Energy Minister concerned over drop in oil prices
As the world reacts to the drop in oil prices, Energy Minister Franklin Khan has expressed concern over the latest developments.
The price of US oil plunged below zero for the first time in history on Monday, amid the coronavirus pandemic.
The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel.
Brent Crude, the benchmark used in Trinidad and Tobago was also weaker, down 8.9 percent below $26 a barrel.
Speaking with Loop News, the Energy Minister explained that the demand for US oil is low and as such storage is an issue.
"What is happening in the United States is that demand is low because of the COVID-19 pandemic and their inventories are extremely high, plus their production levels are high. So you ended up with a situation where because of the demand for petroleum products is low, the refineries have little storage capacity.
And because of that and because of the high production in the United States and because of their limited capacity to export based on where the crude is coming from, that resulted in inventory levels almost reaching at a maximum and hence the reason for the precipitous drop in prices today," he said.
Khan said although the drop in WTI crude prices will not have a significant impact on Trinidad and Tobago, Brent crude prices have also dipped.
"Trinidad and Tobago, however is lucky if I should use that word, that our crude is what you call water-based crude, which means it can be exported to any part of the world by ship. Hence the reason, our price is pegged to Brent. We have two types of crude here, which is Heritage crude and BP crude, both of them are pegged to Brent."
The Energy Minister also confirmed that Heritage Petroleum is exploring its option and may stop exporting crude for the time.
"The price of Brent today is down $25. It is still not a comfortable price to be in and when we make our next shipment we will know what price we will be getting. You can only stop exporting up to the point at which you have storage capacity to keep the crude," he said.
Asked if Trinidad and Tobago should be worried by the developments, Khan said the country should be concerned.
"Yes, we should be worried. Everybody else in the world is worried. Trinidad and Tobago's revenue comes to a great extent from the energy sector. So as a country, we have to be concerned," he said.
In a subsequent release, Heritage Petroleum said as the oil price is expected to be in the low teens in this quarter, the company is pursing a strategy of storage of oil production which will be sold as the oil market improves.
It said at present, its storage capacity is approximately 3.5 million barrels which will allow the company to store approximately 2.5 months of production as some storage is also needed for settling and treating of the production to attain the correct salable quality.