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.

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Central Bank & Finance Ministry views
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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.

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Regional energy views - Tobago, Venezuela
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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

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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