BHP Billiton Building

Curtis Williams

Good news from BHP Biliton, as the company is reporting that all of its appraisal wells in its Calypso development, north of Tobago, have encountered hydrocarbons.

In its operational review for 2021 the company said, “In Trinidad and Tobago, the Calypso appraisal drilling programme concluded on December 20, 2021. All wells encountered hydrocarbons.”

It also had further encouraging news saying two of the wells actually encountered zones not before seen.

The report read, “Bongos-3 confirmed volumes downdip of prior penetrations and Bongos-4 established volumes in a new segment. The well results are currently under evaluation and will be incorporated into the development plan.”

Last year the company’s Country Manager for T&T, Michael Stone told Guardian Media that the appraisal activity in Calypso would help determine the actual size of the discovery it made in its Northern License.

Stone said, “We have announced publicly a 3.5 tcf discovered resource, but beginning in the middle of this calender year, hopefully June or July, we are going to have an appraisal programme, subject to the rig becoming available to us, that is what the timing is dependent on, it is that appraisal programme Curtis, that is going to help us do that very delineation.”

He added, “So we would expect on the back end of that delineation programme, towards the end of the calender year, we will be in a position to be clearer on the resource size and of course there will always be a range and we are hoping if successful to add to the 3.5 discovered resource that we have announced publicly.”

Stone said the plan remained to have some of the natural gas sold into Atlantic LNG and then exported to global markets. He explained that due to the complexity and cost of deep-water drilling and production, it made sense to produce part of it for LNG.

“A resource of this size and scale and in addition a deep water resource, I mean a deep water resource, of course carries a different cost structure just by nature of the deeper wells and complex infrastructure required to bring it to shore, yes LNG is going to be an important component of the Calypso development. It is going to be necessary for some component of that gas to make it into the international market to attract and international indexed price, so yes LNG is an important part of the Calypso development.” Stone explained.

He said the company was hoping that the blocks that were adjacent to the Calypso field, but were in Barbados waters, woild also prove to be successful.

BHP also in its review noted that crude oil prices have recovered to above US$70 per barrel as 2022 opens.

“We believe further gains from here are possible given our constructive view of demand tailwinds. However, future developments in price are also expected to rely in large part on the rate at which currently curtailed supply returns, which is highly uncertain. Looking beyond this phase, our bottom-up analysis of demand, allied to systematic field decline rates, points to a long run structural supply-demand gap. Considerable investment in conventional oil is going to be required to fill that gap and maintain market balance. If that investment is not forthcoming in a timely way, the possibility of oil prices increasing aggressively cannot be ruled out,” the company noted.

In terms of LNG, BHP said the Japan-Korea Marker price for LNG was extraordinarily volatile across the 2021 financial year. The market balance it said shifted from heavily over-supplied to extremely tight going into the Northern hemisphere winter. Since that time, prices have remained elevated relative to seasonal norms, with robust demand combined with ongoing supply outages.

“Longer term, we believe the commodity offers a combination of systematic base decline and an attractive demand trajectory. Within global gas, LNG is expected to gain share due to indigenous supply depletion and/or competitiveness vis-a-vis pipeline imports in some regions. Against this backdrop, assets advantaged by their proximity to existing infrastructure or customers, or both, in addition to competitive emissions intensities, are expected to be attractive,” BHP ended.