This year, a small Caribbean nation is celebrating a century of commercial hydrocarbon production. Trinidad and Tobago, two dainty islands bobbing in warm waters just offshore producing giant Venezuela, has a remarkable legacy in the oil and gas business. The tiny country has syncopated favorable geology, stable politics and a globalized mindset into a position as a major exporter of liquefied natural gas (LNG).

Trinidad and Tobago’s energy sector is its lifeblood. Oil, gas and petrochemicals account for 70% of the country’s exports. The government of Trinidad and Tobago has set its sights on achieving developed-country status by 2020, and it expects to use energy as the beat that will foot it toward that goal.

But, a clamor in 2007 threatened Trinidad and Tobago’s harmony. A countrywide audit by Ryder Scott Petroleum Consultants, a Houston-based reserves-evaluation firm, showed sharp drops in the country’s reserves. And, a series of high-profile, deepwater dry holes muted exploration enthusiasm. The Trinidad and Tobago festival seemed in danger of closing early.

Petro-Canada's Cassra and Canadian Superior Energy Inc.'s Victory discoveries offshore Trinidad and Tobago have jazzed up the country's exploration sector. Facing page, Maersk Contractor's Kan Tan IV semisubmersible drills Canadian Superior's bounty prospect, the second in a series of three exploratory tests on deepwater Block 5(c).

Two big finds

Now, discoveries by Canadian firms have put a bounce back in the energy sector’s step. Earlier this year, Calgary-based Petro-Canada announced a find at its Cassra-1 well in deepwater Block 22, in the North Coast Marine area north of Tobago. That test was drilled in 1,400 feet of water and reached a total depth of 5,600 feet. It flowed 23 million cubic feet of gas per day during a drillstem test from a 30-foot interval. The discovery tested the edge of a whopping seismic anomaly that covers 26 square miles.

Petro-Canada followed the find with a successful appraisal well, Cassra-2, that confirmed its original estimate of contingent resources of about 1 trillion cubic feet (Tcf). Now, the company reports a discovery at its Sancoche prospect, also in Block 22. Petro-Canada has a 90% working interest in Block 22 and state firm Petrotrin has 10%.

On the heels of the Cassra find, a substantial discovery was made by Calgary-based Canadian Superior Energy Inc. The explorer found two prolific reservoirs in its Victory well on Intrepid Block 5(c) offshore the southeastern coast. The well encountered approximately 450 feet of estimated net pay in multiple zones. It tested at a restricted rate of 45 million cubic feet per day from one zone and 35 million a day from another.

It is capable of producing more than 100 million a day from the lower zone, and up to 50 million from the upper zone. The company has estimated on a preliminary basis that the Victory discovery could contain up to 1.1 Tcf of gas and 3.7 million barrels of condensate. Its partners in Block 5(c) are BG Group and Challenger Energy Corp.

Now, the partners are drilling their Bounty well, the second and deepest wildcat in a three-well program planned for the block. Bounty, in 1,000 feet of water, is projected to a targeted total final depth of approximately 18,045 feet. It lies 2.2 miles from the Victory discovery on a separate structure and targets geopressured sands below those productive at Victory.

Bounty was expected to reach total depth in late June, depending on casing requirements. “We’re in the home stretch,” says Mike Coolen, Canadian Superior president and chief operating officer. “We should have the well logged and be making some decisions early in July.”

The company will follow that test with a wildcat on its Endeavour prospect, updip from Bounty. “Endeavour has potential in both the shallower sands that we encountered at Victory, and the deeper, geopressured sands we’re targeting at Bounty. It could be the best of both worlds.” The Endeavour location is structurally high to an old well, dubbed Turtle, which was drilled prior to the use of 3-D seismic and encountered gas flows.

After Endeavour is drilled, BG will assume operatorship of the block. “BG has a great staff, marketing wing and existing infrastructure at the Dolphin and Deep Dolphin fields right next to our block. We’re excited to be able to take advantage of their manpower and experience.”

Natural gas power

During the past two decades, the emphasis of Trinidad’s energy industry has shifted dramatically from oil to gas and from onshore to offshore. In the 1960s, a number of good-size oil fields were discovered off its coasts. As rigs moved into deeper waters, prospects yielded gas discoveries. Gas exploration took off in the early 1990s, and huge finds—such as Dolphin, Angostura and Mahogany—were made.

In 1990, the country produced 270,000 barrels of oil equivalent (BOE) per day, and 40% of that was gas. In 2007, it made 804,000 BOE per day, 85% gas. Current production is 4 billion cubic feet (Bcf) and 123,000 barrels of oil per day.

With an abundance of gas came downstream businesses in urea, methanol and ammonia production, and installation of world-class LNG facilities. Early on, Trinidadian operators moved aggressively into international gas markets and captured substantial share. The country has done an excellent job of developing its gas reserves and markets.

Liquefield natural gas (LNG) from Trinidad and Tobago has traditionally been imported by the U.S., but tight global supplies have changed that flow. At present, Asian and European countries are importing large volumes of LNG from the Caribbean nation. Facing page, touring analysts observe the riser in the moon pool of the Dan Tan IV.

Today, Trinidad and Tobago is the world’s largest exporter of both methanol and ammonia, and the largest exporter of LNG in the Western Hemisphere.

LNG exports began in 1999, when Atlantic LNG, a consortium that includes subsidiaries of BP Plc, BG Group, Suez LNG, Repsol YPF and the National Gas Co. of Trinidad and Tobago, shipped its first cargo from Train 1 at Point Fortin, on the country’s southwestern coast. In August 2002, Train 2 started; the following spring, Train 3. Today, with Train 4, the latest and largest facility online, Atlantic LNG Co. can export 14.8 million metric tons (775 Bcf) per year of LNG.

Prior to 2004, the U.S. imported all of its LNG from Trinidad, and took nearly all of the product the country produced. That’s changed today, due to painfully tight global gas supply and high demand. Prices to load a ship FOB (free onboard) in Trinidad are now Nymex plus $2.75 per million Btu, and U.S. buyers aren’t willing to pay that rate.

“Even though U.S. imports are drastically lower this year, right now all the LNG we are getting is coming from Trinidad,” says Steve Johnson, president of Waterborne Energy Inc., a Houston-based consulting group that specializes in LNG markets.

Those volumes, under long-term contracts, are moving to terminals at Boston and Elba Island, Georgia. However, most of Trinidad’s LNG is sold under contracts that are not destination-restricted, and the country is the largest spot provider of LNG in the world.

Cargoes of Trinidadian LNG are increasingly sailing westward, to such countries as Korea, Taiwan and India. “This used to be unheard of, because the long voyage made it uneconomic. But supply is everything in today’s market. Trinidad is in an excellent position, and that looks to continue into the future.”

Upcoming opportunities

Supply is indeed crucial, and Trinidad is placing a greater emphasis on tapping its exploration potential, estimated by Ryder Scott at 37.1 Tcf of undiscovered resources. As part of the country’s effort to promote exploration, it is offering five blocks to operators in its 2008 licensing round. Off its eastern coast, two blocks in water depths from 1,300 to 2,700 feet are available, immediately offsetting Canadian Superior’s Block 5(c). Three blocks are open off the northern coast, in 300 to 1,800 feet of water, between Petro-Canada’s Block 22 and the coast.

Next year, the country plans to offer blocks in its Deep Atlantic region, a province it considers its most prospective. Currently, one block is under discussion with StatoilHydro.

Meanwhile, the nation is considering changing its fiscal terms to boost its competitiveness on the global stage. It is reviewing taxes, fiscal incentives for exploration of its deep waters, and drilling activities and structures of its production-sharing contracts.

The little nation has used its energy resources to engineer a remarkable economic expansion: its economy has grown an average of 9.2% annually for the past five years, and is on track to grow 5.5% this year. Unemployment is down, gross domestic product is up, and poverty has been sliced.

Given the recent discoveries by Canadian firms, and the promise of blocks yet to be drilled or even offered, the country plans to continue its remarkable party.

Trinidad and Tobago Concession Map(PDF)

Trinidad Stratigraphic Chart (PDF) -- Source: Ministry of Energy and Energy Industries, Government of Republic of Trinidad and Tobago.