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CARIBBEAN ENERGY INFORMATION SYSTEM (CEIS) JANUARY 2014 ISSUE

Introduction The Caribbean’s long-time dependence on fossil fuels for approximately 90% of its energy needs has increasingly come with deleterious effects. Despite increased government efforts on diversification and the application of renewable energy technologies, as well as oil imports at reduced rates through the Petrocaribe agreement, the volatility of oil prices continues to impact economies of most Caribbean nations. How-

ever, the volatility in the oil price market presents an opportunity to pursue Natural Gas as an alternate power generation source in the Caribbean; its introduction would also lower the environmental costs of fuel oil consumption. With the United States being the largest importer of Natural Gas from Trinidad and Tobago, it is not surprising that concerns were raised when the Liquefied Natural Gas (LNG) industry

transformed with the emergence of Shale Gas in the United States market. Shale Gas is a much cheaper alternative to LNG and so the gas industry in Trinidad has become vulnerable to new market dynamics. In this issue of the Petroleum Update we seek to analyze the impact of Shale Gas production in the United continued on page 2/

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is a monthly Bulletin which highlights petroleum issues affecting or relevant to the Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.


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Call: 1-876-927-1779 | Caribbean Petroleum Update : January 2014

How has the Shale Gas Revolution in the United States Impacted Trinidad and Tobago Exports of Natural Gas………………………….….continued from page 1 Figure 1: Shale Gas Production in the United States 2007-2011

The United States for many decades have produced tight gas and coalbed methane, however with advances in Natural Gas extraction techniques, the production of Shale Gas in the United States has increased over recent years. The United States imports Natural Gas from countries such as Trinidad and Tobago, Canada and Yemen (among others) to fuel various sectors of their economy and up to 2007 was Trinidad’s largest importer of Natural Gas, importing approximately 89% of Trinidad’s total production. However, as Shale Gas production increased, the United States began importing less of Trinidad and Tobago’s LNG. According to data from the United States Energy Information Administration (EIA) imports of Liquefied Natural Gas from Trinidad and Tobago fell significantly in 2007-2011 as a result of increased production of Shale Gas in the United States during those years (as illustrated in Figure 1 and 2 In 2008 imports fell by 40% and continued on a downward path ever since while Shale Gas production increased 63% with a steady upward trend. At this rate of production the United States, could likely become a net exporter of the product in the coming years. The average annual decrease in imports of Natural Gas by the United States over the last five years (20072011) was 26%.

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Figure 2: United States LNG Imports from Trinidad & Tobago 2007-2011

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from Natural Gas thereby making electricity rates among the lowest in the region.

Impact of Shale Gas production in the United States on Trinidad & Tobago Natural Gas Industry

The country produces approximately 4.2 billion cubic feet of Natural Gas per day (Downstream Gas Industry Report 2011) The largest upstream players in the oil producing country are BP Group, BHP Billiton, NGC, EOG Resources Repsol, British Gas (BG) and Petrotrin. However, NP and Unipet are considered the downward oil streams.

Trinidad and Tobago is the Caribbean’s first Natural Gas economy as the primary energy matrix comprise largely of Natural Gas, Crude Oil and Bagasse. Natural Gas contributes approximately 85% to the energy consumption matrix and is mainly consumed in the LNG sector. Also, Trinidad generates most of its electricity

Trinidad is also the sixth largest exporter of liquefied Natural Gas. More than half of all Natural Gas produced goes to Point Fortin to the liquefied Natural Gas trains and about half of that LNG is exported to countries such as Argentina, Brazil, Chile while the remainder goes to Europe, Asia and the United States. Since the production

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Caribbean Petroleum Update : January 2014 | Call: 1-876-927-1779

of Shale Gas in the United States, exports of Natural Gas to this country has reduced. The production of LNG from Natural Gas in Trinidad is carried out by Atlantic LNG; its one of the world’s largest producers of Liquefied Natural Gas (LNG). Atlantic LNG utilize Natural Gas delivered from fields in and around Trinidad and Tobago to their four-train liquefaction facility, which is located in Point Fortin, on the southwest coast of Trinidad. In 2005 total LNG exports from Atlantic LNG in Trinidad Tobago was 520,106,845 MMBTU. Of this amount 462,895,062 MMBTU (89%) was exported to the United States. Using the Henry hub price for Natural Gas in 2005 at US$8.64/MMBTU, the estimated revenue Trinidad earned from exporting to the US was US$3,999,413,595. However, six years later in 2011, only 19% of total LNG exports was sent to the US due to increased Shale Gas production in the United States. Total production in that year was 484,520,631 MMBTU of LNG, however only 92,058,920 MMBTU (19% of total exports) was exported to the US. Using the Henry hub price of US$3.99/ MMBTU Trinidad earned and estimated US$367,315,090 as illustrated in Table 1. Conversely, if 89% of LNG exports were still being imported by the United States in 2011, exports would have been 431,223,362 MMBTU. Using the Henry hub price in 2011 of US$3.99/MMBTU, Trinidad stood to earn US$1,720,581,213 . Despite the loss of the United States as a major importer of LNG, the impact on revenue from Natural Gas was minimal as 81% of LNG exports now goes to Gas markets in South America, Europe and Asia. Additionally, as a result of the earthquake in Japan in March 2011 there has been an increase in cargoes from Trinidad and Tobago going to the Asian market. These markets also offer a higher price for Natural Gas which compensates for the loss in revenue from the United States.

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Table 1: LNG Exports to the United States (2011)

LNG Total Exports (MMBTU) Percentage of total exports exported to the United States in 2011 (19%) Henry hub price US$/MMBTU Total Revenue (Est.)

484,520,631

92,058,920 3.99 $367,315,090

Consequently, imports of LNG from the twin island republic decreased. Trinidad still remains an exporter of LNG to the US, however only an estimated 20% of total LNG exports is sent to the United States. Despite the negative impact on export levels in Trinidad, Natural Gas production continues with the aim of increasing exports to other markets such as South America and Asia. However, if the United States was to become a net exporter of Shale Gas, this could impact and reconfigure the energy market in terms of price and exploring other markets. Also, on a larger regional scale the Shale Gas revolution in the US could negatively impact the transition and deployment of renewable energy technologies as countries would be attracted to cheap and relatively clean gas instead of expensive renewable energy sources. Since production of LNG in Trinidad in 1999, the United States was its major export market for LNG. However due to the Shale Gas revolution in the US, the country no longer exports large quantities of this commodity to the United States. Despite the reduction in exports of LNG to the United States, production and exports have for the most part remained unaffected with minimal impact on revenue earned. This is mainly due to the divergence of Trinidad LNG exports to higher paying markets in South America, Europe and Asia.

Conclusion The United States with the use of new and improved drilling technologies was able to resurrect their Natural Gas industry with the production of Shale Gas. C

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Call: 1-876-927-1779 | Caribbean Petroleum Update : January 2014

PETROLEUM NEWS & HAPPENINGS CGX Energy Announces Successful Injunction against Repsol...[...]...Read more What Will Be Belize’s Energy Future?... [...] ...Read more Samuda calls for more info on progress of 360 MW plant ...[...]...Read more Pemex must triple investment in E&P – CEO [...]...Read more

‘Fuelling’ up at home [...]...read more Phillips: Government has no intention to increase revenue from petroleum product...[...]...Read more Tanker Drivers On Strike, Again ...[...]...Read more Canacol Energy (T.CNE) pumps up 5% on Basal Lisama oil pay encounter ...[...]...Read more Tullow Oil share price: Explorer to look for oil offshore Suriname ...[...]...Read more Investor pushing Sherritt to spend more in Cuba ... [...]...Read more Cuba Pushes Ahead With Oil Drilling, U.S. Frets Over Potential Spills Along Border ...[...]...Read more Cuba presses ahead on offshore oil drilling ...[...]… Read more

President Energy enters LOI for drilling rig in Paraguay ...[...]...Read more Jamaica : GB ENERGY grants TEXACO dealers contract extension ...[...]...Read more Venezuela suffers declining oil sales, productions ... [...]...Read more Pemex begins Olmeca crude exports to Europe ... [...]...Read more Texaco Gas Station Dealers On Strike ...[...]...Read more Local unrest, drilling issues delay PetroNova’s Colombia exploration well ...[...]...Read more Angola and Cuba to cooperate in the energy and industry sectors ...[...]...Read more Repsol closes US$4.1bn LNG sale to Shell ...[...]… Read more

Suriname refinery expansion progresses ...[...]… Read more

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REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP JANUARY 2014 Retail prices for Regular Unleaded Gasoline in the twelve Caribbean countries reviewed at the end of January 2014 showed marginal decreases in prices for two countries namely; St. Lucia and St. Vincent and the Grenadines between 1% and 5%, Prices in Antigua and Barbuda, Montserrat and Trinidad and Tobago remained stable. However, there were minimal increases in prices for Bahamas, Barbados, Belize, Dominica, Grenada, Jamaica and Suriname in the range of 1% and 4%, when compared to the previous month. The average retail price at the end of January 2014 was 0.8% higher than the previous month.. Regular Unleaded Gasoline Average Retail Price (US$/Litre) COUNTRIES

DEC-13

JAN-14

2 Mths

1.23 1.34 1.52 1.4 1.15 1.24 1.21 1.25 1.34 1.14 1.34 0.42

1.23 1.36 1.56 1.42 1.17 1.26 1.23 1.25 1.32 1.08 1.39 0.42

1.23 1.34 1.52 1.4 1.15 1.24 1.21 1.25 1.34 1.14 1.34 0.42

ANTIGUA/ BARBUDA BAHAMAS [91 OCT] BARBADOS BELIZE [87 OCT] DOMINICA GRENADA (95 OCT) JAMAICA 87 Octane[E10] MONTSERRAT ST. LUCIA ST. VINCENT/ GRENADINES SURINAME [95 OCT] TRINIDAD/ TOBAGO [92 OCT]

NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.

See prices for all products at www.cippet.org

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Call: 1-876-927-1779 | Caribbean Petroleum Update : January 2014

Analysis of the International Crude Oil prices over the three months period November 2013 -January 2014 saw prices in January averaging US$94.52/ BBL. When compared to the average prices seen in November and December this average price was approximately 0.3% lower and 3.2% lower respectively. The highest weekly price seen in January for the product was US$96.47/BBL - reflected in week one while the lowest price recorded was US$92.42 seen in week two. An average of the three month’s average prices reflected US$94.78/ BBL.

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Ceis petroleum update january 2014 final