bpTT boss: To get into LNG markets, TT must be competitive

If the predictions made by one local energy expert are correct, market demand in the United States may very well determine the future of LNG within the Atlantic Basin. According to Vincent Pereira, President of Market Develop-ment, bp  Trinidad and Tobago, as he addressed the 6th Western Hemisphere Energy Ministers Meeting in Tobago last week, the US is the market which will shape LNG business in this hemisphere. The future development of LNG in the Atlantic Basin, Pereira said, will be determined by four major enablers, namely market, technology and innovation, marketplace dynamics and energy security. Liberalisation is also changing the way markets operate, he said, noting that it will continue to contribute significantly to growth and development in the Americas.

He said, “Free markets bring choice, they lower input costs to power economic growth, they grow market demand for the most efficient products and prepare domestic players for the rigours of competing in global markets.” However, before global players could reap any rewards, artificial barriers to supply and demand has to be removed. “Liberalisation and improved market access go hand in hand as regards enabling real market structures to work, particularly in the LNG business,” Pereira said. Recent developments in technology, he said, have seen LNG within the Atlantic Basin moving from being a high-priced option to a more attractive and competitive base product. Prices are going down in both upstream and downstream industries, the result of technology combined with increasing scale and competition. 

Pereira took the view that  it was to TT’s best advantage to establish markets for its large gas reserve in Spain and the US, by being able to land LNG into these markets at increasingly competitive prices. “Trinidad LNG is now intra-marginal to the tail end of North American indigenous supply,” he said. Competition in the LNG industry is fierce and on-going, he continued, which has provided end-users with the freedom to change their energy suppliers at whim. Marketplace dynamics have determined that this risk could shift towards LNG producers, consequently making investment uncertain. Fortunately, the industry, he said, has adapted and is responding to these changes. It is reflected in the steps taken by companies to improve cost structure and ultimately enhance the financial capacity of major industry players.

Pereira said, “The industry is in a much better position today to absorb and manage the evolving risk profiles than we were only a few years ago. “The greater ability to take on risk was one of the main drivers of the move to scale within the industry.” He went further to note that over the years, interest in energy security has grown and is now attributed to supply and demand. Demand, Pereira explained, is growing as populations grow and prosperity increases giving rise to concerns of how to meet this growing demand. While some were of the view that the answer lay in renewable resources and alternate forms of energy, he was of the view that substitutes for oil and gas would not come on stream anytime in the near future.

Consequently, oil and gas will remain the primary fuels for some time to come, he said. “The resources are there,” he said.  “There is no physical shortage.” He called on governments and the industry as a whole to place more emphasis on energy security, noting that the issue of security arose not from the growing volume of consumption or the required trade growth, but from the fact that the resources necessary to supply the growing demand were concentrated in a limited number of countries. Said Pereira, “Since oil and increasingly gas are traded internationally, the markets are single global markets. As such, every area will seek to develop its own resources rationally, but there is no competitive limit to that set by the cost of development. “The cost of any self-sufficiency for any major area would be prohibitive.”