Opinion
- Editorial
Patrick Manning:
Too much LNG to one destination
Last
week, the Business Guardian published the
first part of Prime Minister Patrick Manning’s
address to British Gas inaugural energy luncheon.
In the first segment, Manning defended
the pace of T&T’s use of natural gas and
explained how Venezuela’s Petrocaribe initiative
had placed this country at a disadvantage.
Following is the conclusion of the
speech:
For our part, we need access to
the US market, T&T, providing the energy security
that we have year after year, stable, reliable supplier,
something happens elsewhere, we fill the gap and
so on.
We believe that we are due some
consideration for this and what we really want is
preferential access to the US market in a particular
area. We are asking the US authorities that goods
packaged in T&T, goods packaged in T&T no
matter where manufactured, packaged in T&T find
duty-free access to the US market.
We are not large enough to create
any significant upset in that market, but that such
a policy if exposed by the United States will not
only stimulate in the first instance, the development
of a packaging industry in T&T.
But to the extent that we can have
goods manufactured in Caricom, packaged in T&T
and exported to the US, they can have duty-free
access to the US market, we can also assist in the
stimulation of economic activity in Caribbean countries
better revenues and a better quality of life and
standard of living of its people.
Regrettably, as of now, we have
had no response to that initiative. Secondly, we
are concerned about security in the region we are
concerned about it and that ever since the demise
of the Soviet Union, developing countries like ours
do not have the option available to them of walking
a thin line between the two idealogical positions,
we do not have it, it is not available to us.
Initially, the US was concerned
about drugs but of course, that has inevitably since
9/11 given way to terrorism, preoccupied now and
quite properly so my dear friends with terrorist
activity around the world and how it affects US
interest we find that concern about drugs have gone
to the backburner and, while that happens, the drug
cartels in South America are no less active today
than they were two or three or five years ago and
that we are seeing a heightened use of Caribbean
countries as transshipment centres as drugs move
from South, the producing countries of the South
to the consuming countries of the North, Canada,
United States and Western Europe and that not all
the drugs that come into your country leave.
The service is paid for in drugs
and the guns that accompany them to ensure the security
of the shipment, they don’t traffic in guns,
they bring the guns, they leave the guns and therefore
you have a serious problem at home and that what
we have offered, we have said to the United States
authorities, that we are prepared.
We are prepared to do our part in
patrolling the Eastern Caribbean, the Eastern Caribbean
is too vulnerable, we are prepared to do our part.
We have set up a radar system in Trinidad and we
are taking steps to acquire assets to give us an
interdiction capability.
As we do that, already the conversation
among the drug dealer is that T&T is getting
too hot so they have to move elsewhere. Where else
they are going to move? They moving to the north
and therefore they are likely to end up in countries
that do not have the capacity to deal with them
as we may have in T&T, limited though that capacity
is, or as it exists in the United States.
Unless some initiative is put in
place a special initiative at this time we run the
risk of Caribbean countries falling victim to drug
dealers happening on the northern borders of T&T.
Don’t believe, for one minute, that we would
be excluded from it recognising that they would
be playing in our major market we are involved in
about 80 per cent of all Caricom trade can’t
leave it unattended.
T&T has offered to patrol the
eastern Caribbean we will acquire the assets to
do that but we cannot afford to finance it. The
security that will be provided will no be for us
alone or for Caribbean countries it is as much the
security of the United States of America as it is
the security of the Caribbean. That offer remains
on the table.
A point is being reached where we
are going to have to decide whether we wish to place
all our eggs in one basket in the way that they
are placed now.
Too much of our LNG goes to one
destination and incidentally at prices that are
not by any means the best prices that are available
in the market.
Recently, the Minister of Energy
returned from Mexico. The Mexican authorities, constructing
I think it is Shell, constructing a regasification
terminal. Mexico finds itself in a situation where
it is now a net importer of gas from the United
States. But they have to pay US prices for it; that
is to say Henry Hub plus a transportation charge
the transportation charges is of the order of 30
cents of that order or a little more than that 30
cents. So it is Henry Hub plus 30.
If T&T decides to sell into
the Mexican market we will start with a price of
Henry Hub plus 30 cents. At the moment when we export
to the US the only terminal that gives us a price
like that is the terminal in Everet that is in Boston
where we get Henry Hub plus 35 cents.
But at Cove Point it is Henry Hub
plus 10 to 15 cents. At Elba Island it is Henry
Hub plus 5 to 10 cents and at Lake Charles—I
think BG knows a little more about this one—it
is Henry Hub minus 10 cents. A shift of markets
will have immediately for us a significant increase
in revenue.
Brazil is not to be scoffed at.
Brazil and northern Brazil initially and now all
of Brazil presents itself as another market. Whether
T&T should shift its market position is something
that the Government will now have to very carefully
consider, very carefully consider it.
And as we consider it we also have
to consider what are the implications of doing that
for leveraging a market position in some of these
large markets; Mexico has what, 120 million people,
Brazil is what 150 million? Big markets and big
opportunities for private sector, big opportunities
and therefore we have to seriously consider that.
There are many other issues that
the Government now has to consider in the face of
a changed environment. In 1973, we had the first
oil price shock the second one in 79.
The upshot of that was a lot of
the oil exporting countries began to re-examine
there own positions and to take positions on it.
We saw the emergence of Aramco, Petroleos de Venezuela,
Petroabras, the Kuwait Company and a number of other
state entities.
When you look back on it today those
entities have been so successful that as a second
period of high oil prices now hits us, and the very
same questions arise in relation to countries that
have not gone that route—T&T being one—the
question that faces us is, is it a route that we
should go?
I don’t want to be misunderstood.
I am not talking about the nationalisation of our
energy sector. I am talking about the internationalisation
of it of it and if we choose to go that route, what
is the model?
What are the opportunities that
have now being presented to us as a result of this
situation, what should we do? Where should we go?
Important question to be answered, it lies before
us.
I also want to comment briefly on
the phases of gas production through which this
country has gone.
The first phase commercial gas production
for power generation 1953.
Second phase ammonia methanol initiative
in 1959.
The third phase LNG initiated in
1999 we are now in a fourth phase of gas development
the development of the downstream industries in
aluminium, iron and steel, ethylene, polyethylene,
propylene and polypropylene those are the new items
and more than that we have melamine, we have UAN.
There is a very good article that
was published recently in the Gasco News, the publication
of the National Gas Company is compulsory reading,
that talks about the opportunities.
Traditionally, the private sector
in this country has been extremely conservative
and I just want to draw to the attention of the
private sector to the host of opportunities that
are now emerging.
We ensure that as we develop aluminum
that a certain amount of it is kept in the domestic
market. We ensure now that there will be no primary
production of any commodity in this country and
all of it exported; and incidentally having said
that may I say that the arrangement with Alcoa also
includes that. There will be no Alcoa smelter unless
Alcoa commits to significant downstream production.
The day of primary production by
itself in T&T is gone forever. We have one train
we have one pot line of aluminium at Alutrint and
we talking about a second one, but all of it so
far is on the domestic market.
The opportunities that emerge for
domestic investment are great and I will like to
urge the private sector not to get involved in the
negativity that has consumed so many of us as we
ponder our developments in the sector and nationally
but to see the opportunities.
They are there, and the Government
is creating the environment and ensuring that the
opportunities are there we ask you to take advantage
of them.
Sadly, in the construction sector
we made the announcement years ago 100,000 houses
committed to rapid development and so on, but we
still find that the private sector has been reluctant
to make the investment so we still have a shortage
of concrete on the market. We still have a shortage
of cement in the entire Caribbean and so on and
so on.
There are many opportunities that
are there we call on the private sector to involve
itself and to increase the local content, the local
content, of our energy development. As we move forward
and as we develop we are going to have to ensure
that there is a greater private sector development
in the industry.
The energy incidentally sector is
the largest sector in the Caribbean, and therefore
it is private sector development not just locally
but private sector development of the region.
At home we must have a new gas utilisation
policy, in respect of, we have already enunciated
an element of that in respect of electricity production
we have made it clear that natural gas is too valuable
a commodity to be wasted on simple cycle electricity
generation, the policy now is combined cycle and
we are going to retrofit some of the existing plants
to ensure that.
Higher capital costs but better
gas utilisation and lower operating costs as you
go down the road. We are committed to supplying
gas to the region LNG in Jamaica and at preferential
prices they have gotten a cut off of market price,
pipeline gas we are committed to supplying Barbados
with gas when the gas is available.
I repeat, when the gas is available
it’s a timing issue we are committed to supplying
Barbados with gas and of course at a pipeline gas
price a little better that they would normally have
been able to get elsewhere and we are determined
to develop Tobago as a centre for exports of natural
gas in the form of compressed natural gas a new
technology that is emerging we are... yesterday
we discussed gas supplies to the Cove estate in
Tobago we are committed to doing that.
The NGC has been mandated to do
the work to install the pipeline we will have to
discuss how we will finance it, but Tobago will
be a an essential part of this as we commit ourselves
to a programme of keeping Tobago green.
In 1975, there was a major conference
in Tobago where the Government brought all the stakeholders
together and they discussed the best use of our
gas resources that’s what they discussed and
the policies that you see emerging today are policies
that were enunciated since then, with a change and
a significant change in the environment in which
we operate the time has come for us to revisit Tobago.
Next year, somewhere between Carnival
and World Cup Cricket 2007, which is March 13 is
it? We intend to convene in Tobago the energy sector
domestically and interested parties from abroad
what we will discuss is whether goes to the energy
sector of T&T we are reviewing we are bringing
all the stakeholders local and foreign we are going
to have presentations some we will prepare ourselves
we will have the views of the private sector both
local and foreign and state entities abroad and
some to some kind of conclusion as to where T&T
goes, and that includes the refining industry.
Meanwhile, as we expand and upgrade
the Pointe-a-Pierre refinery we are rationalising
the use of land in Pointe-a-Pierre in such a way
that we will end up with an industrial estate and
a location for a second large state of the art refinery
there, we are not yet committed to the upgrade of
the bottom of the barrel preferring at this stage
to leave that for the attention of a new state of
the art refinery which we are seeking to attract
here.
Our energy policy will only be acceptable
to us if it contributes and attains the objective
that we set for ourselves that is pressing it into
service in national development and the development
of our people.
God
bless you all.
The
Trinidad Guardian
Thursday 21st September 2006
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