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T&T secures US$15M signing bonus, other financial benefits on new gas deal

Kaieteur

Map showing the Loran- Manatee crossborder field, with Loran being located in the marine area of Venezuela.

By Kiana Wilburg / Kaieteur News

GEORGETOWN
Petroleumworld 11 19 2021

Following several rounds of negotiations with Dutch multinational Shell, the Government of Trinidad and Tobago has locked up a crucial gas deal that will see its people feeling substantial financial benefits way before the project goes into operation in 2025.

The Production Sharing Agreement (PSA) for the project which will last for 25 years was signed on Wednesday between the TT administration, Shell Trinidad and Tobago Limited and Shell Trinidad and Tobago Resources SRL (Shell). The agreement is in respect of the Manatee Field located in SubBlock 6D in the East Coast Marine Area of Trinidad. It should be noted that SubBlock 6 D is just a portion of the existing Block 6 already contracted to Shell.

According to Prime Minister, Dr. Keith Rowley, the project will be one of the largest natural gas developments to be undertaken in the country and is expected to cost US$1.8 billion. The PM said preliminary estimates indicate that natural gas production could start as early as 2025, with an initial production of up to 350 million standard cubic feet (mmscf) per day, before ramping up to as much as 700 mmscf per day.

Prime Minister Dr. Rowley was keen to note however that his people will not wait until production starts to “see the financial benefits accruing from the PSC.” In this regard, he disclosed that a suite of annual charges are payable within 10 days of the effective date of the contract and thereafter within the first 10 days of the contract year. The Prime Minister said these include an administrative charge of US$300,000 increasing at 4% per annum, training, research, and development contributions of US$150,000 per annum increasing at 6% annually until the start of production, when contributions will equal 0.25% of the value of the contractor’s share of profit petroleum.

The Prime Minister said there is also a one-time technical bonus of US$200,000 to the Ministry, an annual scholarship contribution of US$100,000 per annum increasing at 6% per annum and a signing bonus of US$15 million.

As per terms of the PSC, the Prime Minister said, “Shell is required to comply with Government’s Local Content Policy which requires the contractor to maximize to the satisfaction of the Minister the level of usage of local goods and services and employment of nationals…”

With respect to the Manatee field where production will take place, Dr. Rowley said this forms
a part of the Loran- Manatee cross-border field, with Loran being located in the marine area of Venezuela. Prime Minister Rowley explained on Wednesday that the Loran-Manatee reservoir has an estimated gas resource of 10.04 trillion cubic feet (tcf), of which 2.712 tcf is within the Manatee field.

On August 16, 2010, he said the Government of the Republic of Trinidad and Tobago and the Government of the Bolivarian Republic of Venezuela executed a Unitisation Agreement for the Exploitation and Development of the Loran-Manatee field. He said an absence of urgency and no definitive commitment to making the necessary investment among the various interested parties saw this proven resource remaining dormant as though stranded. He said the Government of the Republic of Trinidad and Tobago and the Bolivarian Government of Venezuela therefore agreed to the independent development by each Government of the field within the Loran-Manatee cross-border that falls within its marine area.

By a Government to Government Agreement dated October 15, 2019, the Loran Manatee Unitisation Agreement was terminated, Dr. Rowley said, thereby delinking the development of the Manatee field from the Loran field. While the imposition of US sanctions may have temporarily derailed cross-border initiative, he said this situation is not expected to last indefinitely.

The Prime Minister further noted that the decision to proceed independently on the development of the cross-border fields created the opportunity for both the Government as resource owner and Shell as contractor to monetize what would be one of the country’s largest natural gas fields to date.

In an Agreement, dated August 19th 2019, between the Government and Shell for the extension of the term of Block 6, it was agreed that separate terms would apply for any Petroleum Production derived from the commercial development of any field(s) in the sub-block 6d (Manatee) portion of the Contract Area, subject to mutual agreement of the Parties.

Pursuant to the terms of the Agreement, Shell was encouraged and thus requested the opportunity to initiate negotiations to continue its appraisal and pre-sanction activities which were necessary to progress the commercial development of the sub-block 6d (Manatee) portion of Block 6. This request was positively received by the Ministry of Energy and Energy Industries, acting on behalf of the Government.

Prime Minister Rowley said Wednesday’s event was the culmination of the negotiations between the Ministry and Shell and the subsequent approval by Government. He said too that it signifies his Government’s ongoing commitment and action to meet domestic natural gas requirements.


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