Introduction

Trinidad and Tobago is one of the many global oil and gas producers which have been hit hard by the precipitous drop in global energy commodity prices over the last two years. One of the main drivers of this decrease in prices has been a dramatic increase in the supply of oil and gas from shale reservoirs. There have been major discoveries, not only in the USA – who is now setting to become a dominant energy exporter – but also in East and West Africa, Israel and Lebanon, to name a few.

Consequently, world energy prices are not expected to rebound to pre-2014 prices within the mid-term horizon.

This isn’t to say, however, that the energy business is no longer profitable. During the period of high prices, there was inflated demand for services and equipment, which drove costs up for energy services. New rigs, new seismic vessels etc. were built, while new supplies of steel and engineering services had to be added. The high prices allowed energy services companies to pay off financing and other operational/ commercial debts. When prices dropped, there was an oversupply which has in turn led to Exploration and Production (E&P) costs coming down by over 40% overall. Thus, precipitous price decreases haven’t necessarily meant equivalently precipitous drops in profitability for oil companies.

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