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Trinidad and Tobago: Insight to a Gas-based Future

By Trevor M. Boopsingh

Trinidad and Tobago contains less than one percent of known global reserves of natural gas. Despite this small share of gas reserves, the country has been successful in establishing one of the leading gas based export centres in the world. These exports are principally ammonia, methanol, steel and more recently, liquefied natural gas (LNG). In both the cases of ammonia and methanol, Trinidad and Tobago is already the world's leading exporter. In the case of LNG, by the time Trains II and III are on stream in 2003, it will be among the top five exporting countries.

Trinidad and Tobago has therefore been uniquely successful in the global marketplace in creating an environment in which gas-based export industries flourish. Given the small size of both the country and of its reserve base, a priori, this success must have been predicated on some unique combination of institutional, commercial and regulatory arrangements. The development of the majority of these Gas-based industries (excluding LNG at Point Fortin) was predicated on an original plan for an Industrial Estate at Point Lisas which was modified and adapted almost on an as needed basis, as the scale and size of the industries grew from the very modest first efforts by W.R. Grace with a 150 tonne per day ammonia plant to more than twenty-five world-scale units producing a variety of products and utilizing progressively newer technologies and larger economies of scale.

Gas reserve development has been significantly advanced particularly over the last decade as the markets for natural gas in Trinidad and Tobago grew, particularly as an LNG export project got underway in 1994-95. Reserves in Trinidad and Tobago are now estimated at approximately 32 TCF - more than twice the level of ten years ago - and it is expected that for at least the next decade reserve appreciation will continue at similar rates.

Trinidad and Tobago has become a most important NODE or HUB for natural gas for the GLOBAL gas industry, serving markets as far south as Brazil, and across the Atlantic into Spain and Europe. It will become one the three critical gas nodes for the Western Hemisphere. This is due to a combination of:

Future natural gas industrial development must therefore recognize the likelihood of a continuum of further expansion of the industrial base in Trinidad and Tobago, in size, breadth, depth, diversity and increasing complexity. This will include developments based on:

At present, while there are now four gas suppliers, with the dominant supplier controlling more than 70% of the market, and also being the single largest holder of the acreage in the gas prone offshore environment, it may be very likely that this will increase to almost 10 over the next decade. The midstream sector, i.e. gas transmission, comprises two providers, one of which is a wholly owned state enterprise and important elements of the de facto regulatory framework remain informal. Currently nine consumers account for upwards of 95% of consumption of natural gas and this will expand to maybe 20 in the same time frame.

Maximizing national returns in new and existing industries requires inquiry beyond immediate technical and commercial feasibility. One such area is the relative potential for both backward and forward linkages to the domestic economy. Traditionally, such inquiry has been restricted to some research and sporadic attempts to engage in partnering exercises about downstream possibilities.

However, the advent of LNG may have generated the critical mass necessary to sustain the emergence of a domestic capability in a whole new range of activity linked to the upstream sub-sector. The industry has, therefore, now moved to a new threshold, one in which the three pillars, apart from expansion and replacement for future development must be:

a) deepening the reach of the industries into new, more complex and different development

b) risk mitigation on the economy as a key aspect of future development

c) increasing the overall benefits which accrue to the nation through enhancing the role of domestic capital in the sector, labor including management by nationals, the application of appropriate technology, and local institutional and business development

In the first round of expansion of the sub-sector in the 1980's, the Government of Trinidad and Tobago was the principal source of equity in ammonia, methanol, steel and electricity projects. Major local private-sector participation arrived with the CMC methanol joint venture in the early 90's. With divestment of much of Government's equity interests in the nineties, and, with the second round of expansion in ammonia, methanol, LNG and electricity being dominated by foreign direct investment, there is now a clear and present need for strategic interventions by way of Government policy and judicious injections of Government equity to ensure that the benefits of the resource accrue to national stakeholders.

The impact of the continued development of the natural gas industry into the future, on the Environment, and the Health and Safety of the neighboring communities will become much more critical in this next phase of the gas industry's development. In particular much more attention will have to be given to the impact of future development on the neighboring communities and in particular its human impact. As such, the opportunity now exists to develop a planned approach to a comprehensive industrial development program envisaging at least twenty-thirty more years energy related industrial and commercial development with a clear opportunity to continue such activities for another twenty years. A key starting point will be in the identification of potential industrial sites suitable for such activity, with the potential for expansion far into the future. Medium term planning is therefore, now critical, if the issues of resource allocation, industrial relocation of people, facilities and plant, environmental constraints, and social harmony, are to be properly addressed and a pleasant and rewarding future for all the citizens of Trinidad and Tobago realized.