SCENESETTER FOR VISIT OF SECRETARY OF ENERGY

UNCLAS PORT OF SPAIN 000208

SENSITIVE

SIPDIS

ENERGY FOR SECRETARY BODMAN
HOMELAND SECURITY FOR A/S STEPHAN
STATE FOR WHA/CAR, WHA/EPSC, USOAS

E.O. 12958: N/A
TAGS: PREL EPET PGOV PTER ASEC OVIP TD
SUBJECT: SCENESETTER FOR VISIT OF SECRETARY OF ENERGY

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY


1. (U) Embassy Port of Spain warmly welcomes your May 12-13 visit to
Trinidad and Tobago (T&T). Your trip presents an opportunity to
reinforce engagement with T&T, building on the goodwill generated by
last June's Conference on the Caribbean and in advance of next
year's Summit of the Americas meeting. T&T is important to
America's energy security, having supplied more than two-thirds of
U.S. imports of liquefied natural gas (LNG) over the last five
years. It also has been expanding its political and economic
influence in the region, leveraging its dynamic and prosperous
economy. Trinidad, however, also is coping with an upsurge of crime
driven, at least in part, by narcotics and firearms trafficked from
the South American mainland. While T&T sometimes differs with the
USG on foreign policy matters, it is a friend, ally and strong
supporter of hemispheric free trade.


2. (U) This cable provides a brief overview of the country and a
look at potential topics that will be covered during your stay.
Meetings with the Ambassador and members of the Country Team shortly
after your arrival will provide further information and the
opportunity to discuss issues at length.

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POLITICAL SNAPSHOT
--------------


3. (U) Prime Minister Manning's People's National Movement (PNM)
party retained its parliamentary majority when the citizens of
Trinidad and Tobago voted on November 5, 2007. The PNM won 26 seats
to the opposition United National Congress' (UNC) 15. The year-old
Congress of the People (COP) party contested the election as well
but won no seats. 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. The COP also
draws mostly from Indo-Trinidadians, though it consciously sought
(as did the other parties) in the last election to cross ethnic
lines.


4. (SBU) Manning first served as Prime Minister from 1991 to 1995,
when the PNM lost its parliamentary majority to the UNC and Basdeo
Panday became Prime Minister. An electoral deadlock in 2001
eventually led to the return of Manning and the PNM. With a secure
majority in Parliament, Manning need not call another election until

2012.

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


5. (U) T&T has a vibrant industrialized economy, buoyed by 18
trillion cubic feet of proven natural gas reserves. It is our
largest trading partner in the Caribbean and the leading beneficiary
of Caribbean Basin Initiative trade preferences. T&T is
experiencing strong GDP growth, averaging 9.8% over the last five
years, sustained by exports of oil, natural gas, and petrochemicals.
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,
moderated to 7.9 percent in August 2007, and climbed back to 10
percent in January 2008 as a result of wage agreements concluded on
the eve of November's national elections. T&T is considered a
low-risk investment destination. The T&T dollar remains stable in
value against the U.S. dollar (at about 6.25/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
--------------


6. (U) Oil was discovered in Trinidad in the mid-19th century, and
the local energy industry is celebrating the 100th anniversary of
commercial oil production in 2008. 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) is
eroding its regional market share.

7. (SBU) USG interest in energy security centers on imports of LNG
from Trinidad, which has supplied two-thirds of U.S. imports of this
commodity over the past five years. While LNG accounts for only 10
percent of U.S. overall natural gas imports, T&T's resources plays a
critical role supplying East Coast markets from New England to
Louisiana. For this reason, USG agencies recently conducted a
vulnerability assessment aimed at improving protection of critical
infrastructure in T&T's energy sector, an initiative that enjoyed
full cooperation from the GOTT and energy sector companies. The
GOTT is also working with the U.S. Department of Energy and U.S.
Southern Command to host a regional energy infrastructure protection
conference in Port of Spain May 14-15.


8. (U) Atlantic LNG, the country's sole LNG producer, is a
consortium of companies including BP (which absorbed Amoco several
years ago),British Gas, Repsol, Suez (successor to Cabot's interest
in ALNG Train 1),and the local National Gas Company (NGC). In
2005, Atlantic LNG completed Train 4, the largest 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. (SBU) While the GOTT is studying the feasibility of constructing
a fifth LNG train, possibly to supply Caribbean and other regional
markets, prospects depend on two factors: availability of natural
gas and whether the GOTT allocates new gas for export or domestic
consumption.


10. (SBU) The years 2006 and 2007 saw few significant gas
discoveries and limited interest from international energy companies
in bidding for rights to explore unassigned deep water blocks,
fueling concerns that new discoveries are not keeping pace with
utilization. These concerns increased with the August 2007 release
of an independent audit showing a proven reserves/production ratio
of 12 years, down from previous estimates of 15-20 years. In
January 2008, two Canadian companies announced discoveries in T&T
waters, with additional reserves estimated at roughly one more year
at current consumption levels. The GOTT is voicing optimism that
other planned exploratory wells will find more gas; at the same time
it has hinted that it might offer more favorable financial terms in
the offshore bid rounds it has scheduled for 2008 (shallow water)
and 2009 (deep water).


11. (SBU) The best near-term prospect for raising production is from
several large gas fields that cross T&T's maritime border with
Venezuela. The two governments made significant progress in 2006-07
in talks on joint development, 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. Loran/Manatee, the largest of
these fields, is estimated at 10 trillion cubic feet (TCF),of which
2.7 TCF are assigned to T&T. Chevron, as designated operator on
both sides of Loran/Manatee, has facilitated progress at the
technical level. However, the effort to conclude a field-specific
accord with Venezuela has been stalled since June 2007. Energy
Minister Conrad Enill stated publicly in February 2008 that efforts
are under way to revive negotiations. While Chevron officials
welcomed Enill's remarks, other private sector contacts doubt that
Venezuela will move this project forward.


12. (U) While Prime Minister Manning acknowledges the role of LNG
exports in T&T's economic prosperity, his development vision focuses
on expanding gas-based industries to generate sustainable jobs in
metals, plastics, and downstream manufacturing. Trinidad and Tobago
is already a world-class producer of ammonia and methanol, with
significant U.S. investment in several plants. New projects would
expand steel and add aluminum, ethylene and polypropylene
production. However, ALCOA's proposal to construct a 341,000
ton/year aluminum smelter met with unprecedented resistance from
local environmental activists, culminating in the Prime Minister's
late 2006 decision to put the ALCOA project on hold pending
agreement on a new site. Anti-smelter activists have since turned
their energies toward blocking Alutrint, a smaller proposed aluminum
smelter with 60% GOTT and 40% Venezuelan private ownership, as well
as a new steel mill to be constructed by India's Essar Steel. It
remains to be seen whether U.S. company Westlake Chemical will meet
similar resistance to its proposed $1.5 billion ethylene plant,
slated for completion by 2011.

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LABOR AND TRADE UNIONS
--------------


13. (SBU) Trade unions have at times been at odds with GOTT efforts
to increase competitiveness. In one example, after years of
thwarted negotiations with the airline workers' union, the GOTT took
the drastic step in 2006 of closing down BWIA, the unprofitable
national carrier, and creating a new, downsized entity. It is still
unclear if the new national carrier, Caribbean Airlines, will be
unionized. The Prime Minister suggested last year 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
--------------


14. (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 its 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
--------------


15. (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 present. In 2007 there were almost
400 murders, the highest number recorded in any one year. For the
first four months of 2008, T&T has realized a staggering 160
murders, more than one a day. 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 and
each day, local merchants raise more concern.

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


16. (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 six 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 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
--------------


17. (SBU) PM Manning, bolstered by greater energy revenues and a
strong economy, is seeking to expand T&T's role regionally and
internationally, for example by offering technical assistance to
African oil and gas countries. Closer to home, he is a strong
backer of CARICOM integration and seeks U.S. support for an expanded
T&T security presence in 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.


18. (SBU) 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 CARICOM Single Market and Economy (CSME) is progressing but
far from reality, however, as demonstrated by periodic political
backlash in Jamaica and Barbados over the success of T&T businesses
in penetrating those markets. Furthermore, Venezuela is overtaking
T&T as the Caribbean's largest energy supplier, through its
PetroCaribe program. For its part, T&T has been contributing US$67
million annually to the CARICOM Petroleum Fund it set up in 2004 to
finance social development projects in oil-importing member
countries. At a recent CARICOM Heads meeting in the Bahamas, Manning
announced an increase in T&T's Petroleum Fund contribution as well
as US$38 million in new money for the CARICOM Regional Development
Fund.


19. (SBU) Manning also is raising T&T's and the region's profile
internationally by hosting the Fifth Summit of the Americas (SOA) in
April 2009 and the next Commonwealth Summit about six months later.
While the GOTT is only slowly coming to grips with the logistical
challenges of the SOA, bilateral dialogue on themes and concepts for
the Summit has been constructive. T&T's focus on "human prosperity"
offers scope for both U.S. priorities like competitiveness and
Caribbean priorities such as crime and food security. T&T also
should be receptive to U.S. priorities in the two other thematic
pillars it has put forward, energy security and environmental
sustainability.

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


20. (SBU) Though T&T is friendly to the U.S., there are areas of
policy difference. Due in part to 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. While not taken with
the systems in either Venezuela or Cuba, T&T seeks to maintain
positive ties with each of those nations and is an advocate of
dialogue between Washington and Caracas and Havana. T&T, along with
its neighbors, did not recognize Haiti's interim government in the
absence of a CARICOM consensus. T&T also did not support the U.S.
intervention in Iraq, and its media have been openly critical on
this issue. Its voting record at the U.N. also leaves much to be
desired from a U.S. policy perspective, though it is roughly in line
with its CARICOM partners.

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


21. (U) T&T remains an important ally, trading partner and regional
leader. 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 you.


AUSTIN