1. Trinidad and Tobago Hydrocarbon Development Process- OLADE First Latin American and Caribbean Oil and Gas Workshop, Quito Penelope Bradshaw-Niles July 13, 2011

2. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Trinidad and Tobago- Overview of Energy Sector Country Hydrocarbon Objectives Petroleum Legislative Framework Bid Round Procedures Contents 2

3. Trinidad and Tobago Strategic Location Population - 1.3M Labor Force - 0.5M Literacy Rate - 88% LOCATION Northeast of Venezuela Southernmost of Caribbean Total Area – 1,820 sq. miles Latitude 10 1/2°N, Longitude 61 1/2° W

4. Overview of Energy Sector

5. 1974 First PSC 1996 Model PSC 1998 Deep Water Blocks 1867 First Well Drilled 1908 Commercial Oil Production 1954 First Offshore Well 1969 East Coast Discovery Petroleum Industry - Highlights The Energy Sector: 3% of global energy business Energy sector employment - 6%

6. Trinidad & Tobago’s Oil and Gas Fields

7. T&T Gas Reserves (TCF) 1993 (TCF) 1996 (TCF) 2005 (TCF) 2009 Proved Reserves8.212.318.814.4 Probable Reserves4.63.7 9.07.8 Possible Reserves1.12.0 7.15.9 Total13.918.034.928.1 7  Identified Exploratory Resources 25.9 Tcf **Based on Revised Audit by Ryder Scott Co. – January 1 2010

8. Historical Hydrocarbon Production

9. Country Objectives 9  Effective and optimal monetizing of the natural resources  Security of country’s energy supplies  Protection and preservation of the environment  Establishment of research initiative  Training and development of nationals

10. What does Trinidad Offer? 10  Substantial petroleum reserve base  Competitive gas pricing regime  Equitable taxation system  Strategically located in the Atlantic Basin with strong markets close by  Highly skilled labor force  Well developed land and harbor infrastructure

11. The Cabinet of Government of the Republic of Trinidad and Tobago Ministry of Energy & Energy Affairs State Enterprises Petrotrin National Energy Corporation Standing Committee on Energy Chairman: Prime Minister National Gas Company Government’s Decision-Making Model

12. Legislative Framework

13. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO The Petroleum Industry is governed principally by (i) the Petroleum Act (1969),and its amendments, the Regulations (1970), and (ii) the Petroleum Taxes Act (1974). The Petroleum Act establishes a framework for the grant of licenses/contracts for the conduct of petroleum operations. Petroleum Legislation

14. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO The Minister is responsible for determining areas to be made available for petroleum operations. He/She may elect to invite applications for the rights to explore and produce hydrocarbons Competitive Bidding Process is the preferred option: The element of Competition Transparency of process – Policy has been in existence since 1987 and no change is contemplated Legislative Framework

15. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Legislative Framework The following type of licences/contracts may be issued by the Minister : -An Exploration Licence grants a non-exclusive right to carry out petroleum operations -An Exploration and Production Licence grants an exclusive right to explore for, produce and dispose of petroleum - A Production Sharing Contract grants the contractor the right to conduct petroleum operations within the prescribed contract area.

16. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Government’s Policy Pre 1995 – few PSCs Post 1995, the Government’s policy has been to issue Production Sharing Contracts for the conduct of Petroleum Exploration. This does not preclude the option of utilising the licensing regime

17. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO PSC Highlights Phased exploration period 9 years for deep water 6 years for shallow and average water depths Biddable minimum exploration programme. Term of Contract 25 years for shallow 30 years for deep water. Flexible relinquishment provisions tied to the phased exploration work programme. Exploration acreage can be retained

18. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO PSC Gas Provisions Attractive Gas Provisions – A prescribed natural gas market development phase of up to five (5) years – seven (7) years deep water. Extension of the term of the contract, subject to the execution of a gas sales contract for a period which will allow for the supply of natural gas under the terms of the gas sales contract.

19. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Technical review of open acreage Nomination process Blocks to be offered chosen based on nominations and T&T’s strategic interests. Recommendations made to Cabinet on the areas to be offered and the terms and conditions of the bid. There is a prequalification process for the right to be operator. It can be done at any time and lasts three years Competitive Bidding Process

20. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO TERM OF CONTRACT Shallow Water/Deep Water 1 st Phase - seismic option – 2/3 years 1 st Phase - seismic and exploration drilling - seismic and 1 well – 3/41/2 years - seismic and 2 wells – 4/6 years - seismic and 3 wells – 5 years 2 nd Phase- exploration drilling 3 rd Phase - exploration drilling Drilling of exploration wells is a requirement in the second and third phases of the exploration period. Summary Tender Form for 2010 Bid Rounds (1)

21. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO MINIMUM WORK PROGRAMME WORK UNITS (US$1MN equivalent to one work unit) Geophysical SEISMIC 3D Seismic ____________ Other Geophysical____________ Geological Studies Drilling: WellsDepth _____________ SIGNATURE BONUS US$_____________ Summary Tender Form for 2010 Bid Round (2)

22. Crude Oil Price MBOPD ABCD < $50.00 $50.00 - $75.00 $75.00 - $100.00 > $100.00 % < 75XXXX 75 - 100XXXX 100 - 150XXXX 150 – 200XXXX > 200XXXX Profit Share Matrices Windfall Feature: BR + 70%*[(P – US$100.00) / P]*(1- BR) Where: BR is the base rate at Column D P is the market price Cost Recovery: 60% Price MMCFD ABCD < $4.00 $4.00 - $6.50 $6.50 - $9.00 > $9.00 % < 200XXXX 200 - 350XXXX 350 - 500XXXX 500 - 750XXXX 750 – 1,000XXXX > 1,000XXXX Natural Gas Windfall Feature: BR + 70%*[(P – US$9.00) / P]*(1-BR) Where: BR is the base rate at Column D P is the market price

23. Example of Bid Evaluation Criteria Geophysical 30pts Seismic 3Dseismic 20pts Other Geophysical 10pts 2D seismic,Gravity, Magnetics etc Geological Studies Bidders are asked to provide details of named studies proposed and illustrate their value in contributing to improving the understanding of the petroleum system. Drilling 70pts Wells - Depth The work programme is totally self assessable Each Element of the bid attracts a certain number of points

24. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Sharing of Production – 100pts – Minister’s Share of Profit Oil- 50pts – Minister’s Share of Profit Gas - 50pts Signature Bonus (where applicable) – one point per million dollars (open ended) Currently being utilised as a tie breaker in the deep water All other bonuses contributions are no longer biddable Bid Evaluation Criteria

25. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Evaluation of bids and announcement of results within a two months from the date of bid submission. There are two Cabinet appointed committees which perform the evaluations: – A Technical Evaluation Committee comprised of staff of the Ministry of Energy, Finance and the Attorney General. – An Overview Committee chaired by the Permanent Secretary, Ministry of Energy. Bid Evaluation

26. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO The Overview Committee makes recommendations on the awardees to the Cabinet. Cabinet forwards the recommendations to the Standing Committee of Energy Committee makes recommendations to Cabinet Cabinet then acts on the recommendations of the SCE Evaluation cont’d

27. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Control – At the mercy of a dynamic/volatile global environment – To complete the process in the project time frame - 9 months – Not in control of the entire process Challenge

28. Results of the Last Two Bid Rounds

29. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Shallow Water Production Sharing Contracts signed with four companies – NCMA 4 – Centrica – NCMA 2 – Niko/RWE DEA Ag – NCMA 3 – Voyager/Niko – Block 4(b) – Niko Deep Water Three blocks received bids – 23 (a) – BP, Niko, BHP/Total/Repsol – 23(b) - BHPB/Repsol – Block TTDAA 14 - BP Results

30. Upstream Activity Niko/RWE Centrica Voyager/Niko Niko 23(a) TTDAA 14 23(b)

31. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Mixed Experience - by and large successful – Depends on the global environment (price, supply-demand, energy security) – Perceptions of prospectivity of the acreage Obligations contained in the CBO are varied to suit the operating environment (carried participation) – Fiscal incentives where necessary New fiscal regime for deep water enacted into legislation Incentives built into the PSC Trinidad and Tobago’s Experiences

32. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO 28 PSCs in various stages of their operations 20 (BP has 120 but will be counted as one) licences in various stages – Productive oil and Gas areas – Acquisition of Seismic – Drilling – Deep Water round undertaken and bids received Should have deep water drilling soon Shallow Water and Land acreage being almost exhausted Achievements

33. Future Developments: Upstream Blocks for nomination are coloured light blue. There are currently 36 deep water blocks available.

34. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Current Focus is on Deep water Expected to climax in September, 2011 with the next Competitive Bid Round Shallow water and land acreage are not readily available The MOE will be reviewing all remaining acreage – Operators will not be encouraged to keep acreage inactive Investment Opportunities via Bid rounds

35. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Legislation allows for application to be made for State acreage – This would involve blocks less than 100sqkm minimum size – Where there is 1 interested party – Company already has tenure and good exploration /exploitation record Other Avenues for Access to State Acreage

36. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Ongoing Licence Negotiations for Blocks in the Western Offshore Gulf of Paria – Pt Ligoure/ Brighton Marine/Guapo, East Brighton Will result in new exploration work program mes Seismic and wells Streamlining/optimisation of acreage – Impending Data Policy important part of this thrust Other Activities

37. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Complete the entire bid process in 9months Offer more deep water acreage – Needs more technical work Vibrant industry focused on deep water exploration and production and the optimisation of production from shallow water and land areas Generation of business opportunities for all companies providing services to the industry and its spin-offs Aspirations and Way Forward

38. Thank you

39. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Petroleum Profits Tax reduced from 50% to 35% Uplift of 40% on capex for exploration drilling SPT of 18% up to US$90, >US$90 – 0.2% for every dollar increase Royalty Legislation

40. THE GOVERNMENT OF THE REPUBLIC OF TRINIDAD AND TOBAGO Profit Share matrices opened Price and Production Bands widened Windfall profit feature Profit Shares and work programmes are biddable Abandonment Provision Escrow Account from time of development Financial Obligations fixed in PSC Cost Recovery fixed at 60% Incentives in the PSC 40