TRINIDAD PETROLEUM CONFERENCE HIGHLIGHTS

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000268 SIPDIS SIPDIS E.O. 12958: N/A TAGS: EPET EFIN TD SUBJECT: TRINIDAD PETROLEUM CONFERENCE HIGHLIGHTS REF: POS 203 ¶1. The 2006 Trinidad & Tobago Petroleum Conference (TTPC),held on February 6-7 in Port of Spain, chose the theme "Harnessing the Gas Economy" to recognize the change in status of Trinidad and Tobago as an oil producing economy to a gas producing one. The conference, organized by the South Trinidad Chamber of Industry & Commerce, featured presentations by a number of industry experts and company executives, as well as a range of senior GOTT officials, among them the Central Bank governor and the junior minister of finance. An anticipated presentation by Prime Minister Manning did not occur, though his remarks likely would have been similar to those he delivered the previous working day at the launch of the Atlantic LNG production Train 4 (reftel). An invited official from DOE gave a market presentation. Media focus on the conference was greater on macroeconomic presentations rather than those of energy companies. Following are selected highlights of the conference, based on media accounts and Embassy attendance. -------------- Central Bank & Finance Ministry views -------------- ¶2. Ewart Williams, governor of the Central Bank of T&T, told conference attendees that increased growth was likely in Gross Domestic Product (GDP). He expected that real GDP growth in 2006 would exceed 10 percent. As an illustration of increased business activity, Williams cited a rise in U.S. dollar sales by the bank recently to over US$100 million. Williams termed this development shocking, as such sales usually average $25-30 million in the month of January. Unidentified capital outflows were a concern to Williams and a barrier to economic growth in T&T. Williams said increased focus on agriculture, infrastructure, and long-term financing was important for ensuring the security of Trinidad's economy. An important issue was instituting the petroleum-based Revenue Stabilization Fund (a bill for which is presently undergoing drafting),expanding the industrial base, and concentrating on education and training. ¶3. Christine Sahadeo, a minister in the Finance Ministry, spoke on state enterprises and GOTT divestment policy. She said GOTT planned to encourage private companies to list themselves on the TT Stock Exchange. She encouraged the private sector to be more active in the domestic capital market. Sahadeo called on companies to extend to employees the benefit of optional Employee Stock Ownership Plan (ESOP) shares. Sahadeo denied that divestment implied a failure of government, arguing instead that it was a "necessary and complementary part of the process." From 87 state enterprises in 1992, there were 79 today, she said. Sugar Manufacturing Company Ltd. (SMCL),which replaced Caroni (1975) Ltd. two years ago, was now marked for divestment. Sahadeo said that invitations would go out shortly for bids on SMCL. At the same time, she rejected the idea of privatizing First Citizens Bank (FCB),which had been a success story since it was formed in 1993, and now was Trinidad's third largest bank with an asset base of TT1.5 billion ($250 million). A remaining question, however, was whether to privatize FCB or give it a development bank role. ¶4. Sahadeo presented statistics on the Revenue Stabilization Fund. In January the fund balance was TT5.48 billion (US$874 million). The T&T government has allotted TT1.86 billion ($297 million) to add to the fund this year. Assuming no other changes during the year (such as withdrawals for assisting CARICOM nations, as has happened in the past),the infusion would yield a balance of TT7.35 billion ($1.17 billion) by end of the T&T fiscal year in October. -------------- Regional energy views - Tobago, Venezuela -------------- ¶5. Former finance minister Wendell Mottley was the most provocative speaker at the conference. He spoke on the politics of petroleum and its effects on the Caribbean. Mottley said that what makes Venezuela strong as an oil- producing country is wielding oil power that can force large oil companies to renegotiate exploration PORT OF SP 00000268 002 OF 002 contracts, which leads to an increase in royalties and taxes. The trend in the hemisphere was one of increasing state control over natural resources, as evidenced by Venezuela and Mexico, and increasingly in Brazil and Bolivia. Underlying this was the failure of governments to maximize their energy revenues. Mottley cited as an example the failure of U.S. authorities to collect much more money last year then it did five years ago from energy companies that had extracted more than $60 billion in oil and gas from publicly owned lands and coastal waters. He pointed to ExxonMobil, which increased revenues 40 percent last year, but saw its tax bill rise by only 14 percent. In this context, Mottley did not appear to be suggesting that T&T adopt the Venezuelan model. Rather, he said T&T "should have a clear construct of regional energy integration" and should be more active in supporting its Caribbean neighbors, which he characterized as being in desperate economic shape. ¶6. Orville London, Chief Secretary of the Tobago House of Assembly, spoke on the potential to the island from natural gas. He said the government was close to approving an eco-industrial estate in the south of Tobago that would include a gas-fired power plant (the island now receives electricity via submarine cable from Trinidad). Tapping two gas fields located offshore of Tobago could provide a boost to the island's economy, which is now largely dependent on tourism. London said 50 percent of employment and 90 percent of Tobago's foreign exchange depended on tourism. London's outlook was a diversified, gas-based economy on Tobago, the "capital of paradise." AUSTIN