As the late Lord Kitchener in his classic tune bemoans that the Carnival is over, it signals a return to sobriety and a degree of some normalcy for the insurance industry after a season when all men lose their reason.

That is not to say that Carnival does not have a place in the lives of the people of Trinidad and Tobago but there is a need to put a brake on the excesses that pass for “freeing-up” and having a good time. For the insurance industry there is no doubt that the accident rate would have spiked largely due to a combination of factors including the over indulgence in alcohol and tiredness when returning home in the early hours in the morning. This past Carnival season saw a number of incidents some of which might be attributable to inadequate crowd control and the failure to pay attention to safety in public places. Such incidences might yet have their sequel in the Courts and could ultimately involve some players in the insurance business.

In this post Carnival period the leaders in the insurance industry have agreed to do some soul searching in a retreat with a view to addressing the challenges resulting from the changed business environment resulting from 9/11 and to prepare a response to the new trading rules of the CSME, GATS and FTAA. What is clear is that the good old days have gone forever and the insurance industry must be prepared for a liberalised market. It does not mean that the local market will disappear but it will put in doubt those players that cannot compete on the basis of economy of scale and scope. It may even mean some companies having to seek out joint venture or strategic partners and/or to identify and carve out niches in order for them to remain relevant.

It is therefore of paramount importance that the insurance industry leaders continue to take an interest and to play an influential role in the deliberations that are ongoing in these trade negotiations. In effect the direction of these negotiations will shape the survival and growth strategies for the industry and it is for this reason that the decision makers must track what is taking place at these bodies. The insurance industry must have a sense of history and a deep understanding for and appreciation of the past — in particular the developmental initiatives of the 1970’s and the first half of the 1980’s. That was a period of nationalistic fervour and policies that sought to displace foreign nationals and expatriates in favour of locals in the localisation process. In fact both the banking and insurance industries heeded the call and that led to the creation of a cadre of local professionals. The decade of the 1990s saw the introduction of new policies and a relaxation of the localisation model and once more  majority foreign ownership was welcome.

The dismantling of the foreign exchange regime aided the new policy direction but this led to a rolling back of some of the gains for the local insurance market of the earlier period. One of the key pillars in the localisation process was the maximum utilisation of domestic capital and resources that were available for risk-taking and the immediate gain was the growth of local insurance companies and the management of the outflow of foreign exchange. Certainly in the past five years, foreign exchange conservation was no longer a consideration for the insurance industry and in fact companies have been falling over themselves to be used as conduits for sending business into the international market. In this way domestic risk taking becomes inefficient and inadequate use is made of the domestic risk capital thereby contributing to the haemorrhage of foreign exchange.
The world insurance markets have changed and many key players have been severely affected by the stubborn downward cycle of the stock market and their own equity bases have been eroded. They now have to do a repair job and it is for this reason that insurance rates have continued to rise and coverage restricted. If anything, the insurance rates and terms and conditions in the local market have not moved as steeply as in other markets and in many instances where local risk taking capacity exists, the premiums rates might be lower than might be charged in the international markets.

This is a new phenomenon as the opposite was the case for many years. The initiative for the industry leaders to start the dialogue about matters affecting the insurance business is a step in the right direction and is a welcome change where people mistrust one another and are not willing to share information for fear that it would be used against them in a competitive situation. The insurance industry must proceed to work together and co-operate in matters affecting the insurance business including sharing information on claims, fraud, malpractice and other related issues without acting in a cartel manner with regard to price setting. In the absence of unity and co-operation, a deterioration of underwriting results and standards will continue and leave a vacuum where certain elements in the society are able to take advantage of the situation.No one insurance company in spite of its size and influence on its own can bring about significant change in a competitive environment that is the insurance business but collectively the industry can ensure some much needed change takes place that will restore order and standards. It is in everybody’s interest that the insurance industry remains competitive and healthy so that the obligations to policyholders can be met sometime in the future since in the final analysis it is only if the loss experience is favourable that premiums will be contained.

E-mail: daquing@cablenett.net

For those who don’t know, the war in the Middle East has already started. Albeit limited to small incursions of special operations troops and aircraft attack of military targets (mostly in the eastern regions of Iraq), the incursions are happening daily. Against this background, we have dedicated this week’s article to discussing “the Economic Impact of War” with a view to understanding the risks, the effects on the global stock markets, and key investment strategies which investors may want to consider.  While it is difficult to predict the exact outcome of a United Nations or International Coalition led military force to remove the Saddam Hussein regime from Iraq, some issues are clear.  In all wars or serious military conflicts, there is increased government spending and its resultant effect on economic stimulation. History clearly shows us that there will be volatility in the equity markets over the short term and economic growth over the long term. It is not likely that the war with Iraq would be long and large, such as WWI and WWII. In these types of wars, it would be typical to see early jumps in growth and inflation but over the longer term, growth actually slows down and disinflation becomes an issue as does financing of the conflict.

We also do not believe that the conflict with Iraq would be short and small. Such wars have little or no effect on global supply or economic stability. Thus the war with Iraq will likely be a short war but have huge impact not only on international involvement but on the  stability of the oil price and supply. The war may also be a longer one, in which case it would be similar to Vietnam. But over a longer term, such a war would lessen its influence on global supply and pricing issues as stability in these factors would be reached. Basically, Iraq would get isolated. The major factors would then migrate to public opinion issues and financing the war.

From his interview with Dan Rather of CBS last week, Saddam Hussein did convey some of his thoughts on how he expected the war to go. He expects to lose ground and have heavy casualties, but he is hoping to inflict enough damage and loss to the UN Forces (or International Coalition of Forces) as they progress such that they will see the conflict as not worth it and stop. In his words, “the West can’t take the Blood”. As all sides see the war progressing quickly, it is likely that it will reach a controlled or contained state reasonably early in the conflict. Over all resolution such as installation of a democratically elected government would certainly take much longer. The Rather/Hussein interview did provide valuable insight by allowing western peoples to hear first hand the convincing and calculated rhetoric which has been and is continued to be supplied to the middle eastern Islamic community.

 

Oil price and supply: The key factor

Despite the many distracting and emotional issues being debated about the Iraq conflictincluding issues such as global security and terrorism, we believe the single most important issue is stability in global pricing and supply of oil, the world’s number one commodity. Further, each countries position on the UN security matters is directly positioned in line with their oil interests. As a point of fact, Iraq possesses the world’s second largest proven oil reserves, currently estimated at 112.5 billion barrels. That is about 11percent of the world total. Further, with OPEC holding 77 percent of the world’s proven reserves but only meeting 40 percent of the world’s daily production requirement, it holds that the Middle East as a region will over the long-term become even more important unless alternative fuels are developed. It bears mentioning that Iraq, along with its OPEC partners possess most of the world’s excess oil production capacity. However, as oil price and supply relates specifically to Iraq, the 1991 Gulf War has already proven that Iraq’s 2.0 million BBLs per day of production can be removed from global production with little or no effect to global oil price or supply. It is really the uncertainty of war in general and its potential to affect the oil supply from the entire Middle East region that raises doubts and this is the critical issue that must be settled. It is also important for investors to be clear on two other issues relating to Iraqi oil. First, contrary to common belief, the United States gets very little of its oil supply from the Middle East and thus is not “dependant on Middle East Oil Supplies” . In point of fact, the US produces internally 50 percent of its domestic production. An additional 40 percent of the US required crude oil consumption is supplied from within the hemisphere by Canada, Mexico, and Venezuela.

The remaining 10 percent is obtained from Africa (principally Nigeria) and the Middle East. None the less, the United States foreign policy toward the Middle East is surely dominated by concern over maintaining reliable and steady oil production and price in order to ensure global economic stability. Now this leads us to the second major misunderstanding, that of ownership of the oil. It is clear that the United States, as does the rest of the world, want stability in oil supply and pricing. This is manifested in two issues, stable government and open access to the region. Open access does not mean ownership of actual production, it should simply mean that the principals of business operate efficiently in producing and exporting the oil.

As a closing point on oil, investors need to be reminded that when Iraq nationalized its oil production in 1960, it in fact took away the producing assets from mostly US and UK companies and then established new production partnerships with Russian and French companies to operate them. Thus it seems that the position of the US/UK in wanting regime change in Iraq as opposed to the French-led, Russian-supported position of allowing Iraq more time to comply with UN resolution 1441 leaves investors with having to make a decision as to which private interests will ultimately benefit from the outcome of the war. For the Iraqi people, it really makes little difference as to who is the actual operator of the production assets as the ownership and related royalties is not in question and should not change.

What oil price will do?

It is unlikely that there will be any supply issues coming out of the Iraq conflict but uncertainty about the future will likely drive prices higher. The question is how high and how long would prices stay elevated. In the case of the Gulf War in 1991, oil prices shot up from being in the USD 22.00 range for Brent Crude to peak at near USD 40.00 before the war when uncertainty was at its greatest and political tensions at their highest. Interestingly, Brent Crude price fell from USD 26.00 days before the war started to USD 20.00 just a few days after the war started. The price remained stable around the USD 20.00 level throughout the war and showed little change after the war concluded. From an economic perspective, the longer oil price stays high, the longer the drag on the economy and the greater the negative impact it would have to the GDP. It would be reasonable to conclude that once the uncertainty of stability of supply from the Middle East region is proven, the oil price would fall. Hence, the sooner the war gets fully underway and the war premium in oil price is removed, the better it would be for the global economy. The longer the potential for conflict looms without closure, the worse it would be for the economy.

How will the equity markets react?

The likely case is a short war in which oil price should stabilise in the early stages as supply is proven. Equity markets would drop with a flight of capital to the relative safety of government bonds.

A reasonable parallel can be drawn to the Gulf War. To review the time line of the Gulf War, Iraq invaded Kuwait on August 2 1990, just days after TT had its own political upheaval. On January 17, 1991, after six months of political turmoil, the air war started with the land war following on February 25. Operation Dessert storm lasted only 250 days. On its conclusion, technically September 4, 1991 consumer and business confidence recovered, oil price remained stable, and economic growth improved. In order to assess the potential downside risks to equity markets during conflicts, it is useful to look at past experience and how the equity markets reacted to the onset of war. Again, using the most recent war, the Gulf War as a comparison, and reviewing the DOW, FTSE and DJ Euro STOXX 50 indexes, we see that the markets all fell on news of the Kuwait invasion and reached there lows within 30 days. From then on it was a slow and uncertain climb back up with notable step up functions at the start of the war. Proving once again that investors can deal with good news or bad news, but no news (or uncertainty) is the worst scenario. From its lowest level just after the Kuwait invasion, the DJ Euro STOXX 50 index returned a 35.5 percent over the next 12 months. Similarly, the S&P yielded an average annual return of 15.7 percent during WWII over the period of December 6, 1941 to Allied Victory on August 14, 1945. For the Korean War, June 25, 1950 to July 25, 1953, the S&P turned in a 8.7 percent average annualised growth. Even during the 11 year Vietnam War (August 1964 to April 1975) and during stagnated and difficult economic times, the S&P showed a small growth. Thus for every major conflict in the past 75 years, equity markets actually grew and improved over the conflict and after as well. Notably, bond return indexes also showed solid returns throughout the military conflicts reviewed.

War and  investment strategies

For individuals already invested, considering the present climate and future long term prospects, they should stay invested. From our review of history, it seems that the investors will favour the defensive sectors such as drugs and tobacco in the near term and will only move back into the more volatile sectors such as telecom and technology after most of the uncertainty is removed. But remember, settlement of the Iraq conflict one way or another should lead to a recovery in consumer and business confidence, stability in oil price and improved economic growth. For individuals with cash to invest, this seems to be a circumstance of marked uncertainty and such circumstances in the past have usually given rise to attractive investment opportunities. History has suggested that the markets will fall at the start of the conflict, giving rise to attractive equity pricing.

Investing from a bottom-up approach, that is selecting individual companies based on their stand alone ability to provide growth and return to shareholders should provide an excellent base for investment and the war discount an excellent price. History also suggests that markets will grow coming out of the war, to end higher, so there is a level of confidence in positive equity returns. In our particular circumstance right now, many of the economic stimulus needed to incite the next growth phase in global economic expansion have already been put in place. Perhaps the dramatic stimulus from the Iraq conflict will jump start the recovery process as well as remove much of the current uncertainty. None the less, the economic stimulus and growth typical after settlement of a major conflict has opened the door for investment opportunity. Let us hope for a timely and as pain-free as possible resolution to this middle east crisis.

E-mail:     darcy@investments-intl.com

Q.   Some insurance agents have told me that their products are great ways to invest because I can get a tax break. But I have also been told never to use a tax concession as a reason to choose an investment. Which advice is  correct?

Anjanie, Couva

A : It depends on the situation. Generally, it is always advisable to invest in an instrument on which you derive the greatest tax efficiency. For example, it is always prudent to capitalize on the tax deductions afforded to individuals of up to $12,000 per year for investment in annuities. Similarly, investing in residential property would reduce your taxable income up to $18,000 per year. Most insurance agents market products which capitalize on these allowances on your tax return. So if it is specifically tailored to these allowances then by all means proceed. However, when it comes to assessing the return earned on one investment when compared to another of different risk, taxation should be a secondary consideration. Investing in an instrument which is riskier than another, only because there is a tax break, may not be the wisest thing to do. When choosing between investments, the first principle is to assess the risks involved and only after you have chosen the investments suitable to your particular risk tolerance should the tax treatment be considered.

Q.   How can I invest directly in the U.S. and U.K. stock markets?

Kavita, Valsayn

A : In order to invest in these markets you would have to approach a broker.  There are a few options which can be considered. You can arrange for a broker in Trinidad and Tobago to purchase the shares.  While the broker in Trinidad would not have a seat on the exchange the shares can be purchased through a broker abroad. Going through this route may or may not be expensive depending on the relationship which exists between the  intermediating broker and the broker overseas. Alternatively, you may want to open an account directly with a broker in the US or UK. This would be subject to certain requirements by the broker which may have to be fulfilled. Depending on their assessments, the posting of different degrees of margin (a percentage of the value of shares being purchased) may be necessary. There are also brokerage houses available on the Internet which you may be able to access once the relevant requirements are fulfilled. Talk to a broker in Trinidad and Tobago or check the web and shop around to get the best deal possible.

Incidentally, now may not be a wise time to get into these markets. Due to  deflation in the global economy markets abroad may be going down a bit further, before going back up. As mentioned in a previous column the local market has been performing phenomenally better than markets overseas.

Q.   I’ve heard that a good time to buy shares in the stock market is when prices are low. Right now the local market seems to be moving very high, does that mean it’s not a good time to be buying?

Samuel, Felicity

A : Fundamentally, the price of any share is related to the company’s earnings potential. The logic is that the higher the profitability, the greater is the possible dividend payout. There has been a significant rally in the local market since November last year due to the low interest rates and rebound in confidence after the last election which broke the 18-18 gridlock. Therefore prices have risen to a significant degree. This is not to say that the prices of shares are overvalued and there are going to be corrections. It can be said though that the market has reached a point of relative flattening when compared to the previous months. However, given the growth outlook for the economy and the earnings forecasts for a few of the companies on the exchange, further price growth may be in the offing once the respective financial accounts are published. Therefore, now may be a good time to get into the market, but in particular sectors which are expected to do well this year. Talk to your stockbroker to get an idea of some of the companies whose share prices are likely to go up.

 

THE transformation of Invaders Bay into a modern centre of entertainment and social activity is a welcome development. Opened several months ago, the Movie Towne cinema complex has proved an instant success as it has brought to Port-of-Spain a world-class facility featuring the latest productions of the movie world.

Last week Monday, the complex expanded its attractions with the opening of the first Ruby Tuesday casual dining restaurant in the Caribbean. Trinidad and Tobago becomes the 12th country to operate a Ruby Tuesday franchise which began in the United States some 30 years ago. According to Derek Chin, operator of the $6.5 million TT franchise, Ruby Tuesday restaurants have become famous for their salad bars. Chin deserves to be commended for his vision, his confidence in TT’s future and his courage to invest millions to bring such modern facilities to the nation’s capital. Indeed, he has plans to establish a Japanese restaurant called the Laughing Buddha at the complex. It seems that Chin’s initiative has sparked an investment momentum at Invaders Bay as Planning and Development Minister Keith Rowley recently announced that a 128-room Marriot Hotel will soon be going up in the area. The Marriot chain of hotels is well known in the United States for its service, and its establishment at Invaders Bay is sure to enhance the attractiveness of that western sea-side section of the city and the tourist potential of the country as a whole.

Once upon a time, the Bay was a bathing place for city dwellers who didn’t have the means of transport to reach Trinidad’s better known beaches. Now it is the scene of a magical kind of development providing top-class movie entertainment, quality eating, a variety of shopping and soon a modern hotel. The development of the Invaders Bay area, joining the already popular sports centre – the Jean Pierre Complex and the Hasley Crawford Stadium – brings a new excitement and quality of life to the nation’s capital city. There is land there for many other enterprises and one expects that the example set by Derek Chin will be followed by other investors, encouraged also by Minister Rowley’s promise of Government’s backing for any further development at Invaders Bay. Government, he assured, will always support any private sector venture which creates employment.

According to the Minister, western Port-of-Spain is becoming the social centre of Trinidad and Tobago and, as a result, land there has become extremely valuable. And the establishment of such First World businesses as Ruby Tuesday proved that the people of TT were capable of providing first world service. “We believe in our people to reach, aspsire to and attain the highest standards in the world,” he observed. The sparkling transformation of Invaders Bay underscores the optimistic economic outlook now growing throughout the nation. Still, the country owes a debt of gratitude to Mr Chin for launching the development of that area of Port-of-Spain to the tune of many millions.

OVER the past year, I have counted at least 25 advertisements for corporate communications/public relations officers/managers. Usually there is a demand for tertiary level education and experience at a senior level.  Am I in “la-la” land or do these employers know something I don’t?  One of the reasons these advertisements keep re-appearing is that there is a real shortage of trained and experienced communications practitioners. 

Another reason why organisations keep searching is that they have not themselves defined the task and key deliverables of the “Cor Coms Managers”. Those employers looking for someone who can really add value in the area of corporate communications have a really difficult task on their hands.  The main reason for this shortage is that the society is not providing the necessary education and training in this area.
 
It was in 1974 that the school of Continuing Studies introduced a certificate in Mass Communications, where a person could specialise in Public Relations.  Twenty eight years later this offering has not been expanded and it is not possible to read for a degree in Public Relations or Corporate Communications in the region. Despite this gap in the educational offering, employers expect to find trained and qualified professionals lining up for jobs in the field of communications. In the short term employers will have to identify persons with potential and invest heavily in providing the necessary training.  It is an investment but once you accept the importance of effective communications in winning the hearts and minds of your various publics, the return appears clearer.  Identifying high potential persons in itself is a problem, however, it is not impossible.

A liberal arts degree is a good starting point but there are a number of other competencies which are absolutely necessary.  From where I sit, the most important skill in the arsenal of a communications officer is solid language skills, both written and oral. Appropriate use of language is the nervous system of the communication department.  The tools of the trade include: news releases, feature articles, speeches, audio-video scripts, internal communications, interviews and annual reports. An easy way of testing for this skill is to provide an opportunity for the interviewee to write a news release at the end of the interview.  In addition to testing for language capability, this gives you a good idea of the person’s ability to respond under pressure as well as their keyboarding competence.

Second on the list of key requirements is a high ethical standard.  In this day of corporate scandals and indiscretion, the communications persons must be prepared to act as the corporate conscience and draw the line.  In training programmes I usually suggest that “if you can’t live with it in two-inch type in the morning newspaper, then don’t do or say it”.  Testing for this is difficult, however organisations must be true to their articulated core values. High-quality work is another core requirement.   Again this is difficult to judge in the interview but what you’re looking for is someone who is committed to producing work that is accurate, on time, within budget and complete.  The old concept of “completed staff work” applies.

A significant part of the job of the communications practitioner is the ability to make judgment calls.  This really speaks to experience. The quality and variety of past work experiences of a candidate can provide some indication of their ability to make sound judgments. The final area which I would look for is the extent to which the person is engaged in continuous learning. Businesses grow and change over time, sometimes they even shrink, but no matter the direction, professionals need to keep abreast of changes. If you happen to find the individual who satisfies these requirements, you have another responsibility: continuous training to ensure that the person remains on the cutting edge.

Having said all this, if I was asked to identify the key requirement for a successful communications practitioner I would suggest that it is an understanding of the culture of the organisation. Many bright, energetic, high potential performers underestimate the importance of understanding corporate culture. The context of the communications practitioner is the culture of organisations.  Many initiatives and programmes flounder because we ignore the cue from stalwarts. Keep your ears open for the trite but potent statement, “well you see around here we do it this way!”  

This is a big cue for action. Understanding the culture is one thing.  Changing it is another.  While the Corporate Communications Manager has primary responsibility for designing and implementing the communication strategy, the key champions of organisational chang e are members of the leadership team who MUST walk the talk. People don’t do what you say, they do what you do.

The views expressed in this column are not necessarily those of Guardian Life. You are invited to send your comments to guardianlife@ghl.co.tt

Excepts of a presentation made by Allan Russell, Petrotrin’s Exploration and Development Manager, at the Petroleum Conference and Exhibition at the Hilton Trinidad recently, where he provided highlights of the company’s current involvement in the gas value chain and offered  some insights into future natural gas projects and developments. The title of his presentation was the “New Gas Player.”

In the past Petrotrin has concentrated on winning crude oil in order to augment supplies of feedstock into our Point-a-Pierre refinery. But as far back as 1998 the company embarked on plans to enter the gas production and marketing business in consort with other companies via the monitisation and development of the North Coast Marine Area with British Gas, Veba, now Petro-Canada, and Agip. Discoveries with new joint venture partners are certain to change this picture and we stand on the threshold of being involved in many aspects of the value chain.
Today, we produce over 100 mmscf/d from sources in the North Coast, Trinmar Operations, Vermilion Joint Venture and from other sources. We aim to increase this production to 150 mmscf/d within one year’s time. Let us take a closer look at our involvement in LNG. This map highlights the main gas fields and major pipeline systems installed within Trinidad and Tobago. The Hibiscus platform was installed in over 500 feet of water and is connected via a 24-inch pipeline for supply of gas to ALNG Trains 2 and 3 located at Point Fortin. Petrotrin holds a 19.5 percent unit interest in the NCMA.

Specifically, Petrotrin is the licensee of the Block 9 acreage that contains a major portion of the Chaconia field and a portion of the Hibiscus field. Poinsettia and SW Poinsettia are included in the Unit to meet  20-year supply considerations.

The Hibiscus field is on production at 290 mm/d and Train 2 is in the start-up/commissioning phase. LNG cargoes are being sold into the USA. Predecessor company Trintoc discovered the Chaconia field with the drilling of the Chaconia 1 and 2 exploration wells followed by the discovery of the Hibiscus field during 1981. The Hibiscus field is being developed first and Chaconia second. Poinsettia may be brought on in five to 6 years in order to maintain production rates. The North Chaconia prospect is a fault-controlled trap that has been defined on some 2-D lines to the west of the structure. What we do not know is whether the structure is closed to the east and if there are any hydrocarbon indicators such as obvious “bright spots”. Seismic acquisition is planned for 2003. Gas sales to Atlantic LNG is via long term contracts. On the downstream end the LNG produced is shipped and sold on a joint basis. The arrangements required involve gas sales agreements, LNG purchase agreements, shipping contracts, re-gasification arrangements and finally sales agreements with the prospective buyer. Petrotrin holds a 19.5 percent interest in the NCMA and  PFLE which allows Petrotrin to be involved indirectly in LNG purchase from ALNG Train 2, shipping on a long term basis, re-gasification at the un-loading terminal and final gas sales at the exit point of the re-gas terminal. In this arrangement maximum control of costs and derivation of revenues are obtained.

However, many contracts are needed that are ‘back-to-back’ to each other and offer great challenges in these rather complex contractual arrangements. LNG is only a means of connecting the supply side to the demand side of the market. In so doing, a number of activities must be undertaken that leads to the existence of different players. The LNG pricing arrangement is on a “netback” basis. From the sales amount, re-gasification costs, shipping, liquefaction and pipeline tariff costs are deducted. The remaining money or price is retained by the upstream producer. In summary, GAS and LNG FLOWS DOWN while MONEY FLOWS UP.  (He then showed the various points of sale for gas and LNG.)  There are four existing LNG terminals along the eastern seaboard of the continental United States. Running from south to north they are Lake Charles in Louisiana, Elba Island in Georgia, Cove Point in Maryland and Everett in Boston. 

Gas prices generally increase from south to north due to increased pipeline costs. Highest prices occur in the New York and Boston metropolitan areas. Henry Hub is a transfer point located at the southern end of the US natural gas system. Natural gas is sold in the United States on a widely traded index called the Henry Hub which is physically located in Louisiana. As in oil and product markets there are sophisticated marketing products on offer, eg Forward sales, Future sales, swaps, hedges etc. The Henry Hub Index over the past 12 months have shown a general increasing trend up to US$5.60/mmbtu but is expected to return to lower levels in the near future. What are the ingredients to achieving this level of participation and  success. I wish to highlight the excellent working relationships with all the partners involved in this unit, buoyant gas prices and great reservoir performance. The Vermilion/Petrotrin joint venture discovered rich gas and gas condensates in exploration well Carapal Ridge No 1. The Central Block is located in the middle of the island running in a north-east south-west direction. Drill Stem Tests concluded that ample supplies of gas were found but a more deterministic measure of quantities needed to be ascertained.

The partnership worked together to develop plans to conduct a long-term test on the well and to determine the productive capacity of the discovery. Gas production began in December 2002 with sales going to the refinery at Pointe-a-Pierre.  Good deliverability rates and condensate yields have been obtained. The Carapal Ridge discovery has the potential for long-term supply of wet gas and condensates.  At the end of the six-month test, the partnership will be in a position to better contract out supplies. By far there are serious advantages to finding gas on land. By far, the existence of existing infrastructure makes a short time from discovery to production start-up. The big advantage that land gas has over offshore deliveries include existing infrastructure to move the gas to the consumer/customer and lower development costs since no platforms are required.

The keys to success has been the great working relationship with our partner Vermilion in this venture, good permeable reservoirs and rich condensates. Let us look at the west coast area comprising the Soldado fields and the North Marine acreage. Gas production from the Trinmar Operated areas are generally dependent on the level of crude oil production since most of the gas is associated. At current levels production is 35 mm.d. However, there have been gas wells drilled in the last drilling campaign that shores up evidence of non-associated gas that can deliver up to 10 mmscf/d of wet gas supply per well. Seismic mapping have shown up several amplitude anomalies that need to be tested. If successful this supply can increase our gas reserves picture. Petrotrin is an integrated petroleum company and as such has both gas sources as well as a demand side of its business.
 
Demand for gas at the refinery is for hydrogen generation and fuel for steam generation. The E&P operations utilise gas for thermal recovery of shallow heavy oils and for fuel.

Natural Gas Liquids recovery

Natural gas liquids are recovered by PPGPL under contract with Petrotrin. The extracted liquids are sold and the dry gas returned to Petrotrin. The current situation with respect to involvement in the gas businesses is both exciting and rewarding to Petrotrin. On the supply side we have proved up by ourselves and in consort with partners additional gas discoveries. On the downstream side we are involved in many new arrangements.  Growth is currently taking place and we are hopeful of additional discoveries.Our short term desire is to increase production to 150 mm/d and prove  up additional gas prospects. Our next adventure would surely be to prove up additional gas within the context of the Block 9 area.