Do LNG investors have positive effect on their communities?

The Editor: The Liquified Natural Gas (LNG) is a commodity in which there is growing demand. Presently, over 554 billion cubic metres is now traded, in contrast to 125 billion cubic metres in 1975.  Estimates by the National Petroleum Council in the United States of America show that the demand for natural gas is growing and imports of LNG, both in the United States and Europe is increasing measurably and is expected to increase by fourfold its present demand by the year 2025.

Mr. Claude Mandil, Executive Director of the International Energy Agency stated that natural gas demand would grow faster than oil demand, increasing its share of world energy demand from 23 percent to 28 percent in the next three decades. LNG is an efficient fuel, especially for power generation. The reason being, lower air pollution and carbon dioxide emissions. Moreover, with LNG it is found to be an optimal match for providing feedstock for the combined-cycle power Plants. These Plants are extensively used worldwide together with nuclear power Plants for the provisioning of electricity.

It is instructive to note that the capital cost of producing one ton of LNG has been decreasing significantly, because of changes in technology. Accor-ding to the PETROLEUM Economist, February 2004, between 1985 to presently the capital cost of a Plant has decreased one-third. Such decrease in cost should have the expectation of decreasing LNG prices. Over the next twenty-one (21) years, which is the life span of an LNG Train in the United States gas demand can increase by a fifth of its present demand. Presents imports of LNG into the United States is approximately 3 billion cubic feet per day. Further, with the deregulation of the Japanese and Korean markets for LNG, there is rapidly increasing demand for LNG imports. Moreover, in emerging markets such as China and India, new demand is being created and this demand is increasing.

In Europe, with LNG consumption presently at 2 billion cubic feet per day, this is rising annually and by the year 2025 it is expected to be three times that amount. All in all, LNG is expected to grow almost fivefold over this period, notwithstanding significant increases of importation of natural gas by pipeline from major new flows from Russia, to both Europe and China. The increase in LNG imports by countries mentioned in the previous paragraph, there is expected to be about twenty-eight [28] Plants in twenty [20] countries instead of fourteen [14] Plants in twelve [12] countries as it now stands. The challenges faced by long distance supply generates a number of commercial opportunities:

1. Developing secure supply chains,
2. The application of financial and technological strengths within the industry to realize decreasing capital cost in processing LNG derived from natural gas..

In effect, the industry is a Process Industry and the wage payments and profits expected justify the meteoric growth in the supply chain and anticipated demand for LNG. The capital investment required is in excess of 600 Million US Dollars per sample size Train. In these investments there is an apportioning of risks between suppliers and end users of both a volume and pricing mechanism, which is acceptable to both parties and concluded on the basis of contractual flexibility, cognisant that the Gas Market is volatile. In spite of price volatility, projects are advancing with significant speed.

The open and vexed question is the level of wages paid by multinational Corporations, such as, BP, BG and REPSOL for labour components in the construction of an LNG Plant. It was argued by David J. O’ Reilly, Chairman and Chief Executive Officer of CHEVRON/TEXACO, that the capital cost of these Plants are internationally priced. Therefore, the general laws of international economics hold as firmly ........as they do elsewhere. He argued, “if Governments create an attractive investment environment they will attract foreign and indigenous private investments.

The wealth created from such investments will have positive economic effects on a broad base, and this should be a high priority of Governments of the Region.”  Mr. O’Reilly concludes that the presents of foreign investors in a third country should yield a relationship, which will bring opportunities to individuals, prosperity to communities and economic growth to countries. Further, the greatest gain will go to the broad public that seeks hope and rising opportunity. Are BP, BG, and REPSOL doing that in Trinidad and Tobago? The Prime Minister confront head-on and settle the labour unrest in the Country: Can the “Swan Song” be a Private Jet!

• Dr. Shastri Moonan, B.Sc., M.S., M.A.L.D., Ph.D., Attorney-at-Law
• Brian Garner, Engineer/Accountant
• 64 B Carlos Street, Woodbrook [622-6587]