Trinidad’s drilling dynamics and economicsMay 24, 2023
Anthony Brash, managing director of Well Services Petroleum Company, talks to The Energy Year about the most effective strategy the Trinidadian government could take in applying petroleum taxes and the company’s latest drilling activities. Well Services Petroleum Company provides contract drilling and well workover services.
What is your outlook for 2023 following the fiscal revision for petroleum in September 2022?
If oil prices continue to decline into 2023, producers are going to cut back on their well programmes. There was an amendment last year to the SPT [Supplemental Petroleum Tax] to raise the trigger to USD 75 per barrel, but at the same time, the prices were still above that value so producers paid SPT for the whole of 2022. The amount of money that is paid toward the SPT could have been utilised for drilling more wells and making higher profits. Then that profit would pay toward the Petroleum Profits Tax [PPT], which is 55-50%, plus a 5% unemployment levy.
What would you suggest as a more effective strategy regarding petroleum taxes?
The SPT used to have a 40% write-off against the drilling of new wells. Then it was dropped to 25%, and the government just took it back up to 30%. It should be 100%, since it would encourage producers to drill, and all the money spent drilling a well could be written off against the SPT. By producing more oil from new wells, there will be a higher value in Petroleum Profits Taxes for the government to collect.
The government is approaching this the wrong way by wanting to take money up front. What they should do is give incentives to increase production and drilling because not only does that give them more money in petroleum tax, but the service industry is activated, and services hire people, who also pay taxes through PAYE [the Pay-As-You-Earn System] and NIS [National Insurance Services]. The government would make a lot more revenue if they gave more incentives, especially against the SPT.
The SPT is really supposed to be a windfall profit tax. The oil costs so much money to produce now – conditions are not the same as when they developed this tax. The SPT ideally should be eliminated entirely and the 50% PPT kept.
Do the taxes on gas production make it more attractive to invest in than oil?
There is a government royalty of 12.5% for gas production that was introduced a few years ago, which the oil producers pay. That is why bpTT got rid of their oil assets. You make more money off of producing gas.
Additionally, not only is it more economical producing gas, you don’t have to work over gas wells, whereas in an oil well, there are always workover jobs that need to be done on a regular basis. These jobs include, dewaxing, washing and changing-out leaking tubing or rods.
What main projects did Well Services Petroleum Company drill for in 2022?
The main offshore project we had in the last year was undertaken to help increase production in the Soldado field for Heritage using our jackup rig 50 and to drill a well in the south of that field for EOG. We also drilled for DeNovo in the Zandolie field using our rig 110.
The drilling projects we did on land involved our rig 4 as part of a contract job for Trinity and our rig 2, which drilled seven wells for Heritage.
How is mat footing beneficial for drilling projects off Trinidad’s west coast?
The whole west coast of Trinidad has soft mud. A typical jackup rig drilling there could penetrate up to 45 feet [13.7 metres] of the seabed, and it would take days to get the legs out of the mud. We have mat-type rigs that can drill in up to 100 feet [30.5 metres] of water. Instead of having independent legs, the legs are all tied into a mat that’s longer and wider than the rig main deck, so it does not damage the seabed.
With the mat-type rig, the weight of the rig is spread across the mat so that there are only a couple of feet of penetration into the mud.
Has the demand for your drilling training programme increased with Guyana and Suriname developing their oil and gas sectors?
We do have some people from Guyana, Suriname and Trinidad in our training programme, as the school is still operating. We have a new offering with the International Association of Drilling Contractors’ WellSharp programme. Our trainer can also travel to Suriname and Guyana to teach the course, as the exam is done online now.
There is not a lot of demand for the course we do here from those countries, as most people travel to the US for training when their companies pay for them to do the course. We mainly train Trinidad’s oil sector workers, such as those working for Heritage Petroleum, as well as some from bpTT.