Secretary of Energy's visit to Trinidad reinforces

UNCLAS SECTION 01 OF 03 PORT OF SPAIN 000253 SENSITIVE SIPDIS STATE FOR WHA/CAR, WHA/EPSC, EEB/IEC DOE FOR OFFICE OF THE SECRETARY, OFFICE OF POLICY AND INTERNATIONAL AFFAIRS, OFFICE OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY DHS FOR A/S BOB STEPHAN E.O. 12958: N/A TAGS: EPET PREL ENRG EIND EINV CARICOM TD SUBJECT: Secretary of Energy's visit to Trinidad reinforces bilateral energy relationship SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY ¶1. (SBU) SUMMARY: During his May 12-13 visit to Trinidad and Tobago, the Secretary of Energy reinforced the US-T&T relationship by drawing attention to bilateral LNG trade and commending T&T for its open market and regional leadership. At the same time, he flagged U.S. energy company concerns that the GOTT needs to get incentives right for upstream exploration and development. His messages on alternative energy and biofuels received extensive press coverage. Septels report on his discussion of energy infrastructure protection with GOTT ministers. END SUMMARY. ¶2. (U) Secretary of Energy Samuel Bodman visited Trinidad May 12-13, accompanied by Assistant Secretary of Energy Kevin Kolevar, Assistant Secretary of Homeland Security Robert Stephan. Accompanying from DOE were Foreign Policy Advisor Molly Williamson, Deputy Chief of Staff Ben Getto, DAS William Bryan, Public Affairs Director Andy Beck, Americas Director Gary Ward, and International Relations Specialist Sam Browne. This cable reports on the Secretary's interaction with industry and media, as well as representational functions hosted by the PM and the Ambassador. Septels report on the Secretary's formal meetings with PM Manning and GOTT Ministers, which focused on bilateral cooperation to improve energy infrastructure protection. -------------- --- US Energy Companies Share Perspectives, Concerns -------------- --- ¶3. (SBU) In the Secretary's roundtable meeting with US energy sector companies, several representatives voiced concern over the GOTT's long-term strategy for natural gas resources. Noting the lack of focus on developing new gas reserves or expanding LNG exports, one industry professional commented that the market for petrochemicals and metals was a distraction that contributed little to the country's overall development. Another noted that after commissioning the largest LNG train in the world at the end of 2005, Atlantic LNG (ALNG) had difficulty sourcing enough gas to run at capacity in 2006, and yet the GOTT was signing agreements to build new energy-intensive projects like aluminum smelters. Companies also cited inconsistent policies on local content. While some foreign companies invested heavily in building up local engineering capacity, for example in the LNG project and in local manufacture of off-shore platforms, the GOTT recently awarded a US$1 billion refinery upgrade project with no local content requirement whatsoever. -------------- Low Hanging Fruit is Gone -------------- ¶4. (SBU) A major concern of nearly all attendees was the perceived lack of financial incentives for upstream exploration and development. Upstream companies agreed that the financial risk to reward ratio was not advantageous and was in fact stifling the development of gas reserves. Noting that "the low hanging fruit is gone" - referring to the large, shallow-water gas fields already exploited - the group asked Secretary Bodman to press for GOTT recognition that greater financial incentives are needed for international oil companies to develop smaller and deep water offshore gas fields. While T&T was a very attractive market five years ago when drilling costs were low, the picture has changed due to higher drilling costs and a larger GOTT take, in the form of both production sharing and price splits. On the bright side, the GOTT engaged an expert who has consulted with upstream companies in recent months and is expected to recommend changes to the incentive mix. ¶5. (SBU) The companies welcomed the infrastructure protection focus of Secretary Bodman's visit. The inability of the GOTT to protect the offshore platforms from incursion was a source of concern, with one company calling for enforcement of a 500 meter buffer zone. In a lighter moment, the Secretary observed there is usually great fishing around offshore gas and oil platforms. Nearly all firms represented voiced concern over threat interdiction capabilities and poor coordination between company security and GOTT law enforcement and military. -------------- -------------- PM Credits Secretary's Role in Bilateral Relationship -------------- -------------- PORT OF SP 00000253 002 OF 003 ¶6. (SBU) During remarks at the opening of a large dinner at the Prime Minister's Residence and Diplomatic Center in honor of the visit, PM Manning warmly welcomed the Secretary. Speaking to over 100 guests, comprising GOTT and state-owned energy company officials and spouses, the PM recounted how then-CEO of Cabot Industries Bodman had intervened personally to overcome disagreements among the original members of the Atlantic LNG (ALNG) consortium. Manning went on to describe the Secretary as "T&T's best friend in Washington," thanking the Secretary for keeping his door open and engaging with the GOTT's priorities, most recently on protecting energy infrastructure. -------------- Public Messages -------------- ¶7. (U) Speaking at a breakfast meeting of the American Chamber of Commerce (AmCham) in T&T on May 13, the Secretary highlighted T&T's role in U.S. energy security, describing bilateral cooperation on energy infrastructure security and conveying his desire to continue and deepen that cooperation. He also made a strong pitch for alternative energy, energy efficiency, and openness to private investment that is needed to meet global demand for safe, clean, reliable and diverse energy supply. He praised T&T for its record of openness and transparency, as well as its leadership in resisting non-market based energy supply arrangements. (See Post internet site for text of remarks as prepared for delivery.) ¶8. (U) AmCham members posed questions on ethanol and food prices, prospects for U.S. domestic oil exploration and expansion of LNG imports, and proposals for a natural gas exporters' cartel. The Secretary reviewed factors behind the rise in global food prices, observing that corn-based ethanol production accounts for only 3 or 4 percent of a global increase of 40 percent. He also discouraged international efforts to control energy supply, pointing out that free markets are more conducive to the mobilization of capital required for LNG projects. Asked whether he saw any cause for optimism about energy, he noted Brazil's success on biofuels, adding that he would like to see the U.S. tariff on ethanol imports removed over time. He also observed that the free market is working in T&T's upstream energy sector, where the GOTT has an opportunity to reassess the terms it is offering in response to market signals emerging from its 2006 bid round. (NOTE: Many international oil companies refrained from bidding on deep water blocks offered in 2006 after the GOTT tweaked production sharing terms in its own favor.) ¶9. (U) In a press availability immediately following the AmCham event, the Secretary said that as the U.S. seeks to increase LNG imports, he hopes to see T&T's LNG exports to the U.S. increase. He offered assurance that market-based energy trade between the two countries would not change under a new U.S. administration. He also voiced confidence that T&T will expand its role as a reliable supplier, notwithstanding regional competition from Venezuela's PetroCaribe initiative. While declining to predict oil price trends, he urged consuming nations to respond to high prices by improving efficiency and investing in alternative fuels. (NOTE: Local press covered the Secretary's visit extensively, highlighting in particular his messages on alternative energy and the ethanol-food prices issue.) -------------- Raising T&T's Profile -------------- ¶10. (U) At a small luncheon with energy and government leaders at the Ambassador's residence, Foreign Minister Gopee-Scoon described an initiative to revamp T&T's diplomatic image and re-tool its foreign missions in order to focus on energy and trade. She cited T&T's technical assistance to African countries on developing natural gas based industries as an example of this new thrust. (NOTE: Former DOE Assistant Secretary Karen Harbert suggested to former Energy Minister Eric Williams that GOTT seek ways to share the Trinidad experience in developing and bringing LNG to market. T&T could serve as an example to South American and African countries as these regions seek to develop energy resources based on market based principles.) The GOTT Cabinet had approved a note allocating funds to train T&T diplomats in these areas. As a way of raising T&T's profile in the U.S., DOE Foreign Policy Advisor Williamson suggested that the GOTT approach the Smithsonian Institution on the possibility of featuring T&T in the Smithsonian's annual Folklife Festival on the National Mall in Washington DC. PORT OF SP 00000253 003 OF 003 ¶11. (U) Secretary Bodman encouraged Professor Ken Julien, president of the University of Trinidad and Tobago (UTT) and chairman of the GOTT's Natural Gas Export Task Force, to consider fielding a team for DOE's annual Solar Decathlon, also held on the National Mall, as a way of promoting research on alternative energy. Julien lamented the lack of incentive to develop solar energy in T&T, where electricity rates are among the lowest in the hemisphere. He ascribed Barbados' success in promoting solar water heaters to the fact that consumers there pay four times as much for electricity as in Trinidad. He also suggested that political sensitivity around electricity rates is high for T&T, comparable to gasoline and diesel price sensitivities in Jamaica. -------------- Visit to Atlantic LNG Facility -------------- ¶12. (SBU) Together with the Permanent Secretary (PS) in the Ministry of Energy, Leroy Mayers, and the Chairman of the National Gas Company, Frank Look Kin, Secretary Bodman visited Atlantic LNG (ALNG) on Tuesday May 13. Having played a critical role in the development of ALNG's Train 1 as CEO of Cabot Corporation in the mid-1990s, the Secretary was interested to see the dramatic expansion of ALNG's plant. Robert Fryar, COO of ALNG, updated the Secretary on ALNG's operations, which now include four trains and a production capacity of 15 million tons of LNG per year. Fryar also led the delegation on a tour of the facility. Discussing the future of the gas industry in T&T and the gas fields T&T shares with Venezuela, PS Mayers commented that T&T has an umbrella agreement with Venezuela, but that the specifics on operational development of the cross border gas fields have yet to be negotiated. He indicated that the GOTT was waiting on Venezuela so they could move forward and joked about the importance of being "nice to one's neighbors." AUSTIN