To market, to market

Trinidad and Tobago is in the enviable position of being the lone country in the Western Hemisphere that will benefit the most — at least for the foreseeable future — from the widening gap between total energy consumption and domestic production in the United States. With the US being more dependent on the imports of oil and gas in the next two decades to fill growing demands, Trinidad and Tobago is positioning itself to increase its market share of LNG and possibly have a more dominant position in the US energy environment. “We have to seek ways to increase and/or maintain our market share,” this country’s Energy Minister Eric Williams said at an oil and gas conference in Port-of-Spain last month. The US currently imports over 65 percent of its LNG from Trinidad and Tobago, its single largest supplier world-wide.

The energy gap in the US has taken on such paramount concern that President George W Bush was moved to hold discussions with Prime Minister Patrick Manning last month in Washington on the important role Trinidad and Tobago continues to play in securing the US energy supplies. The US Energy Department projects that the country will become more dependent on imported oil and natural gas in the next two decades as domestic production of oil declines and that of gas does not increase as fast as expected. The Energy Outlook 2004, an annual projection of US energy consumption, forecasts the gap between total energy consumption and domestic production to grow from 26 percent in 2002 to 36 percent in 2025, the period covered by the forecast, according to the Energy Information Administration (EIA). EIA, an agency in the Energy Department projects oil imports surging from 54 percent to 70 percent of consumption in 2025, two percent more than in the 2003 forecast. Natural gas imports are projected to rise from 15 percent to 23 percent, one percent less than in the 2003 forecast.

At an LNG Ministerial Summit in Washington last month which was attended by Manning, US Secretary of Energy Spencer Abraham said energy security is fundamental to the smooth operation of modern society and natural gas has a vital role to play in the balanced and diversified mix of energy resources the US needs to supply a growing economy. Underscoring the importance of natural gas to America’s energy future,  Abraham said President Bush’s energy plan makes several general recommendations for increasing both domestic and foreign supplies of natural gas. “We are hard at work implementing President Bush’s energy plan to correct this supply-demand imbalance. But even if we are completely successful with every aspect of our energy plan, we still will not have adequate supply to meet the forecasted demand for natural gas. For that, we need the contribution of a large and growing market in imported Liquefied Natural Gas,” he told LNG-producing countries.

The United States is one of the existing 12 LNG importers worldwide although the scale of its imports today is relatively modest. The US imported 230 billion cubic feet of LNG in 2002, which supplied about one percent of its natural gas needs and accounted for about four percent of world LNG trade. “To meet our energy needs, the United States will have to become a much large importer of LNG than it is today. Imports of LNG could reach 13 billion cubic feet per day — more than 20 times today’s rate  in the year 2025, and account for 15 percent of our total natural gas supply,” said Secretary Abraham. He estimates that the US will need as many as 13 large LNG facilities, nine more than exist today, to reach the import volume of 15 billion cubic feet a day. The US currently has four LNG import facilities, three on the Atlantic Coast and one on the Gulf Coast.

President of BG Trinidad and Tobago, Peter Dranfield supports the projection that the US gas market is expected to grow significantly by 2010, requiring new supplies from external markets in the interim years. “Even in the more pessimistic demand case at the end of the decade which is six years away, demand for LNG in the US will be quadrupled. In the optimistic case, it will increase six-fold,” said Dranfield at the energy conference in Port-of-Spain. Atlantic LNG’s president Richard Cape said Trinidad and Tobago has an advantaged position for LNG development due to its proximity to the US, “arguably the best gas market in the world.” He noted that LNG from Trinidad has the lowest delivered cost to the US by far compared to other LNG exporters. Transportation costs from Trinidad are estimated to be some 20 to 30 percent below the long-haul costs from West Africa or North Africa to the US.” Add to this, the fact that Atlantic LNG Company’s installed capital base is low cost and getting even lower with expansion and you have a powerful competitive advantage. “This means that for any given market price for gas in the US, more value is left over for Trinidad and Tobago after deducting transportation and capital costs than for LNG from any other source in the world today,” said Cape.

Atlantic LNG, owned by a consortium of companies including bpTT, British Gas, Repsol, Tractebel and the National Gas Company of Trinidad and Tobago currently exports to the US, Puerto Rico, Spain and the Dominican Republic. Atlantic LNG, the world’s fifth largest LNG producer exports 9.7 million metric tonnes per annum (mmtpa) from three Trains, the process where natural gas changes from a vapour to a liquid and re-gasified as needed in export markets. Atlantic is currently constructing a US$1.2 billion Train 4 which will push total annual production capacity close to 15 mmtpa when it comes on-stream in 2006.Cape said there are a number of reasons to support the further expansion of Atlantic LNG. “The least controversial of these are that demand growth appears to be robust and LNG infrastructure in the US in the form of receiving terminals and the shipping fleet is expanding,” he said.

Cape also believes the Atlantic LNG plant can support the equivalent of another two trains at least or 25 million tonnes per year of production.
In his presentation to the LNG Ministerial Summit, Prime Minister Manning said after 30 years of developing an array of gas-based industries with some 20 industrial plants involved in ammonia, Methanol, Iron ore reduction and oil refining and other manufacturing industries, Government examined the potential of LNG export in 1992. Although the market potential in the Atlantic basin was lean, Trinidad and Tobago made the bold and courageous decision to approve the export of LNG to the USA and Spain in 1996. “Today, LNG is the major export from my country. We have moved from being a non-producer to now the second largest producer of LNG in the Atlantic Basin and the largest in the Western Hemisphere. And we are growing. “This year we became the fifth largest producer in the world and this would have taken place in just four years. Our major market is the United States to which we supplied 66 percent of its total LNG imports last year,” he told the audience. The prime minister said the development of the natural gas industry is based on natural gas reserves — primarily in the offshore areas of the country.

Proven reserves amount to 20.8 trillion cubic feet and probable and possible total another 14.4 trillion, giving the country a total of 35.2 trillion cubic feet of natural gas. The potential gas resources have been estimated at another 60 trillion cubic feet. “In addition, we have signed a MOU with Venezuela to allow Venezuelan gas to be produced into and liquefied in Trinidad and Tobago for export, mainly to the United States market. “While we recognise that these reserves are small compared with the giant gas countries it is significant when it is examined in the context of the strategic geographical location in the Western Hemisphere and its proximity to the (US) market with a single voyage time of five to seven days, less than half the time from other exporters and potential exporters,” Manning said.

He also said that security and reliability of supply are key factors which have assisted Trinidad and Tobago to grow its supply to the US market. Venezuela which holds the world’s eight largest reserves of natural gas also wants a piece of the US market and is eager to monetise in an attempt to replicate the success of the massive Atlantic LNG export project. Venezuela, also the world’s number five crude exporter hopes to tap into the growing demand in the expansive US gas markets through a start up of a US$2.7 billion LNG export project by 2007 to produce 4.7 million tonnes of LNG a year.

Last August Venezuelan President Hugo Chavez, who paid a brief visit to Trinidad said the South American country is seriously considering sending gas to be processed at Atlantic LNG for exports to the US until its own LNG project gets off the ground. “We cannot accomplish that overnight, so we consider it entirely feasible that in the meantime, we can send our gas coming from the Deltana Platform to be processed in Trinidad and from there supplies could then be exported to the United States,” Chavez told reporters. Venezuela also plans to develop the resources in the Mariscal Sucre project and the Deltana Platform in their bid to become a net exporter of gas in the next four years. Trinidad and Tobago, however, will fly the LNG flagship in the Western Hemisphere for some time to come until Venezuela and other energy producing nations get their planned LNG projects off the ground.