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Caribbean gas pipeline debated by experts

By John Collins (1)

Their comments on proposed project by Trinidad & Tobago reflect optimism, skepticism over its feasibility and cost.

The Washington-based Inter-American Dialogue (IAD) recently asked three experts on Caribbean regional development to evaluate the recent proposal of the Government of Trinidad & Tobago (T&T) for a project to pipe natural gas up the Antillean chain.

At the recent Summit of the Heads of Government of the Caribbean Community (Caricom), T&T Prime Minister Patrick Manning announced a plan to build a natural gas pipeline network up the Antillean chain to boost exports of the commodity to other countries in the Caribbean. He estimated the energy cost savings for consuming countries at 30% (CB July 11).

The concept, was welcomed by some as visionary and offering the potential for diversifying energy sources and reducing costs. There is a growing dependency of the region on imports of oil and gas for energy. However, the proposal also created considerable skepticism in T&T as well as elsewhere and raised a lot more questions than answers.

The IAD asked three regional experts to comment on the proposal. They are Prof. Anthony Bryan, the Trinidadian-born director of the Caribbean Studies Program at the University of Miami’s North South Center; Trinidadian journalist David Renwick, a recognized expert on the energy sector, who writes on the subject for Caribbean Energy and The Trinidad Guardian; and Amb. Paul H. Boeker, president of the Institute of the Americas.

“This plan is either visionary or impractical because of regional constraints,” said Bryan. “The vision is warranted. Trinidad & Tobago (population 1.3 million) supplied 40% of the U.S. imports of liquefied natural gas (LNG) in 2001. Trinidad is one of the four largest natural gas development centers in the world. Its 23.5 trillion cubic feet of proven natural gas reserves can be exploited for 60 years. Major increases in production are expected in 2003 and beyond. New markets will have to be opened and the Caribbean is a natural.”

Describing the proposal as “technically feasible and practical,” the scholar said T&T “can supply natural gas to the Caribbean by LNG tankers, as it now does to Puerto Rico and the Dominican Republic (D.R.), by compressed natural gas (CNG), a pipeline or electricity.”

Take three years, cost $500 million

While acknowledging that a pipeline “could provide Trinidad’s Caribbean neighbours with some energy price stability over the medium to long term and a 30% reduction in energy costs,” Bryan said “it would take three years to build and, at current estimates, cost $500 million.”

Referring to Manning’s proposal that the countries using the pipeline should have part ownership, the scholar said “the constraints, other than environmental, are obviously financial” and he asked a rhetorical question, “do the smaller island economies have the required consumer market to provide attractive returns on the investment?”

The energy sector expert Renwick observed that the Caribbean natural gas pipeline “is fraught with difficulty and even runs counter to Trinidad & Tobago’s own interests, which are rooted in transshipment od natural gas by ship in LNG form.” Indicating that “substantial LNG infrastructure already exists in Trinidad for the three-train expansion by the Atlantic LNG Co. currently taking place,” Renwick said “it will be extended to support three more trains now in the planning stage.”

While acknowledging that “a cheaper method of transporting gas in the long term is through a pipeline,” the expert warned that “the high costs would nullify any perceived benefits of lower energy pricing for the smaller Caribbean countries likely to be targeted. Funding would have to come from the private sector, which would probably regard the returns  from the markets envisaged as too low to justify the investment.”

Pointing to Venezuela, neighbouring T&T, Amb. Boeker said it “has concentrated, until quite recently, on higher-margin petroleum production while T&T has skillfully developed and marketed its ample natural gas reserves. T&T has been the first in the region to seize the opportunity of the North American LNG market and turn it into a major revenue source for the country.

Puerto Rico part of strategy

“T&T is way ahead of other gas producers in Latin America in producing and marketing its gas in the form of LNG,” said Boeker. “The concept, and its not much more at this point, of a Caribbean undersea pipeline network to supply gas to several small Caribbean markets, and Puerto Rico, is another prong in the same business strategy.”

The former diplomat said the strategy “is basically to preempt the lower-margin gas markets, left for ma#ana by Venezuela, Mexico and other major reserve countries,  and turn them into solid, long-term markets for T&T known.” Viewing the contest Boeker said “the Trinidadian tortoise gets across the finish line before the hares wake from their nap.”

Given the large infrastructure costs that would have to be borne largely by T&T, he cautioned that “it remains to be seen whether this project pencils out. It would lower energy costs for the Caribbean island countries, a significant benefit for industrial and agro-industrial development.”

Referring to the possibility of multilateral financing for the concept, Boeker said “this development dividend for the Caribbean nations could attract support from the Inter-American Development Bank or the World Bank for the on-land facilities for gas transmission and distribution necessary to make the pipeline feasible. If the project proves financially viable on the basis of still-to-be-completed studies, T&T should be able to attract equity partners and debt finance for the pipeline.”

According to the latest commercial guide of T&T, provided by the U.S. Embassy in Port of Spain, last year T&T exported $4.3 billion, concentrated in oil & gas, and $1.8 billion was to the U.S. including Puerto Rico which accounted for more than 10% of that amount. Conversely, T&T imported a total of $3.3 billion of which about one-third ($1.2 billion) was from the U.S.

T&T’s vibrant and dynamic economy, fueled by oil and gas, is reflected in its gross domestic product of more than $8 billion resulting in an annual per capita income of $6,200 for its 1.3 million inhabitants.

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1) Other articles by the well known Caribbean author John Collins can be read at: www.pymesdominicanas.com

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August 5, 2002

 

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