FEATURE

The rise of the Independents:

A new force in oil production
By David Renwick

L
Independent eaving aside the State-owned Petrotrin The LOs and FOs started out in the late 1980s as all
and two multinationals, Repsol and BHP locally-owned companies, most of whom had been
producers
Billiton, the rest of the 67,780 b/d of crude contractors working for Petrotrin and its multi-
are expected oil produced in Trinidad and Tobago in 2013 national predecessors who grabbed the chance to
to be the was by a multitude of small companies, collectively become oil producers on their own account when
known as the Independents. the opportunity was offered to them.
main source
What’s more, these entities are expected to be Over the years, however, most of them have been
of growth in the main source of growth in crude output in the snapped up by foreign companies, who themselves
crude output future, unless some of the exploration activity qualify to be considered as Independents, despite
currently underway both on and offshore leads to being quoted on stock exchanges abroad.
in the future,
the discovery of a major new oilfield. Nationalists are not happy about this, which they
unless the The Independents certainly see themselves as regard as undermining the growth of an indigenous
exploration fulfilling that role and as, at least, part of the answer class of upstream oil entrepreneurs but one recent
to Energy and Energy Affairs Minister Kevin overseas entrant, Leni Gas and Oil (LGO), which is
activity
Ramnarine’s fervent desire to halt and reverse what listed on the Alternative Investment Market (AIM)
currently has for the last three years been an unrelenting in London, considers it, perhaps unsurprisingly, as
underway decline in the amount of crude lifted, almost entirely a positive development.
due to falling production on the part of both Repsol Its Chief Executive Officer, geologist Neil Ritson,
leads to the
and BHP Billiton. argues that “the overseas companies can get
discovery Petrotrin has held relatively steady over the production up faster. They can access finance. They
of a major period, both in its onshore and nearshore (Gulf of know how to reactivate old fields and manage wells.
Paria) operations. They are very competent in everything that needs
new oilfield
Only the Independents – eight lease operators to be done to raise production which, after all, is
(LOs), two farm out (FO) operators, five incremental Minister Ramnarine’s goal.”
production service contractors (IPSCs) and six LGO, which operates the Goudron IPSC, is a
companies operating outside of the LO, FO or 50 per cent, non-operating partner with another
IPSC systems. The first three are arrangements with overseas Independent, Touchstone Exploration, in
Petrotrin to, respectively, reactivate abandoned the Icacos block. It has recently extended its reach
wells, produce small tracts of acreage and expand by taking a 100 per cent share in the deeper horizons
operations in fields that have been neglected over (below 7,000 feet) in celebrated local oilman Dr
the years. The companies that fall into none of those Krishna Persad’s private mineral rights licence in
categories work blocks under joint Trinidad’s south west peninsula, which
venture (JV) deals with Petrotrin and, includes the producing Bonasse field.
in some cases, on their own, such as LGO had earlier added 1,750 acres
Touchstone Exploration and Moraven of prospective acreage adjacent to
Holdings, the only Independent the Icacos block, which it operates
operating exclusively offshore (on independently of Touchstone.
the east coast). Mind you, there is This quick acquisition of additional
considerable overlap, with some properties is typical of how the
companies being involved in more newcomers to the upstream in Trinidad
than one type of arrangement with and Tobago tend to operate and
the state company, which is by far the Neil Ritson has distinguished them from their
largest acreage holder in the country. CEO, Leni Gas & Oil counterparts locally.

136 TRINIDAD & TOBAGO THE BLACK GOLD BOOK

 Dr Persad is something of an exception, State-owned National Gas Company (NGC) to Though the
however. Not only has his KPA Group held on investigate the feasibility of building a pipeline
Independents
to its 46-acre Barrackpore farm out (FO) block, from Point Lisas to the southern basin to supply
it has expansionist plans in store for it. Current operators with CO2 on a commercial basis. are, individually,
production is about 50 b/d which may seem modest Greg Boyles, another small operator (from the usually modest
but is actually, according to Dr Persad, “the best US) whose New Horizon Exploration (NHE) runs
oil producers,
performance in terms of barrels per acre of all the Parrylands East block in a JV with Petrotrin, is
Petrotrin’s partnerships.” also a supporter of CO2-EOR and at one time toyed their very
Plans for 2013 included the drilling of two new 2,000 with the idea on his own account. independence
feet shallow test wells in Barrackpore and initiating “Most people in the energy sector would consider
gives them
work in the shallow horizons in the private mineral it if it made economic sense,” he says. “The lynchpin
rights acreage mentioned earlier, 72.5 per cent of here is the economics associated with the effort. the freedom
which is now in Persad’s hands following his purchase There is a cost of bringing CO2 into play and to innovate in
of Captiva Resources controlling interest via one of his measuring the results of the after-effects of injecting
a way bigger
companies called Beach Oilfield Ltd (BOLT). it into your formation.”
Persad says he wants to rehabilitate 4-5 existing Persad seems to have found a way to deal with the companies
wells and perhaps drill 3-5 new ones, “in order to get economics but most Independents seem to think often can’t
the very low production at Bonasse up to at least 75- they have enough potential reserves in their blocks
100 b/d, with my goal being 150/300 b/d, if I can get it.” that can be accessed by development drilling in
Though the Independents are, individually, already established plays.
usually modest oil producers (collectively their Touchstone Exploration is a sterling example of
contribution is crucial, however), their very that. For the fiscal year-end Touchstone achieved an
independence gives them the freedom to innovate annual average production of 1,727b/d.
in a way bigger companies often can’t. It undertook an 8-well development effort in
Dr Persad is an outstanding example of this in 2013, yielding an annual finding, development and
that he is pioneering an effort to retrieve some of the acquisition cost of approximately US$11.63 per barrel.
“stranded oil” left behind in his own block because Touchstone plans a 21-well effort during 2014,
it can no longer be brought to the surface naturally. using two rigs and hopes to end the year at between
His retrieval agent will be carbon dioxide (CO2) 2,300 and 2,400 b/d.
and flue gas, first by injecting into existing wells The Canadian exploration company, whose
and then extending that field-wide with injector President and CEO is the amiable economist-
and offtake wells. Using CO2 for turned-oilman, Paul Baay, is one of the
enhanced oil recovery (EOR) is not best examples of the overseas incursion
being attempted by any other company into the locally-owned upstream sector
in Trinidad and Tobago at the moment in Trinidad and Tobago.
but Persad believes it will quickly Most recently, in 2014, Touchstone
catch on once an economic way can merged with another Canadian
be found to capture the emissions Company, Petrobank Energy and
from the petrochemical plants at the Resources Ltd, to create a well-
Point Lisas industrial estate and at the capitalised, diverse, entity that is
Atlantic LNG site in Point Fortin. committed to its assets in Trinidad.
Energy and Energy Affairs Minister Dr Krishna Persad In 2011 Touchstone unhesitatingly
Kevin Ramnarine has instructed the Chairman, KPA Group swooped on the Primera Energy ▶

TRINIDAD & TOBAGO THE BLACK GOLD BOOK 137

FEATURE

One of the ▶ Group when Primera’s beleaguered parent, the block in February of this year. This block will
Trinidad and Tobago conglomerate CL Financial, provide Touchstone with approximately 44,700
principal
was divesting most of its subsidiaries. A year earlier, additional acres.
attractions in 2010, Touchstone had bought Territorial Services One of the principal attractions for an Independ-
for an (the WD-8 LO Block) and the acreages owned by ent in Trinidad is the guaranteed market it has for
Damus Oil (LO blocks CO1 and CO2 and FO its crude oil. By their very nature, Independents
Independent
blocks South Palo Seco and New Dome). have no links with refineries, unlike the majors,
in Trinidad The Primera Purchase added no fewer than 16 which do and in most other countries would have to
is the blocks and fields to its inventory, including one seek out domestic refiners and do deals with them
in the Gulf of Paria called East Brighton. That or even have to export their oil.
guaranteed
amounts to about 32,000 net acres within Trinidad, Not so in Trinidad and Tobago, where the
market it giving Touchstone the kind of critical mass Petrotrin refinery is only too happy to purchase
has for its on which it can build a substantial production any crude it is offered, and at good prices too.
platform going forward. “We are absolutely satisfied with the price we get
crude oil
Mr Baay shares the same view of the value of from Petrotrin”, Baay confirms. “It varies month to
the Independents to the Trinidad and Tobago month, depending on the world price but it’s not
petroleum sector as does LGO’s Neil Ritson. “We too far from that.”
small guys are going to make a difference where Walter Cukavac, country manager for another
oil production is concerned,” he says, firmly. “I leading Independent, Range Resources, echoes
feel the Independents could among us add about Baay’s words. “All our sales are tied into Petrotrin,”
20,000 b/d which would take the country back up he assures. “They are happy to buy all the oil we
to roughly 100,000 b/d.” produce. All we have to do is put it into a pipeline.”
Touchstone’s own contribution to this “could be Range has three oil-producing onshore blocks
upwards of 5,000 b/d in due course,” Baay asserts. – Morne Diablo and South Quarry, both FOs and
“by 2015, which will be only our sixth year of Beach Marcelle, an IPSC – from which it lifts about
business in Trinidad and Tobago, we expect to be 600 b/d. It expects to drill 175 wells over the next
lifting between 2,800 to 3,000 b/d.” All this is not so 3 years across its blocks. Its recent agreement with
fanciful when it is considered that, as the President/ Petrotrin to reduce the over-riding royalty (ORR) it
CEO observes “That we have taken production in pays on its blocks has improved its netback per barrel
Trinidad from 143 b/d to 1,727 b/d.” to US$40 before tax at 1,000 b/d and around US$50 a
While acknowledging that Touchstone has barrel before tax at 2,000 b/d.
managed to add acreage at a Like the KPA Group, Range is active
considerable clip in Trinidad and in EOR but using water, not CO2, in
Tobago, Baay insists at “it’s not the the Morne Diablo, with plans to carry
amount of acreage that you have so out waterflood on Beach Marcelle in
much as the number of prospective the future.
drilling locations. We now have 130 It has also been on the lookout for
identified new well drilling locations. expansion into new properties and in
That is approximately 5 years of July 2013 announced it had farmed-
drilling ahead.” into Niko Resources/Petrotrin’s
Despite that, Touchstone has not Guayaguayare Shallow and Deep
stopped looking for additional acreage Paul Baay Horizon block, which is operated under
and has been awarded the Ortoire CEO, Touchstone a production sharing contract (PSC)

138 TRINIDAD & TOBAGO THE BLACK GOLD BOOK

and extends from onshore to the transition zone have significant potential for large gas discoveries.” Most
offshore. One Independent that has still managed to keep
Independents
Range will take over 50 per cent of Niko’s interests majority ownership in local hands, despite its IPO
in the shallow and deep portions of the block, which on AIM earlier this year, is Trinity Exploration and seem to
are 65 per cent and 80 per cent, respectively. Production. It is the only one of its ilk that works think they
The attraction is not hard to discern. As Range acreage off the west coast, the east coast and on
have enough
said in announcing the acquisition: “There are land. The ambition of its CEO, Monty Pemberton,
four prospective fields within the onshore part is “to become the first internationally recognised potential
of the block, each considered to have significant Trinidad and Tobago oil and gas company.” reserves in
potential for oil, while the offshore is believed to More on Trinity elsewhere in this publication ■
their blocks
that can be
accessed by
development
drilling in
already
established
plays

Range Resources
has three oil-
producing onshore
blocks in Trinidad:
Morne Diablo,
South Quarry and
Beach Marcelle

TRINIDAD & TOBAGO THE BLACK GOLD BOOK 139