TRINIDAD GASBAG - ENERGY SECTOR NEWS (#2-08)

UNCLAS SECTION 01 OF 03 PORT OF SPAIN 000574 SIPDIS STATE FOR EEB/IEC, WHA/EPSC, WHA/CAR ENERGY FOR POLICY/INTERNATIONAL - GWARD, SBROWNE SAN JOSE FOR REGIONAL ENVIRONMENTAL HUB E.O. 12958: N/A TAGS: ENGR EPET EIND TD SUBJECT: TRINIDAD GASBAG - ENERGY SECTOR NEWS (#2-08) In this edition, we report on the following developments in the Trinidad and Tobago (T&T) energy sector during October/November 2008: ¶1. Plants Hurt by Falling Commodity Prices ¶2. Energy revenue projections down, spending cut ¶3. Budget cuts spare projects, CARICOM fund ¶4. New Refinery still on track ¶5. Alutrint Smelter Underway ... Trinis Train in China ¶6. TT LNG for Canadian Plant ¶7. GOTT Looking Down the LNG Value Chain ¶8. Updated timetable for offshore bid rounds ¶9. CNG In, Gas Subsidy Out! ¶10. CNG Task Force in the Works ¶11. No Plan to Grow Sugar for Ethanol Production ¶12. Energy Services Trade Mission to Cuba ¶1. Plants Hurt by Falling Commodity Prices -------------- With world commodity prices continuing to fall, four major plants at the Point Lisas Industrial Estate decided to close for maintenance. The four plants represent a combined production capacity of over two million tons of ammonia per year, and the shutdown will considerably impact on TT exports, as well as leaving the state-owned National Gas Company with no buyer for 15% of the gas it has purchased for the domestic market. ¶2. Energy revenue projections down, spending cut -------------- -------------- Prime Minister Manning announced the GOTT would cut its fiscal year 2009 budget by US$850 million in the face of a revenue shortfall resulting from falling prices for T&T's exports of oil, gas, and petrochemicals. The GOTT's original revenue projection for FY-09 was TT$50 billion (US$8 billion),based on oil at US$70 per barrel and natural gas at US$4 per MMBTU netback. The revised projection of TT$44 billion is based on oil at US$55 per barrel and natural gas at $3.25 to $3.50 per MMBTU netback. For details and analysis, see Port of Spain 552. ¶3. Budget cuts spare projects, CARICOM fund -------------- Prime Minister Patrick Manning and Energy Minister Enill affirmed that energy sector projects would continue in spite of falling revenues and GOTT budget cuts. Specifically, they said the Petrotrin refinery upgrade, plans to build a new $3-4 billion oil refinery, the Alutrint aluminum smelter, Essar's new steel mill, and the propylene/polypropylene and ethylene/polyethylene projects, along with several others, will not be affected by budget cuts. Speaking at the December 7-8 CARICOM-Cuba summit meeting, Manning also sought to reassure CARICOM counterparts that T&T's CARICOM Petroleum Stabilization Fund would remain available to fund projects in the region. ¶4. New Refinery still on track -------------- During a recent post cabinet news conference, Energy Minister Conrad Enill said that the proposed new US$3- $4 billion oil refinery will not be delayed or abandoned because of present market conditions. According to Enill "the project will continue." He anticipates that global oil prices will eventually settle and stabilize somewhere between US$85 to US$110 per barrel. Enill said that continuing with the refinery made sense especially looking at China where he said there will be a dramatic increase in demand for fuel within the next eight years, to support its increase in population. ¶5. Alutrint Smelter Underway; Trinis to Train in China -------------- -------------- Construction of the first phase of the 125,000-ton per year Alutrint aluminum smelter plant is set to being in January 2009, and is scheduled for completion by the second quarter of 2011, with production to start in the third quarter of 2011. In October, Alutrint - 60 percent owned by the GOTT and 40 percent by Sural of Venezuela - signed a US$400 million engineering procurement and construction contract with China Machining Import Export Company (CMEC). Seventy Chinese workers are expected to arrive in Trinidad by January 15. Some 800 to 900 workers will be employed on the project. Faced with protests that it has not hired enough workers from the surrounding communities in La Brea, Trinidad, Alutrint offered assurances that it would send 200 local hires to China for training at a similar smelter plant. Suitable candidates will be identified for training and development in this technology over the next three years. ¶6. TT LNG for Canadian Plant PORT OF SP 00000574 002 OF 003 -------------- Energy Minister Conrad Enill announced that Trinidad and Tobago will begin shipment of liquefied natural gas (LNG) supplies from Atlantic LNG to Canadian company Canaport LNG's new terminal and regasification plant in St. John, New Brunswick, within the first quarter of 2009. This arrangement is in keeping with the GOTT's ongoing effort to secure new markets for this product. Earlier this year, TT supplied Brazil with shipments of LNG. Repsol YPF, a shareholder in all four Atlantic LNG trains, owns 75 percent of Canaport LNG. ¶7. GOTT Looking Down the LNG Value Chain -------------- Minister of Energy Conrad Enill recently stated that for Trinidad and Tobago to have more direct control in the LNG industry, it must first shift from a revenue earner from taxes. As such, the Government is exploring investments in the shipping of LNG and regasification or gasification terminals. Enill said it is Government's intention to increase its ownership of assets along the value chain, and the Trinidad and Tobago LNG Company (TTLNG) will play a key role in this process. TTLNG is a subsidiary of the State-owned National Gas Company. He also mentioned the possibility of a fifth LNG train, since the other four trains are already under contractual arrangements. ¶8. Updated timetable for offshore bid rounds -------------- The GOTT will solicit bids on five offshore blocks in shallow water off Trinidad's north and east coasts in early 2009, Energy Minister Conrad Enill announced at the opening of an energy conference in Port of Spain on December 10. Up for bid are North Coast Marine Area (NCMA) blocks 3, 4 and 5 and East Coast blocks 4(a) and 5(a). Enill also reaffirmed the GOTT's intention to launch a bid round for blocks in the Deep Atlantic Area later in 2009. Eight deep water blocks were previously offered in 2006 but attracted only a single bid, reportedly due to poor seismic data and unattractive fiscal terms. ¶9. CNG In, Gas Subsidy Out! -------------- Prime Minister Patrick Manning recently announced in parliament that motorists would be able to fully access Compressed Natural Gas (CNG) within two year. According to Manning, current projections are that it will take until 2010 to have enough gas stations converted for the distribution of CNG, and once this system is in place, the Government intends to end the gas subsidy, which cost the GOTT US$317.4 million in fiscal year 2008. Manning said that his Government's vision is to have a majority of the vehicles on the nation's roads fuelled by CNG instead of the liquid-based fuels. Junior Finance Minister Mariano Browne tabled a motion in Parliament to revoke the 1999 Order which set an Excise Duty of 20.41 cents/liter on CNG, and to impose a new duty of five cent/liter. Browne said the GOTT intends to maintain a retail price for CNG equivalent to US$0.17 per liter. ¶10. CNG Task Force in the Works -------------- Energy Minister Conrad Enill announced that a task force will be set up to promote the use of compressed natural gas (CNG). The task force would formulate incentives for motorists to switch to CNG, new regulations, safety measures and public education. It would also work with the University of Trinidad and Tobago (UTT) to develop training programs in CNG conversion and maintenance technology. Existing gasoline stations are to be converted to serve CNG, and new dedicated CNG stations will be built. ¶11. No Plan to Grow Sugar for Ethanol Production -------------- --- Responding to a question from the Opposition during parliamentary debate, Prime Minister Patrick Manning stated that sugar-cane based ethanol was not an economically viable fuel alternative for Trinidad and Tobago. He said that the country does not have enough land space to grow the amount of sugar cane required for ethanol production. Opposition Member of Parliament Kamla Persad-Bissessar argued that a move to ethanol fuel would have been more in keeping with 21st Century thinking as opposed to Compressed Natural Gas (CNG) which this Administration is seeking as an alternative to gasoline and diesel. ¶12. Energy Services Trade Mission to Cuba -------------- Eight T&T-based energy services firms participated in a trade mission to Cuba, November 24-28. The mission was organized by the South Trinidad Chamber of Industry and Commerce and the GOTT Trade Facilitation Office in Havana. Participants met with state-owned energy sector companies as well as Canadian and Spanish companies PORT OF SP 00000574 003 OF 003 operating joint ventures in Cuba. AUSTIN