Before signing LNG’s dotted line

Last week’s statement by Minister of Energy, Eric Williams, that several energy companies in the United States of America were interested in entering into partnerships with Trinidad and Tobago in LNG re-gasification terminals being established in the US, all add up to this country being provided with opportunities it would never have envisaged, say five years ago. But the demand for liquefied natural gas (LNG) in the United States, Europe, China and Japan is so great and still expanding that the US as well as other foreign capital are anxious to take advantage of the tremendous proven reserves of natural gas in Trinidad and Tobago.  Again, of critical importance is that this country at present supplies the US with approximately 75 percent of its LNG needs. The heightened interest in our natural gas reserves and their conversion into LNG, along with offered partnerships at the re-gasification terminals in the United States, will represent, if accepted, a Trinidad and Tobago involvement from the gas in the ground to its conversion into LNG here and de-gasification and distribution in the US.

Meanwhile, as attractive as proposals may appear, and with them the chance to reverse history, when our energy was exploited for the principal benefit of foreign multi-national energy companies, mainly oil, Trinidad and Tobago will not only have to proceed with caution, but also to put in place strategies which will optimise returns for this country.  Government will have to negotiate, in addition to a sizeable shareholding in any new LNG plants constructed here and de-gasification plants in the US, a provision allowing for TT private sector participation as well.  It will be a move closer to the desired Singapore model, and while this will stem more from the accident of demand, will prove immensely beneficial to the country and its citizens, and in the long term to the wider Caribbean community of nations as well. In turn, the offers which have arisen as a result of present and anticipated future demands create an opportunity for Government to formulate a natural gas and allied  tax regime which will make a far more meaningful contribution to the country’s economy than what obtains under the existing tax structure with respect to LNG plants operating here.

Of interest, is that the benefits will not simply flow from an upwardly revised gas tax regime, but from profits derived from any Trinidad and Tobago involvement and from taxes on domestic private sector profits. Nonetheless, Government should not allow itself to be carried away by the prospects of enhanced earnings in the short and medium term, which would result from increased exploitation of the natural gas resource and any TT public and private sector participation. Instead, rather than yield to blandishments and talk of high returns, and they will be aplenty, Government should set a limit on the natural gas that can be exploited annually. We have raised this question of upper limits before, both with respect to the country’s natural gas and its crude. Nonetheless, we fell it needs restating, for as attractive as any offers may appear and the fact that they are being made, consideration should be given to avoiding too rapid a depletion of our energy resources.