Opinion
- Editorial - Commentary
Trinidad
Express:
LNG Diplomacy
By
Energy Correspondent
Since last Wednesday, I have been inundated with
calls and e-mails from readers wanting to know the
implications of Prime Minister Patrick Manning's
bold statements at the BG Energy Luncheon Series.
According to press reports, Manning severely chastised
the Bush Administration for neglecting the Caribbean.
The war on terrorism had placed the war on drugs
on the back burner, to the detriment of the Caribbean.
The reports also gave the impression that Manning
gave a more than veiled threat to withdraw Trinidad
LNG from the US market if greater attention is not
paid to the region's needs. While I agree fully
with the Prime Minister's charge against the US,
I would hope that the comments about shifting LNG
markets were misrepresented by the press and have
a much deeper purpose. Above all, the Prime Minister
should know that Government of T&T does not
have the capacity to use the "LNG weapon"
against the USA in the manner that the Arabs have
used the "oil weapon".
The
effectiveness of using LNG as a trade bargaining
weapon is at best weak if not a complete non-starter.
The facts about T&T position with respect to
LNG and the US market speak for themselves. Firstly,
the Government of T&T has no control over the
marketing of LNG. The marketing, shipment and sale
of LNG is entirely in the hands of the multinational
companies. Not having a stake in the LNG marketing
arrangements, Government cannot under existing law
dictate when and where LNG cargoes go. Unlike many
other LNG exporters, T&T chose not to invest
in the entire LNG value chain. For example, Oman,
which like T&T made its first shipment of LNG
in 2000, currently has six LNG tankers owned by
the Government and the state owned Oman Oil. Four
more LNG tankers are on order.
Even
if they could have determined cargo destination,
the volumes of LNG traded are still too small to
have a major impact on the US energy balance.
Table
1 shows that whereas gas imports account for 15
per cent of total US consumption, however, LNG share
is less than three per cent. Trinidad and Tobago
contributes over 70 per cent of total LNG imports,
but that amount (1.2 billion cubic feet/day) is
less than two per cent of total gas consumption,
and less than ½ per cent of total
energy consumption. In short, while T&T is an
important supplier of LNG to the US, the overall
share of LNG in the market for natural gas and for
energy in particular, is too small to constitute
a "threat to US energy security".
This
situation does not get better in the long-term.
The US Energy Information Agency, expects US demand
for LNG to grow from .6 trillion tcf in 2004 to
4.1 trillion tcf over the next 20 years. This is
public knowledge among gas exporting countries and
everyone is aiming to get a share. Nigeria, Equatorial
Guinea and Qatar expect to commission more than
12 million tonnes of LNG/annum over the next three
years all aimed towards the US market. Assuming
that new regas capacity will be permitted in the
US, there are at least two implications for the
projected expansion to the LNG trade to the US.
The first is that US prices are likely to moderate
considerably. Secondly, T&T, while remaining
a major contributor will have lost some of its market
share to the newcomers.
In
the circumstances, Manning's posture is the correct
one. It is in T&T's interest to seek alternative
markets for its future LNG output. The countries
of Latin America, in particular Mexico, Argentina
and Brazil present attractive options. Mexico, according
to the Prime Minister now finds itself in a position
where it has to import gas from the US via pipeline.
The latter two face the threat of significant increases
in the price of pipeline gas from Bolivia in the
wake of President Eva Morales' nationalisation of
the industry and his populist promise to get greater
benefits for the people.
Manning's
statement brought another issue to the fore which
has so far eluded media attention. The expiration
of the Caribbean Basin Initiative in 2007 has serious
implications for the export of petrochemicals which
currently enjoy duty free access to the North American
market. Trinidad and Tobago accounts for 71 per
cent and 55 per cent of US methanol and ammonia
imports, respectively. The failure of the US authorities
to negotiate a new agreement could change the terms
of trade for these exports.
While
lacking teeth for effective implementation, the
Prime Minster's statement may have achieved its
primary purpose, which I think was to win the attention
of policy makers in Washington. Knowing the State
Department was present in the country for an energy
security conference the following day, Manning deliberately
seized the opportunity to place squarely on the
table the critical issues that have confronted the
Caribbean for several years. His bold statements
are tentative but encouraging steps into the world
of energy geopolitics. Much more will be required
in the medium-term to resolve issues with our Bolivarian
neighbours across the Gulf.
Feedback:
energyczartt@yahoo.com
Trinidad
Express
Friday, September 15th 2006
Copyright
© 2006 The
Trinidad Express.
All rights reserved
