SCENESETTER FOR ENERGY INFRASTRUCTURE PRE-ASSESSMENT VISIT

UNCLAS PORT OF SPAIN 001019

SIPDIS

SENSITIVE

SIPDIS

ENERGY FOR A/S KOLEVAR FROM CHARGE
HOMELAND SECURITY FOR A/S STEPHAN FROM CHARGE
STATE FOR WHA/CAR, WHA/EPSC, USOAS

E.O. 12958: N/A
TAGS: OREP EPET SENV PREL PGOV PTER ASEC TD
SUBJECT: SCENESETTER FOR ENERGY INFRASTRUCTURE PRE-ASSESSMENT VISIT



1. (U) This message is sensitive but unclassified - please protect
accordingly.


2. (U) On behalf of Embassy Port of Spain, I look forward to
welcoming your delegation to Trinidad and Tobago (T&T) October
10-12. The Ambassador unfortunately is out of the country but also
wishes to express his warm welcome and wishes you success during
your stay. Your visit will be an opportunity to reinforce U.S.
engagement with T&T, building on good will generated when Prime
Minister Patrick Manning and his CARICOM counterparts met with the
President during the Conference on the Caribbean in Washington, June
19-21. This country is an important cog in America's energy
security wheel, having supplied more than 70 percent of U.S. imports
of liquefied natural gas (LNG) last year. T&T has been expanding
its political and economic influence in the region and has one of
the most dynamic and prosperous economies in the Caribbean.
However, T&T is also coping with an upsurge of crime and the impact
of narcotics trafficking that takes advantage of the country's easy
access from the South American mainland. While T&T differs with the
USG on a number of foreign policy matters, it is nevertheless an
important U.S. ally and trading partner.


3. (U) Your visit will include meetings with Prime Minister Patrick
Manning, Minister of National Security Martin Joseph, Minister of
Energy and Energy Industries Lenny Saith, and Foreign Affairs
Minister Arnold Piggot, as well as top executives of local and US
energy companies. This welcome cable provides a brief overview of
the country and a closer look at potential topics that will be
covered in your meetings.

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POLITICAL SNAPSHOT
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3. (U) Prime Minister Manning is campaigning to retain his party's
Parliamentary majority when the citizens of Trinidad and Tobago vote
on November 5. The ruling People's National Movement (PNM) and two
opposition parties, the United National Congress (UNC) and the
year-old Congress of the People (COP),are contesting 41 seats.


4. (U) Manning first served as Prime Minister from 1991 to 1995,
when the PNM lost its parliamentary majority to the UNC under Basdeo
Panday. An electoral deadlock in 2001 eventually led to the return
of Patrick Manning and the PNM. Since then, the UNC has bargained
hard on legislation requiring special majorities, paralyzing the
legislative process on important matters.


5. (SBU) The PNM and UNC parties are heavily but not exclusively
based on ethnicity, with the PNM supported largely by
Afro-Trinidadians and the UNC by Indo-Trinidadians. In September
2006, a substantial number of Parliamentarians previously allied
with the UNC split the Parliamentary opposition by defecting to form
the COP, which aspires to cross ethnic lines. While the campaign
has just begun, some analysts speculate this opposition split may
bring the PNM not only victory at the polls but also the special
majority (31 out of 41 seats) it needs to enact major reforms.
Among these potential reforms would be amending the Constitution to
institute an executive presidential system. Detractors charge that
Manning hopes to become a "president-for-life," while the PM says
these charges are electoral banter and ridiculous.

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ECONOMIC SNAPSHOT
--------------


6. (U) T&T has a vibrant industrialized economy, buoyed by
relatively large natural gas reserves. It is our largest trading
partner in the Caribbean and the leading beneficiary of our
Caribbean Basin Initiative trade preferences. T&T is experiencing
strong GDP growth, averaging 10.2% over the last five years, as a
result of economic reforms, supplemented by tight monetary policy
and high prices for oil and gas. While fiscal policy has generally
been restrained, rising spending coupled with a tight labor market
have contributed to rising inflation, which reached 10 percent
year-on-year in October 2006 but has since moderated to 7.9 percent
as of August 2007. T&T is considered a low-risk investment
destination. The T&T dollar remains stable in value against the
U.S. dollar, contributing to the country's attractiveness to foreign
investment. Standard & Poor's raised its credit rating for T&T to
A- in 2005 and confirmed that rating in 2006 and 2007. GOTT
regularly courts foreign investors, with U.S. companies often taking
the lead.

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A CLOSER LOOK AT ENERGY
--------------



7. (U) The oil industry in Trinidad dates back to the mid-19th
century. After riding the oil boom and bust cycle of the 1970s and
1980s, Trinidad and Tobago has made a major transition over the last
ten years to an economy driven largely by natural gas, both for
export and for consumption in domestic industries, attracting major
foreign-investment projects in liquefied natural gas (LNG),
petrochemicals and steel. T&T also continues to play a role in
regional energy security, supplying refined petroleum products to
the rest of the Caribbean, although competition from Venezuela
backed by concessionary financing has eroded its regional market
share.


8. (U) USG interest in energy security centers on imports of LNG
from Trinidad, which has supplied 70 percent of U.S. LNG imports
over the past four years. This represents 10 percent of U.S.
overall natural gas imports. Atlantic LNG, the country's sole
producer, is a consortium of companies including BP (which absorbed
Amoco several years ago),British Gas, Repsol, Suez (which bought
out Cabot's interests in 2000),and the local National Gas Company
(NGC). Atlantic LNG completed Train 4 in 2005, at which time it was
the largest LNG production train ever built, expanding ALNG's
production capacity from 10 million to 15 million tons per year.
U.S. construction company Bechtel International was the primary
contractor on the Train 4 project, and GE Oil & Gas has an ongoing
service contract.


9. (U) While the GOTT is studying the feasibility of constructing a
fifth LNG train to supply Caribbean and other regional markets,
prospects depend on developing new gas reserves. 2006 and 2007 have
seen few significant new discoveries and limited interest from
international energy companies in bidding for rights to explore
unassigned deep water blocks, fueling concern that new discoveries
are not keeping pace with utilization. These concerns increased
with the August release of Ryder Scott's audit of gas reserves
showing the ratio of proven reserves to production at 12 years as of
January 2007, down from previous estimates of 15-20 years. The GOTT
is now considering more favorable contract terms for international
companies to encourage new exploration.


10. (SBU) The best near-term prospect for raising production is from
large gas fields that cross T&T's maritime border with Venezuela.
Talks between the two governments on joint development made
significant progress in the last year, culminating in the signing of
a framework unitization agreement on March 20, 2007, during a visit
to Caracas by Prime Minister Manning. The agreement sets out the
legal terms for ownership and development of the cross-border
fields, but it does not specify on which side of the border the gas
will be monetized, nor for what purpose. The largest of these
fields is estimated at 10 trillion cubic feet (TCF),of which 2.7
TCF are assigned to T&T. Chevron has interests in this field on
both sides of the border. Progress on reaching a final accord with
Venezuela has stalled, though the gas audit results may spur the
GOTT to renew negotiation efforts.


11. (U) The government also is focused on developing gas-based
downstream industries, in order to diversify the energy and metals
industries and facilitate the growth of manufacturing. Trinidad and
Tobago is already the world's largest producer of ammonia and
methanol, and new projects would add steel, aluminum, ethylene and
polypropylene production. However, ALCOA's proposal to construct a
341,000 ton aluminum smelter met with unprecedented resistance from
local environmental activists, culminating in the Prime Minister's
late 2006 announcement that ALCOA's planned smelter has been put on
hold pending agreement on a new site. Anti-smelter activists have
since turned their attention toward Alutrint, a smaller proposed
aluminum smelter with 60% Trinidad and 40% Venezuelan ownership,
mounting a legal challenge to the Certificate of Environmental
Clearance recently issued by T&T's Environmental Management Agency
for Alutrint.

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LABOR AND RADE UNIONS
--------------


12. (U) Trade unions have at times been at odds with the GOTT's
efforts to increase competitiveness. In one example, after years of
thwarted negotiations with the airline workers' union, the GOTT took
the drastic step of closing down the unprofitable national carrier
last year and creating a new, downsized entity. It is still unclear
if the new national carrier will be unionized. The Prime Minister
has suggested in the recent months that the GOTT may try a similar
tactic with the far more powerful Oil Workers Trade Union (OWTU) in
an effort to create a new, unified national petroleum company to
replace the state-owned Petrotrin.
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NARCOTICS TRAFFICKING
--------------


13. (SBU) The country's location just seven miles off the coast of
Venezuela makes drug trafficking a major challenge. Narcotics from
South America transit T&T's waters or move through the airports.
Illegal drug use and trafficking are on the rise. The narcotics
trade is likely linked to the persistently high number of murders
and other violent crimes that plague the country. The government
faces an uphill battle in trying to control these problems,
exacerbated by inadequate border controls, corruption in the police
service and a slow judiciary. T&T's vibrant petrochemical industry
has the potential to provide diverted precursor chemicals for use in
illegal drug production. The country's growing economy and
well-developed banking, communications and transportation systems,
facilitate a significant number of sizeable financial transactions
that can obscure money laundering.

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CRIME
--------------


14. (SBU) Violent crime has been one area of particular concern over
the last several years. T&T saw significant increases in murders
and kidnappings from 2000 until 2006. In 2005 there were 384
murders, the highest number recorded in any one year, declining
slightly to 369 in 2006. Kidnappings for ransom have decreased
dramatically since January 2006. The GOTT has widely been viewed as
unable to effectively address the serious crime problem, partially
due to corrupt and inefficient police, inadequate disciplinary
systems, a slow-motion court system and political intransigence.
This, coupled with perceptions that some criminal organizations
operate relatively freely, has led to a loss of confidence in the
GOTT's ability to solve the crime problem. To date, the crime
situation has not affected foreign direct investment or tourism,
though several local business families have fled the country.

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TERRORISM
--------------


15. (SBU) T&T has no significant indigenous terror groups, but some
criminal Muslim organizations remain a concern. T&T has a
considerable Muslim minority, comprising roughly eight to ten
percent of the total population, though estimates vary widely. The
majority of Muslims are represented by moderate Islamic
organizations, but a few radical Islamic fundamentalist leaders have
reportedly advocated for terrorist actions to be taken against the
United States. The most famous of Trinidad's radical organizations
is the Jamaat al-Muslimeen, a local Afro-Trinidadian group that
launched a violent failed coup attempt in 1990. Over the last few
years, however, several radical splinter groups have emerged.
Anti-American sentiments are sometimes heard even from moderate
Muslims, and several of the major mainstream groups helped to
organize protests against U.S. actions in Iraq in early 2003. T&T
is party to eleven of the twelve UN anti-terror conventions, and in
September 2005 passed anti-terrorism legislation. Elsewhere, T&T
has come into compliance with the International Ship and Port
Facility Security Code (ISPS),and the T&T Central Bank cooperates
with post in alerting financial institutions to potential sources of
terrorist finance.

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REGIONAL INFLUENCE AND INTEGRATION
--------------


16. (SBU) PM Manning, bolstered by greater energy revenues and a
strong economy, is seeking to expand T&T's role regionally and
internationally. He is a strong backer of further CARICOM
integration and seeks US support for deploying T&T ships to help
patrol the Eastern Caribbean. A move toward regional integration
took place in October 2006 in advance of the Cricket World Cup
Tournament. In his capacity as chairman of CARICOM's Security
Committee, PM Manning signed a Memorandum of Agreement in Port of
Spain with visiting Secretary of Homeland Security Michael Chertoff,
paving the way for an Advance Passenger Information System (APIS).
APIS screened all travelers entering the region for the tournament.
In the wake of the brutal 2005 hurricane season, T&T donated nearly
TT 40 million (US $6.67 million) in disaster relief to islands in
the region. It also contributed troops, relief supplies and
volunteer workers almost overnight to the stricken island of Grenada
following Hurricane Ivan. Regional integration in the form of the
Caribbean Single Market and Economy (CSME) is progressing but far
from reality, however, as demonstrated by political backlash in
Jamaica and Barbados over the success of T&T businesses in

penetrating those markets. Furthermore, Venezuela, through its
Petrocaribe program, under which Caribbean countries can purchase
oil under concessional terms, has now replaced T&T as the
Caribbean's largest energy supplier and will continue to impact
regional relations.

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POLICY DIFFERENCES
--------------


17. (SBU) T&T in many ways demonstrates a fierce independence; it
has been immovable on several key recent U.S. foreign policy
priorities. Because of former President Robinson's role as a
"father" of the International Criminal Court (ICC),T&T was one of
the first ICC signatories. It has not signed an Article 98
agreement with the U.S. and likely never will. T&T continues to
desire and work towards good relations with Venezuela as they share
a long maritime border and common energy concerns. It often defends
Cuba, which it sees as a Caribbean brother. T&T, along with its
neighbors, did not recognize Haiti's interim government in the
absence of a CARICOM consensus. T&T did not support the U.S.
intervention in Iraq, and its media have been openly critical on
this issue. T&T's voting record at the U.N. also leaves much to be
desired from a U.S. policy perspective. Most notably, T&T voted,
together with its CARICOM partners, in favor of Venezuela's
candidacy for the vacant Latin American Caribbean seat on the UN
Security Council.

--------------
CONCLUSION
--------------


18. (U) T&T remains an important ally and trading partner with the
U.S. and in the region. It has a well-established and functioning
democracy and regularly cooperates with the U.S. on energy and
security matters. We look forward to facilitating a successful
visit to T&T for your delegation.


KUSNITZ