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ENERGY Caribbean Yearbook (2013-14)

Energy issues going

Energy issues going international Can state energy companies make the grade? Almost every famous name in the energy business has been involved in Trinidad and Tobago’s energy sector at one time or another. Yet, despite 105 years of commercial production, no local company has ever gone abroad to invest in oil or gas exploration and production. There was a very short-lived alliance between Petrotrin and Venezuela’s Inelectra in the early 2000s for exploration in the Gulf of Paria East block. Petrotrin even set up a special subsidiary, Petrotrin de Venezolana, for the purpose. But after one well had been drilled, the arrangement was aborted. Petrotrin toyed with the idea of investing in the Cuban oil sector at one point, but that never went very far either. It’s not hard to guess why the many companies formed locally to dabble in domestic upstream activity never considered going overseas. Most of them didn’t last very long, and none had the financial muscle, even in the Caribbean. But times and attitudes have changed. The local company Trinity Exploration and Production, armed with US$90 million of shareholders’ funds from a listing in London early in 2013, is mulling the possibility of investing in oil and gas activity outside Trinidad and Tobago. But the real thrust in this direction is coming from the energy ministry itself, which is anxious for state-owned firms in the energy sector, having demonstrated that they can perform competently at home, to spread their wings abroad. The companies involved are: • NGC (National Gas Company: gas trader, pipeline operator, LNG exporter) • Petrotrin (the Petroleum Company of Trinidad and Tobago: oil and gas producer, refiner) • NP (the National Petroleum Marketing Company: bunkerer, refined fuels wholesaler/retailer) • PPGPL (Phoenix Park Gas Processors: gas liquids extractor/ marketer). The first three are fully owned by the government: the last is 51% owned by NGC. The major role in this international outreach has been assigned to the NGC, probably the most profitable domestically-owned firm in Caricom, public or private. Its turnover was TT$19 billion in fiscal year 2011, TT$5 billion more than the year before. Its after-tax profit was TT$4.6 Companie billion, compared with TT$2 billion in 2010. Energy minister Kevin Ramnarine has pinned his faith on NGC to an extraordinary degree. He sees it “becoming to Trinidad and Tobago what Petrobras is to Brazil or Petronas to Malaysia. Petrobras is almost as powerful in Brazil as the Brazilian government. There is also the wonderful story of state company Ecopetrol in Colombia. It was worth a couple of billion dollars a few years ago and now is being quoted at over US$100 billion, creating tremendous value for the people of Colombia, who are its shareholders.” NGC’s successful foray abroad is therefore essential to the minister’s grand vision. It has been mandated to “look at investment opportunities around the world” in order to expand. Countries West and East Africa, where there have been several major oil and gas discoveries in recent years, is particularly in the frame. “We are keen on establishing an investment portfolio in Africa through the vehicle of the NGC,” says the minister, noting that “natural gas has the potential for eradicating poverty in East Africa through the provision of cheap electricity to the populations in Tanzania, Kenya and Mozambique. These are just some of the possibilities as we seek to internationalise the Trinidad and Tobago energy model.” In its African initiatives, NGC has worked closely with PPGPL, the specialist in gas liquids extraction and marketing, a likely activity for state investment in Africa. PPGPL has already initialled a memorandum of understanding with the Tanzania Petroleum Development Corporation for “technical and expert services” in conjunction with a 500 km pipeline being built by the Chinese Petroleum Development Services to take gas from discoveries offshore southern Tanzania to the capital, Dar es Salaam. PPGPL’s president Eugene Tiah confirms that “there are lots of opportunities in Africa, but you have aggressive countries like China that are not waiting around. If we don’t take advantage of the opportunities, they will be gone soon.” Nearer to home, Central America is seen as a fruitful area for state energy company outreach, particularly Panama, with whom an MOU was signed in March 2012. Potential avenues for Trinidad and Tobago state company investment there include bunkering facilities (Petrotrin), a blending plant and refined products retailing (NP), and gas-based industries (NGC/PPGPL). 12

Energy alternative fuels issues Fuel switching is not catching on Only Trinidad and Tobago, and to some extent Jamaica, which has experimented with an the pump, are showing any interest in alternatives to gasolene and diesel as transportation fuels. But the Caribbean Energy Policy (CEP) devotes a whole chapter to the subject. This means that the adoption of non-traditional fuels for transport is now an imperative to which Caricom’s 15 member nations will have to adhere E10 (ethanol) mixture at Compani (though the CEP is not a mandatory guideline, only voluntary). “Fuel switching”, as the CEP describes it, is designed to encourage the use of “cleaner energy sources and a more efficient transportation sector.” Transport is seen as “contributing a high level of emissions, including greenhouse gases,” thus making it “a serious environmental matter” in the eyes of the CEP. Transport in Caricom is also “highly vulnerable to dependence on imported fuel supplies and unpredictable spikes in oil prices.” So, not surprisingly, the CEP recommends greater use of compressed natural gas and biofuels like ethanol and bio-diesel, as well as “electric and hybrid vehicles.” Trinidad and Tobago has about 4,500 vehicles equipped with CNG (out of some 650,000 registered). A few hybrids have been imported by motor vehicle dealers, including one for the ministry of energy, to boost “energy efficiency awareness among the driving population”. It is not clear how many motorists in Jamaica have opted for E10, but it can’t be very many. Countries In other words, the adoption of nonconventional transport fuels has a very long way to go in Caricom. While Trinidad and Tobago is not dependent on imported fuel supplies, the driver for fuel switching is the need to reduce the use of gasolene and diesel and cut the government subsidy on the price of these fuels at the pump, which is costing several billion TT dollars a year. The energy ministry is still seeking a way of enticing motorists to add CNG capability to their vehicles. One approach under consideration is to fund the cost in whole or in part. CNG has some advantages, but it also has some disincentives, as even the ministry concedes. The vehicle becomes heavier, it loses trunk space to the CNG cylinders, the system has to be inspected annually (instead of every three years for gasolene and diesel vehicles over a certain age), stricter safety measures are applied, engine power is reduced 5-10% by conversion, and range falls to 200- 250 km compared with 400-550 km for gasolene/diesel vehicles. With such an array of negatives, it is perhaps unsurprising that CNG had not enjoyed the take-up the ministry would like to see. If and when natural gas deliveries finally arrive in the rest of Caricom, the same hesitation will presumably be seen. Hybrid car donated to the Ministry of Energy It is hard to predict whether electricity would fare any better. Purely electric vehicles are not on the immediate horizon for Caricom, since charging points are unlikely to be available for a long time. The halfway house is the hybrid vehicle, powered by gasolene or diesel but equipped with a battery which does not need a recharging station. “The motion of the wheels as the car moves charges a battery,” minister Ramnarine explains, “and at the opportune time, when the battery is charged, the vehicle switches to the battery.” Another unconventional fuel source is methanol, made from natural gas blended with gasolene or diesel, or even used on its own. An experiment in 2011, involving Petrotrin and Trinidad and Tobago’s two methanol giants, Methanol Holdings and Methanex, was said to have produced “encouraging” results. But the initiative was not taken any further by Petrotrin, whose participation in any long-term addition of methanol to gasolene is essential for any real progress to be made. energycaribbean YEARBOOK 2013/14 13

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