Reinvention: On The Global Stage

While individuals from Trinidad and Tobago are well-known globally, the Trinidad and Tobago ‘name’ has a much weaker recognition than Canada, the U.S., the United Kingdom or any of the world’s other established producers. Of the spate of service and support companies—and even producers—present on the island, remarkably few have a footprint that spreads beyond the Caribbean. As global economic headwinds begin to change, Trinidad and Tobago’s traditional advantages might be diminishing in importance, but the country still has several of them at its disposal that it can—and should—develop in order to maintain its industry and expand its recognition abroad. Desmond Roberts, CEO of Perfection Services Ltd., believes that several factors are in place for Trinidad and Tobago’s energy sector to maintain interest both at home and abroad. “More so than the competitiveness, or lack thereof, the problem is not grasping the opportunities when they present themselves … things are lining up for Trinidad and Tobago to establish itself as a leader and hub in the Caribbean oil and gas industry; we just need to be sure to take advantage of this,” says Roberts.

Perfection Services Ltd. provides offshore container accommodation units for most of Trinidad and Tobago’s major operators and has seen an increase in business during maintenance season as clients upgrade the accommodations on their rigs.

Shifting Sands: Casting The LNG Export Net Wider

Necessity may, as the old English proverb suggests, be the mother of all invention, but shale gas finds in the U.S. may prove to be the unlikely mother of reinvention if Trinidad and Tobago is to learn from recent developments in North American gas markets. Only three years ago, approximately 75% of the country’s LNG exports went to the U.S. This has plunged to less than 20% in 2012. Minister Ramnarine has even suggested that American imports of Trinidadian LNG could fall to zero in the coming years. Ernst

and Young’s Gregory Hannays says, “the hallmarks of the energy sector here—cheap gas and proximity to key markets—are no longer advantages found only in Trinidad and Tobago. As a result, it is absolutely vital that the industry reinvent itself.”

Nigel Darlow, CEO, Atlantic LNG

The potential remaining for the country’s assets even after more than 100 years of production is remarkable, and must not be overlooked. An estimated 1 billion barrels of oil remain onshore alone.

Diversification is a key feature of the country’s reinvention, and it has already begun casting its export net wider to take into account shrinking demand in the U.S. and growing demand elsewhere. Research from Australian bank Macquarie suggests that LNG trading will rise by over four % per year between now and 2020. Trinidad and Tobago already exports 15 % of its gas to Asia, and continued growth across the region means that markets such as Korea and Japan will provide the majority of this increased demand for the foreseeable future. Demanding far higher LNG prices than the US, where shale gas discoveries have slashed prices in half on the Henry Hub index over the past four years, Asian markets will come to absorb a substantial shore of Trinidad and Tobago’s gas at higher prices, and the widening of the Panama Canal will only serve to facilitate this avenue of great opportunity. Nigel Darlow, CEO of Atlantic—operator of one of the world’s largest LNG trains—suggests that both his company’s and their client’s diversification to further markets has poised the industry to remain strong in coming years.

Roger Packer, President of the Energy Chamber and Managing Director of Tucker Energy Services, agrees with this outlook. “We have been able to change and move our shipments into different areas of the world. If you look at where our LNG shipments are going today, it will show you how we have really changed direction and been able to take advantage of better-priced markets,” says Packer. Atlantic’s Darlow also points to further key research indicating global demand to increase to 425 million tonnes in the next ten years. “With the current global LNG network, supply in reservoirs is not being replaced by new finds; so not only is demand increasing and shifting, but we are seeing major changes in the markets from which the supply originates.” Despite the gas shortfall that Trinidad and Tobago has experienced recently, once most upstream players complete their integrity programs, the outlook for the country is bright,” says Darlow.

Roger Packer, President of the Energy Chamber and Managing Director of Tucker Energy Services

While markets in the Far East do hold enormous potential, Trinidad and Tobago’s location holds several advantages in its proximity to South American markets as well; Minister Ramnarine sees Trinidad and Tobago as the Atlantic Basin’s “LNG pioneer.” Talks are underway to develop an LNG-export network within the Caribbean, both through a pipeline to Barbados and in medium-sized tankers shipping CNG throughout the region. Roland Fisher, CEO of Gasfin says, “We have been besieged by people in the region wanting a small-scale LNG receiving service.” Gasfin, a Luxembourg-registered company specializing in mid-scale LNG infrastructure, has also identified Trinidad and Tobago as a potential supplier to nearby Caribbean islands. While American shale gas finds have thrown the traditional structure of Trinidad’s gas markets into question, Minister Ramnarine believes that gas will replace oil as the fuel of the 21st century, creating a reinvented and diversified—but not diminished—space for Trinidad and Tobago on the global gas stage.

Point Lisas And The NGC: Models In High Demand

Each successive Trinidadian government has been accused of not fully understanding the previous one, leading to a series of disconnected policies and regimes that have hampered the development of the country’s energy sector. If there are two projects, however, that are models of government and policy success, they are the Point Lisas Industrial Estate and the NGC. From contentious beginnings, Point Lisas has been the fundamental driving force in pushing the Caribbean island to becoming the world’s leading producer and exporter of methanol and ammonia, allowing Trinidad to export value-added petrochemical production rather than raw commodities. In tandem with the estate, the NGC has been key in ensuring that the country’s gas has been successfully captured, distributed and monetized in a centralized and efficient manner.

The MEEA and Energy Chamber have engaged in a number of trade missions recently to discuss the demand for these two models in a variety of markets. Desmond Roberts of Perfection Services Ltd. says, “The vein coming in from West Africa to French Guyana and Suriname continues into our waters and looks to provide some promising finds.” Following this vein to its origins, West African markets have been developing their own vibrant energy sectors and have been looking westwards for help in setting up efficient models to drive their economies.

The Point Lisas Estate in Couva has been a major engine of Trinidad's growth since its establishment in 1976

Yara Tringen, Trinidad and Tobago’s largest producer of ammonia has been in existence since before the

Point Lisas estate was created. Yara’s President, Richard de la Bastide, says “there are several advantages to the Point Lisas Industrial Estate beyond just concentrating several companies in one geographical area. Local contractors have been able to develop and gain experience from a variety of companies involved in one wider industry.” The synergy that Point Lisas has encouraged has allowed for a more in depth development of Trinidad and Tobago’s downstream sector while providing substantial employment in the area around Couva, where the estate is based. “By creating an industry-focused estate, a number of job opportunities were created which may not have arisen in a more diluted setting,” remarks de la Bastide, speaking to what might be one of Point Lisas’ greatest strengths.

Today, the NGC has an asset base of over US$4 billion, making it one of the Caribbean’s most lucrative enterprises. This model, along with the industrial estate setup to create a domestic value chain, is more or less a pioneering effort by the Trinidadian government and has seen remarkable success. Emerging oil and gas economies in West Africa and beyond would benefit immensely from this shared knowledge. Both companies have, hand in hand, allowed for Trinidadian business to flourish through the thorough utilization and processing of the country’s resources.

Production, Service And Support: Expanding The Value Chain & Taking It Abroad

As lucrative and successful as the industrial estate and NGC models would be abroad, so would any number of Trinidadian companies that constitute the country’s energy sector. In fact, in the face of a general downturn in activity across the industry, service companies have fared exceptionally well as ongoing integrity works at home have pushed companies to opportunities abroad. Edsel Lee, Regional Manager for Team Industrial Services, says “even with the downturn in production, we have not seen a lapse in service work. As a matter of fact, service companies have seen increased performance in recent years, with Team marking record years for each of the past four years.” Team’s success has lead its U.S.-based head office to place the management of the company’s Angola branch under Lee’s supervision from Trinidad and Tobago. The diversification of service companies in Trinidad and Tobago—both in terms of their offerings and their locations—is demonstrative of a business acumen aimed at ensuring that the service sector remains strong regardless of domestic economic conditions.

Tucker Energy Services Limited, one of the oldest companies in the country’s industry, is also one of its biggest success stories of a Trinidadian company operating abroad. Tucker’s Packer believes that local partners are one of the most important aspects of taking a company abroad into new markets. In discussing Tucker’s strengths, Packer identifies completions, wire line logging tools, sand control and, in particular, cementing as areas in which the company has managed to bring a particular ‘Trinidadian operational model’ overseas. “We have succeeded in entering niche markets where our strengths—such as cementing—are in high demand,” says Packer. “This is where much of the opportunity for other Trinidadian companies lies; in identifying their strengths and niches where they would be needed. The opportunities are numerous.”

Kenneth Ferguson, President, The Kenson Group of Companies

Douglas Boyce, COO of marine support services company Hull Support Services Limited, believes that Trinidadian companies will have an advantage over their European counterparts in West African markets. “A mentality of favorable south-to-south relations … stems from a similar history or even a similar soul between West Africa and the Carib-bean,” says Boyce. Hull Support Services is looking to brand themselves as a Trinidadian company abroad by creating strategic partnerships with companies in foreign markets, similar to the partnership they are offering to foreign companies wishing to enter their home market. The strong currents where the Caribbean sea meets the Atlantic ocean means that subsea service companies originating from Trinidad and Tobago have the added experience of working in particularly complex conditions, which serves them well in applying that expertise overseas.

In the small space that Trinidad and Tobago occupies, the number of niche services required to support the island nation’s industry alone provides a wealth of opportunity. The Kenson School of Production Technology (KSPT) was founded by Chairman Kenneth Ferguson to fill a gap in education geared towards the energy sector, and has successfully identified yet another niche for expansion abroad. In the late 1990s, when Ferguson founded the school, he says “most petroleum companies were having great difficulty in sourcing locally skilled and experienced nationals to work offshore.” Ferguson built KSPT around the model of placing students directly from colleges and technical schools with multinationals operating offshore. This on-the-job training has been increasingly popular locally, with most operators having ties to KSPT directly or indirectly. Kenson’s management has been exploring opportunities in West Africa and Tanzania to export both their technical and educational services to the region. KSPT has already seen a round of students from Uganda who will be returning to their country to join the industry, thus creating a network of qualified individuals to continue sharing knowledge locally.

National Helicopter Services Limited (NHSL), a formerly government-owned transportation logistics company, will begin construction of a new, comprehensive heliport at its current site in Couva in 2013. The company plans to add a certified repair center for helicopters from throughout the region as well. Joshey Mahabir, the company’s Managing Director, says “in the past two years, we have seen an increase in the exploration and drilling activity in Trinidad and Tobago’s waters, mainly on the northeast coast of the country.” Being one of two helicopter operators on the island, NHSL’s growth is reflective not only of the company’s successes, but of the industries projected performance. “Due to the amount of clients we have already gained as a result of this interest,” continues Mahabir, “our two current check-in locations have outgrown the size of our operations.” NHSL’s heliport and repair center will make air transport across the island’s onshore fields and to its offshore rigs more efficient and comprehensive. NHSL has identified and is already working on expanding its presence in the region, beginning with Guyana and Suriname. If the government can embody a similar attitude to ensuring the country’s road network is expanded, the industry will truly be prepared for the growth it is set to experience.

Entering the Trinidadian market can prove to be somewhat of a challenge for new companies, as indicated by Trinidad and Tobago’s low ranking in the World Bank’s Ease of Doing Business Survey. In this context, companies like JSL International have also been successful in establishing a one-stop-shop solution to provide advisory

and practical services to newcomers. Javid Ramcharitar, JSL’s Managing Director, says “a well-prepared entry strategy is essential, as is a key service provider who will navigate a company through the often complicated set-up procedure; the current government has introduced incentives for oil and gas companies to set up in Trinidad and Tobago, including a reduction in petroleum taxes.”

Ramcharitar hopes to take his one-stop-shop model of helping companies establish operations abroad; he has already seen success regionally and believes that the experience provided by Trinidad and Tobago’s industry will be particularly useful in other emerging markets. “From the gas viewpoint,” he says, “Trinidad and Tobago has a skilled resource base that should be exported.” JSL maintains a running database of qualified CVs for use both domestically and abroad, should the last-minute need arise. Given JSL’s success in establishing companies within the country in recent years, there is no reason why exporting Trinidad’s skilled resource base will not prove equally successful.

Wain Iton, CEO, Trinidad and Tobago Stock Exchange (TTSE)

Bridging A Disconnect: Financing And The Energy Sector

With capital being as globally mobile as it is today, pitching to and securing investors is given as much importance as evaluating the technicalities and geographical impact of a project. It is only natural, then, for the finance and energy sectors to experience significant overlaps. Trinidad and Tobago, however, breaks the mold for this overlap and the lack of any real relationship between the country’s energy sector and the remainder of its economy—finances included—is intriguing. As Anthony Jordan, Regional Corporate Manager of Republic Bank, Trinidad’s largest, points out, “Our liquidity situation is very decent and with the right circumstances, we have a great deal of money to lend.” Jordan is not the only figure to endorse the liquidity of banks in Trinidad and Tobago, nor is he the only one to be both hopeful and skeptical about chances for investing in the energy sector. “There certainly is potential in this area of the financial sector, but for this to happen … the government has to provide more incentives for banks to lend to the upstream exploration and production sector,” explains Jordan.

Naturally, the lag between initial exploration, drilling and actual production is a significant risk for smaller banks to get involved in. Jordan has identified service companies as the ideal investment, because their capital expenditure for equipment lies within a more manageable range. Besides the relatively easy availability of capital for E&P’s in North America and Europe, there is a general lack of understanding of the energy industry from the perspective of the financial institutions. Joel Pemberton, CEO of Trinidadian-owned Trinity Exploration and Production, is attempting to mend this gap. “Providing loans to the oil and gas industry can be very technical and local banks need to build their internal expertise,” Pemberton says. “We are bringing the top analysts from RBC London to Trinidad to host a session with local banks on how to value oil and gas companies and structure their finances”.

Trinity is the country’s seventh largest operator and the only company operating onshore and on both coasts. With its name meant to reflect its Trinidadian heritage, Trinity is setting the example for what successful reinvention will mean for Trinidad and Tobago, both at home and abroad. Taking the lead in reforming the financing of the oil and gas sector while promoting Trinidad-based investment abroad, Pemberton hopes that Trinity is only the first of many such companies that truly represent Trinidad and Tobago’s potential in the oil and gas world.

Wain Iton, CEO, Trinidad and Tobago Stock Exchange (TTSE)

This financial disconnect is made all the more acute given the further complexities of such a small market. “Trinidad and Tobago is a very closed society that functions in a large part on relationships. Banks are not willing to provide reasonable rates to projects and people they are not familiar with,” explains Rikhi Rampersad, Managing Partner at Deloitte’s Trinidad and Tobago office, the most recent arrival of the Big Four to the island. Deloitte has just acquired geological consultancy firm AJM Petroleum Consultants, rebranding the partnership as AJM Deloitte. Rampersad intends to see 2013 bring the expansion of Deloitte’s offices in Port of Spain to include AJM Deloitte and a team of geologists dedicated to improving the company’s service offerings to the sector. “As a result, many of the smaller players that could propel the country and sector forward have a difficult time breaking into this circle,” says Rampersad. In order for Trinidad and

Tobago’s local production and service companies to develop, the mindset in the local finance industry needs to change to help foster smaller business growth.

This is a sentiment echoed by Wain Iton, CEO of the Trinidad and Tobago Stock Exchange (TTSE). By way of explaining the lack of companies listed on the TTSE, Iton says, “It is an entrenched business ethic for smaller companies not to go public.” Similar to Trinity, the TTSE is also working towards educating potential investors to the benefits of listing on Trinidad’s admittedly stagnant stock exchange. Currently, Mora Oil Ventures is the only oil company listed on the secondary exchange.

Reinvention encompasses a change in attitude, target markets and competitiveness. At the same time, reinvention does require funding. In order for the finance sector to grow—and thus encourage greater economic diversification—and for local companies to spread the ‘Trinidad’ name across the globe, local banks will have to themselves invest in developing teams dedicated to oil and gas research and risk capital finance.

Beyond Expertise: Technology

The technology available for monitoring activity at both onshore and offshore oil wells have developed into extremely advanced systems as new terrains and geological challenges have been ecountered across the globe. Not to be left out, in addition to its highly skilled people, Trinidad and Tobago has made some contributions to the technological side of things as well. Gregory Boyles, President of Houston-based New Horizon Exploration Ltd., came to Trinidad and Tobago with the goal of introducing a new technology to a market in which he saw opportunity. In describing New Horizon’s artificial lift work in the southern Parrylands block, Boyles says, “During the last ten years of drilling the horizontal wells and using injectors, we found the reservoirs to be very compartmentalized, and that the highly viscous, heavy crude, was very difficult to produce. If specific fluid levels are not maintained during drilling, the well will cease to produce oil, and that was the impetus to develop our technology.” The efficiency and cost-effectiveness of the Smart Pumper technology developed by Boyles and distributed by its sister company PetroCom promises to be popular amongst smaller companies such as New Horizon, which often cannot afford the more expensive SCADA technologies to monitor their wells.

Anton Paul, Managing Director, Hydrocarb TT

Hydrocarb TT, a family-owned lease operator and service provider, has seen a similar demand in the arena of enhanced recovery

optimization. Hydrocarb TT recently launched a tar-sands patent for a similar technology that aids in extracting oil from sand grains in an economically viable manner, without producing any environmental waste. Anton Paul, Hydrocarb TT‘s Managing Director, wishes to see Trinidad and Tobago pursue stricter intellectual property rules in order to protect local innovations. He also sees technology as a way for Hydrocarb TT and other local companies to compete on a global scale. “Gaining respect in the global arena by multinationals is an ongoing challenge,” says Paul. “The development of these technologies shows the greatest potential we have.” If companies like New Horizon, PetroCom and Hydrocarb are able to dedicate resources to research and development pursuits, they will be setting yet another example of how Trinidad and Tobago can focus on remaining a key player.

Diver prepares to inspect a rig