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Caribbean gas pipeline debated by experts |
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By John Collins (1)
Their comments on proposed
project by Trinidad & Tobago reflect optimism, skepticism over its feasibility
and cost. |
 The
Washington-based Inter-American Dialogue (IAD) recently asked three experts on
Caribbean regional development to evaluate the recent proposal of the Government
of Trinidad & Tobago (T&T) for a project to pipe natural gas up the Antillean
chain.
At the
recent Summit of the Heads of Government of the Caribbean Community (Caricom),
T&T Prime Minister Patrick Manning announced a plan to build a natural gas
pipeline network up the Antillean chain to boost exports of the commodity to
other countries in the Caribbean. He estimated the energy cost savings for
consuming countries at 30% (CB July 11).
The
concept, was welcomed by some as visionary and offering the potential for
diversifying energy sources and reducing costs. There is a growing dependency of
the region on imports of oil and gas for energy. However, the proposal also
created considerable skepticism in T&T as well as elsewhere and raised a lot
more questions than answers.
The IAD
asked three regional experts to comment on the proposal. They are Prof. Anthony
Bryan, the Trinidadian-born director of the Caribbean Studies Program at the
University of Miami’s North South Center; Trinidadian journalist David Renwick,
a recognized expert on the energy sector, who writes on the subject for
Caribbean Energy and The Trinidad Guardian; and Amb. Paul H. Boeker, president
of the Institute of the Americas.
“This plan
is either visionary or impractical because of regional constraints,” said Bryan.
“The vision is warranted. Trinidad & Tobago (population 1.3 million) supplied
40% of the U.S. imports of liquefied natural gas (LNG) in 2001. Trinidad is one
of the four largest natural gas development centers in the world. Its 23.5
trillion cubic feet of proven natural gas reserves can be exploited for 60
years. Major increases in production are expected in 2003 and beyond. New
markets will have to be opened and the Caribbean is a natural.”
Describing
the proposal as “technically feasible and practical,” the scholar said T&T “can
supply natural gas to the Caribbean by LNG tankers, as it now does to Puerto
Rico and the Dominican Republic (D.R.), by compressed natural gas (CNG), a
pipeline or electricity.”
Take three years, cost $500
million
While
acknowledging that a pipeline “could provide Trinidad’s Caribbean neighbours
with some energy price stability over the medium to long term and a 30%
reduction in energy costs,” Bryan said “it would take three years to build and,
at current estimates, cost $500 million.”
Referring
to Manning’s proposal that the countries using the pipeline should have part
ownership, the scholar said “the constraints, other than environmental, are
obviously financial” and he asked a rhetorical question, “do the smaller island
economies have the required consumer market to provide attractive returns on the
investment?”
The energy
sector expert Renwick observed that the Caribbean natural gas pipeline “is
fraught with difficulty and even runs counter to Trinidad & Tobago’s own
interests, which are rooted in transshipment od natural gas by ship in LNG
form.” Indicating that “substantial LNG infrastructure already exists in
Trinidad for the three-train expansion by the Atlantic LNG Co. currently taking
place,” Renwick said “it will be extended to support three more trains now in
the planning stage.”
 While
acknowledging that “a cheaper method of transporting gas in the long term is
through a pipeline,” the expert warned that “the high costs would nullify any
perceived benefits of lower energy pricing for the smaller Caribbean countries
likely to be targeted. Funding would have to come from the private sector, which
would probably regard the returns from the markets envisaged as too low to
justify the investment.”
Pointing
to Venezuela, neighbouring T&T, Amb. Boeker said it “has concentrated, until
quite recently, on higher-margin petroleum production while T&T has skillfully
developed and marketed its ample natural gas reserves. T&T has been the first in
the region to seize the opportunity of the North American LNG market and turn it
into a major revenue source for the country.
Puerto Rico part of strategy
“T&T is
way ahead of other gas producers in Latin America in producing and marketing its
gas in the form of LNG,” said Boeker. “The concept, and its not much more at
this point, of a Caribbean undersea pipeline network to supply gas to several
small Caribbean markets, and Puerto Rico, is another prong in the same business
strategy.”
The former
diplomat said the strategy “is basically to preempt the lower-margin gas
markets, left for ma#ana by Venezuela, Mexico and other major reserve
countries, and turn them into solid, long-term markets for T&T known.” Viewing
the contest Boeker said “the Trinidadian tortoise gets across the finish line
before the hares wake from their nap.”
Given the
large infrastructure costs that would have to be borne largely by T&T, he
cautioned that “it remains to be seen whether this project pencils out. It would
lower energy costs for the Caribbean island countries, a significant benefit for
industrial and agro-industrial development.”
Referring
to the possibility of multilateral financing for the concept, Boeker said “this
development dividend for the Caribbean nations could attract support from the
Inter-American Development Bank or the World Bank for the on-land facilities for
gas transmission and distribution necessary to make the pipeline feasible. If
the project proves financially viable on the basis of still-to-be-completed
studies, T&T should be able to attract equity partners and debt finance for the
pipeline.”
According
to the latest commercial guide of T&T, provided by the U.S. Embassy in Port of
Spain, last year T&T exported $4.3 billion, concentrated in oil & gas, and $1.8
billion was to the U.S. including Puerto Rico which accounted for more than 10%
of that amount. Conversely, T&T imported a total of $3.3 billion of which about
one-third ($1.2 billion) was from the U.S.
T&T’s
vibrant and dynamic economy, fueled by oil and gas, is reflected in its gross
domestic product of more than $8 billion resulting in an annual per capita
income of $6,200 for its 1.3 million inhabitants.
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1)
Other articles by the well known Caribbean author John Collins can be read
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August 5, 2002
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