More trouble for Trinidad’s LNG sector


More trouble for Trinidad’s LNG sector

LNG production in Trinidad and Tobago was disrupted last week after a power outage shut down the Atlantic LNG export terminal. The power problems followed poor drilling results in May that have raised questions about the future of Train 1 at the plant.

The consortium that operates Atlantic LNG, which is led by BP and Royal Dutch Shell, reported on June 21 that the facility’s four trains were being brought back on line and would soon be operating at normal capacity. The plant has a nameplate capacity of 14.8 million tonnes (19.7 bcm) per year, though exports only reached around 15 bcm in 2018.

Trinidad’s Energy Ministry said it hoped the shutdown had not adversely affected output targets, though it has been in talks with some customers about shipping schedules affected by the disruption.

The power outage is the latest problem to hit the facility, after what had been a relatively upbeat start to the year.

In February it was hoped the launch of BP’s Angelin field would inject some life into Trinidad and Tobago’s gas sector and complement the start-up of the Juniper field in 2017. Combined output from the fields is estimated at around 34 mcm per day (12 bcm per year).

The country’s gas output hit a high of 43.5 bcm per year in 2010, but then fell back to around 34 bcm in 2017 as depleting reserves at older fields were not replaced quickly enough. Though Angelin and Juniper have helped stem the decline, there was bad news in May when BP reported poor infill drilling results at its Cannonball and Cashima fields.

The company had anticipated supplying up to 8.5 mcm per day (3 bcm per year) of gas from the fields to Train 1 at Atlantic LNG in 2020 and 2021, though BP said this target was now at risk on the back of the drilling campaign last month.

With feedstock supplies to Train 1 under pressure, BP has said it might have to be mothballed after 2019, which would see shut in 20% of Atlantic LNG’s capacity.

This would appear an extreme reaction to the results of a single infill drilling programme, the details of which remain fairly sketchy. BP has also committed US$8 billion of investment in Trinidad over the next 10 years, which should open up new gas production and boost feedstock streams to the LNG plant.

Talk of mothballing the train has emerged as Trinidad’s government continues its discussions with BP and Shell on restructuring the Atlantic LNG project. Train 1 benefitted from generous incentives from the government – such as a 20-year tax holiday – when it was commissioned in 1999. With this benefit due to end this year, talks on the future of the train have been slow as the economics of the project are scrutinised and questions about feedstock security emerge.

The different shareholder structure of each of the trains has also complicated feedstock allocation. Shell owns 46% of Train 1, with BP holding 34%. Trinidad’s state-run NGC owns 10%, as does a unit of Chinese sovereign wealth fund CIC.

As talks on Train 1’s future continue there is hope the renegotiation of several production-sharing contracts (PSCs) by Shell could enable it to make up the 3 bcm per year shortfall in feedstock supply caused by BP’s problems at Cashima and Cannonball.

Meanwhile, BP stressed that feedstock supply to the other three trains at Atlantic LNG would not be affected.

Indeed, the outlook for the plant as a whole appears relatively upbeat in the short to medium-term.

It is anticipated that other new projects such as Cassia C and Matapal will enhance the utilisation of Atlantic LNG’s capacity. Cassia C is BP’s third platform on the Cassia field in the Columbus Basin that will compress and export 34 mcm per day (12.4 bcm per year) of gas. Matapal will develop gas lifted from the Savannah well, with first gas due in 2022. Its output capacity of 11.3 mcm per day (4 bcm per year) will flow from a three-well development to the Juniper platform.

BHP Billiton’s Greater Angostura and EOG Resources’ Sercan projects are also expected to add to production.

These projects are crucial in replacing older fields as they are taken offline. But they need to be delivered on time and as planned, as any delays can quickly put pressure on feedstock supply, as shown by BP’s infill issues.

Trinidad exported 12.4 million tonnes of LNG in 2018. Exports are forecast to scale up by around 3% this year, with last week’s power outage at Atlantic unlikely to have affected that target significantly.

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