydrogen in the creation of a sustainable petrochemical industry. To this end State Owned National Gas Company and its wholly-owned subsidiary National Energy in collaboration with Kenesjay Green Limited are actively collaborating on the creation of a sustainable hydrogen economy for the energy sector of Trinidad and Tobago. NGC has also been instrumental in the formation of a new green agenda Sub-Committee of the Point Lisas Energy Association (PLEA). The Sub-Committee will lead PLEA sustainability and green agenda actions, and coordinate synergies among member companies. It is this spirit of co-operation together with innovation that will enable the Point Lisas Industrial Estate to maintain its relevance and status as a World Class Industrial Centre. An embodiment of these characteristics is the initiative being pursued by Kenesjay Green Limited and Hydrogen de France to establish the country’s first industrial project to produce carbon-free hydrogen. Kenesjay and Hydrogen de France are to be applauded for their ingenuity and it is hoped that other companies will follow suit.

A comprehensive, inclusive and cost-effective strategy to address climate change requires bringing in complementary policy areas and exploiting synergies among them. A case in point is electric vehicles. Vehicle electrification is not taking place in a vacuum. It is taking place in parallel with strategic commitments to renewable energy and electricity storage. In this context, electric vehicle adoption is much more than powering vehicles by electricity. Rather it is a transformative technology that will create synergistic changes in the supply distribution by mitigating impacts on the grid and lowering costs.

As part of our Nationally Determined Contribution we have pledged to a reduction in greenhouse gas emissions of 30% by December 31, 2030 in the public transportation sector. A key measure in achieving this objective is the promotion of electric vehicles as the preferred mode of transportation. To facilitate the transformation we have removed all customs duties, motor vehicle tax and value-added tax on the importation of battery-powered electric vehicles with an age limit.

This transformational change represents a major shift in our transportation policy and presents an opportunity for the Government to reduce or eliminate the fuel subsidy. In so doing, Government can alleviate the potential shocks in furter subsidy reform. Over the last ten years, the subsidy paid amounted to $23 billion and with the current high oil prices, the subsidy for fiscal 2022 to date has averaged $142 million per month. As a consequence Government took the decision to increase fuel prices to mitigate the financial impact of the subsidy on the Treasury and to better utilize the improved revenue in financing social and capital expenditure and reducing debt. It is instructive to note that the subsidy on premium gasoline was reduced by 52%, super gasoline was reduced by 38%, kerosene was reduced by 31% and diesel was reduced by 11%. There was no increase in the price of LPG.

We are in a volatile energy scenario with the potential for fuel prices to move in either direction. In the current circumstances, we may have little choice but to implement a fuel liberalisation programme to allow domestic fuel prices to move freely with market prices. In any such arrangement, we will implement measures to cushion the impact on the traveling public. It is therefore important that our transportation policy moves away from the current model based solely on liquid fossil fuels.

The future of mobility will be electric, with electric vehicles becoming the preferred climate-friendly transportation option. However, building an electrified vehicle ecosystem is not without its challenges.  We are fortunate to have operating in Trinidad and Tobago oil and gas companies who are leaders in the electrified vehicle ecosystem and  whose expertise and experience would be invaluable in the building of the country’s electric vehicle ecosystem.

Going green, as a CEO of an Energy Major puts it, is not as simple as flipping a switch. While the total amount of renewable energy that’s available is growing, it is not keeping pace with the rising energy demand. There is still a great disparity in energy consumption between renewables and fossils fuels. Fossil fuels accounted for more than 80% of global energy consumption in 2019, and despite gains by renewables, are projected to account for 69% of global energy consumption in 2050.

As the global energy transition leads to structural changes in energy markets and the energy mix there is a risk of diminution of oil and gas revenues, which have been the major drivers of the country’s socio-economic welfare. Given the uncertainty of energy transition it is difficult to define the end game, that is, which technology will emerge and what will be the final energy mix. Therefore it is in our interest to expeditiously take steps to monetize the country’s abundant oil and gas resources. The latest gas reserve audit established that at year end 2020 technically recoverable resources amounted to 23.2 trillion cubic feet (tcf) and prospective resources at 55.2 tcf.  Whereas the latest oil audit, established 3P reserves at 455.3 million barrels and prospective resources amounted to 3.2 billion barrels with 90% being in our deep-water province.

Accordingly, we have embarked on a series of bids rounds which commenced with the deep-water bid-round in December of last year. The closing ceremony for this bid round will be held on Thursday June 2nd, 2022.  On offer is a large selection of deep water acreage comprising seventeen (17) blocks.

Trinidad and Tobago is not singular in the matter as several countries are actively promoting bid-rounds at this time so we know that we are competing for exploration capital. Seven licensing rounds were closed by the first quarter 2022 and another eight licensing rounds, that are open, are expected to close by the end of 2022. Regionally, Suriname, Colombia and Brazil closed successful bid-rounds. Upcoming 2022 bid-rounds comprise Guyana’s deep-water blocks, Brazil sub-salt blocks and Ecuador oil blocks.

Our series of bid-rounds continues with the onshore bid-round. In September 2021 the Ministry of Energy and Energy Industries invited nominations for Onshore Acreage for Competitive Bidding. Eleven blocks were nominated. Based on the responses, the Ministry plans to launch the Onshore Competitive Bid Round within this quarter. The offshore shallow water bid-round will be next. In total there are twenty-five open shallow water blocks for consideration. A date for the launch has not yet been determined

The proliferation of bid-rounds will increase the competition for capital in an energy market that is undergoing transition. While we are acknowledged as a proven hydrocarbon province with substantial unrealized potential, we need to maintain our competitiveness and resilience. This involves the lowering production costs, improving oil and gas production efficiency, an attractive fiscal regime and a more expeditious execution of the regulatory oversight.

In navigating what is an uncertain energy future, Trinidad and Tobago has as its partners, major oil and gas companies, who are committed to upstream activity, a world class downstream sector and an energy services sector which is comparable to its counterparts in developed petroleum economies. Their activities are complemented by an extensive and reliable infrastructure which facilities the affordable and efficient movement of oil, gas and petrochemicals. We also have major physical assets in the Guaracara Refinery and the former Mittal Steel Plant, which remain subjects of interest for some potential investors.

The interest with respect to the former Mittal Steel Plant is currently at the preliminary stage.  As regards the Guaracara Refinery, three final bids were received in April 2022 and were evaluated by Trinidad Petroleum Holdings Limited (TPHL) and the relevant Ministry officials. One of the bidders was selected and has entered into exclusive negotiations with TPHL and GORTT with the aim of negotiating definitive agreements and securing committed financing, within a specified period of time. We expect that the process and selection of the preferred bidder will be soon finalized. In keeping with our commitment to transparency and accountability, the relevant details of the outcome of the evaluation of the bids will be disclosed on the completion of the exercise.

Unrealized potential is of no value to anyone, not to the resource owners that are the people of Trinidad and Tobago or to interested investors if that resource remains out of reach, undeveloped or unexploited. Accordingly, Government has been in dialogue with upstream companies to expedite Final Investment Decision for known reserves.  As regards potential and un-developed resources Government has been soliciting proposals from upstream operators on the incentives required to stimulate activity for the exploitation of these resources. To that end, the Ministry of Finance in collaboration with the Ministry of Energy and Energy Industries, is conducting a comprehensive review of our oil and gas taxation regime to ensure that Trinidad and Tobago remains an internationally competitive hydrocarbon province. The review encompasses capital allowances, petroleum profits tax, supplemental petroleum tax and royalty, both onshore and offshore, in shallow water and deep-water.

However as we move to identify new resources, we have to manage available resources. Management of our hydrocarbon resources has not been without challenges. A combination of covid-19, low commodity prices and technical issues have setback levels of both oil and gas production. However, with the ease in the pandemic and new activity both oil and gas production are set to rise.

With new production coming onstream in 2022 and 2023 gas production is projected to increase from present levels to 3.2 trillion cubic feet by 2024. Gas supply between 2024 and 2027 will be tight before improving in 2028 with the coming onstream of mega projects, the Manatee and Calypso. However, the key to a sustained gas industry will be the exploration and development of our hydrocarbon resources as well as access to cross-border natural gas resources. Hence the aggressive bid-round programme.

The outlook for oil production is promising. The recent successes by Touchstone and BHP have reactivated strong interest in oil exploration both on land and offshore. There is currently a suite of prospects that are being pursued by Heritage independently or by joint venture with significant potential. Apart from these activities, there is significant acreage that is not being exploited by Heritage. Accordingly, the Company has been mandated to accelerate its programmes for lease operations, farmouts and joint ventures to avoid the stranding of potential hydrocarbon assets.

A small island developing state, Trinidad and Tobago must, out of necessity, engage with the rest of the world and particularly our regional neighbours, as we continue to build and strengthen our economy. High on our agenda has been the development of economic co-operation in the energy sector.  To this end we have executed unitization agreements with the Government of the Bolivarian Republic of Venezuela, the Government of Barbados and the Government of Grenada, which will allow for the exploration of hydrocarbon resources in the maritime boundaries shared with these countries. We have also executed a Memorandum of Understanding with the Government of the Co-operative Republic of Guyana and also with the Government of the Republic of Haiti on co-operation in the Field of Energy. In May 2020 we signed a Protocol of Intent with Government of the Republic of Ghana on co-operation in the energy sector.

We need to move beyond the intent to co-operate and aggressively pursue opportunities that utilize our extensive expertise and experience in the energy sector. The local energy service companies with a significant presence in Guyana and Suriname are already in the forefront of the export of energy services. NGC and its subsidiaries National Energy and Phoenix Park Gas Processors Limited (PPGPL) have also been actively engaged in marketing their services regionally and internationally.

NGC made a significant breakthrough in Ghana in winning a  decent contract to design, procure, construct and install a pressure regulator package at the Takoradi Distribution Station, located in Abodze. In February 2020, PPGPL through its subsidiary Phoenix Park Trinidad and Tobago Energy Holdings Limited acquired the liquids marketing and trading business of Twin Eagle, a US based Company. In January 2022, this was followed up by the acquisition of the Texas NGL Terminal of Keyera Energy Inc, a subsidiary of Keyera Corporation, one of the largest midstream oil and gas operators in Canada. With this acquisition, Phoenix Park can access and aggregate LPG supply to sustain and grow its markets in Mexico, Latin America and the United States.

These initiatives have the potential to make a substantial contribution to not only the domestic energy sector but also to the economy of Trinidad and Tobago. They are examples of the utilization of experience and expertise within the industry to provide economic benefit to the country. In the same vein, by marshalling the many industry strengths, we will be able to achieve an orderly energy transition for the benefit of stakeholders. However, there is no quick fix. The energy landscape is rapidly evolving and therefore our strategies should be geared to respond in a timely fashion to changes in the market.

In the final analysis, however, how the industry fares in the transition depends to a large extent to our collective efforts. In this very forum, we have assembled the policy makers and key industry players who have an interest in the performance of the industry in this global energy transition. Given our vested interests I am confident we can work together to successfully navigate the energy transition to our mutual benefit.

In closing, I wish to thank the Energy Chamber for the opportunity to deliver the keynote address to this distinguished audience and to provide Government’s take on the energy transition as it relates to the domestic energy sector.  Please have a great and rewarding Conference.

I thank you for your attention.

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