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CARIBBEAN ENERGY INFORMATION SYSTEM (CEIS) MARCH 2013 ISSUE

Oil/Natural Gas and The Potential of the Caribbean oil industry

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urrently, islands of the Caribbean basin are primarily net energy importers (with the exception of Trinidad and Tobago, one of the major exporters of liquefied natural gas (LNG) in the world). Venezuela provides a sizable amount of crude oil and refined products to their Caribbean neighbours at below-market prices and with favorable financing terms under the PetroCaribe agreement. Some Caribbean islands are important centres for oil refining and storage, due to their proximity to external markets. In recent years, there have been concerns that the continuous global increase of oil prices will negatively affect economies of the Caribbean, as there is a significantly high (and still growing) dependence on oil for energy needs. In response, the island nations have been discussing ways to promote alternative energy/oil sources to better feed their energy sectors. There have also been significant investments by international entities garnered toward the exploration of the offshore areas of the Caribbean, as existing factors deem it fit to maximize on the oil potential in the region. MAIN PLAYERS Trinidad and Tobago

Trinidad and Tobago rank 5th in Natural gas export to the US.

Trinidad and Tobago has the bulk of the Caribbean's oil production. Most of such oil production and exploration is focused offshore. The government has been encouraging field development onshore as well. In 2012, the country produced approximately 82,000 barrels of oil per day, of which 73% were produced offshore. Oil production had been falling since the 1980s and leading to the 90s. Prices however significantly increased a decade later when BHP Billiton’s offcontinued on page 2/

CARIBBEAN PETROLEUM UPDATE

To access CEIS website

Image source: http://www.ecoglobe.ch/energy/e/peakoil.htm

CONTACT US

Caribbean Energy Information System Scientific Research Council Hope Gardens, Kingston 6, Jamaica 1-876-927-1779 (Telephone) 1-876-977-1840 (Fax) ceis@src-jamaica.org www.ceis-caribenergy.org

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 : March 2013

Oil/Natural Gas and The Potential of the Caribbean oil industry ........................ continued from page 1

shore Angostura oil and gas field came online in January 2005. Oil producers including the Petroleum Company of Trinidad and Tobago, BP Trinidad and Tobago and BHP Billiton, in the past seven years (2005-2012), had a steady decline in oil production. EIA also stated that, “in 2006, oil outputs reached nearly 178,000 bbl/d, but production has fallen below the country’s expectation to produce 200,000 bbl/d of crude.” According to Global Insight, “the recent fall in output has been attributed to maturing oil fields and operational challenges faced by some of the country’s largest producers.” EIA data indicates that the United States has been T&T’s primary customer, with average demands of 76,000 barrels per day of crude oil and refined products. Trinidad and Tobago consumes an estimated 40,000 bbl/d and even though they are major producers, the country also imports small amounts of crude oil and refined products. “Trinidad and Tobago is also the largest exporter of LNG to the United States, and the fifth largest exporter in the world behind Australia, Indonesia, Malaysia and Qatar”, according to FACTS Global Energy 2010 figures. EIA data shows that Trinidad and Tobago exported 129 Bcf of natural gas to the United States in 2011, about 37 percent of total U.S. LNG net imports, but less than 1 percent of total U.S. natural gas supply. For the past seven years, U.S. LNG imports from Trinidad and Tobago have declined by almost one-third, which reflects a general decline in total U.S. LNG imports. According to PFC Energy “the country may not be able to maintain output levels through to year 2020.

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Cuba

International Attention

Production in Cuba has increased from 13000 bbl/d in the 1980’s, to approximately 55,000 bbl/d making the island net importers. Cuba imports from Venezuela and has net imports amounting to approximately 116,000 barrels per day, while consumption is over 170,000 barrels per day. Most of Cuba's oil production occurs in the northern Matanzas province. Much of this production occurs onshore, though there is some offshore production in shallow coastal waters. Cuba’s oil production seems to have largely stabilized in the near term, amid any additional increases in production dependent upon the discovery of substantial new reserves.

In recent years, there have been concerns that higher global oil prices will negatively affect the Caribbean economies, as they are highly dependent on oil for their energy needs. In response to the rise in prices, Trinidad and Tobago alongside Cuba and other island nations of the Caribbean have began discussing ways to promote alternative energy sources and better integrate their energy sectors. According to estimates from Bloomberg and Oil and Gas Journal (OGJ), “the Caribbean region has a combined 1.6 million bbl/d of nominal refining capacity.

There have been huge interests to explore Cuba's offshore basins towards the Gulf of Mexico. According to the U.S. Geological Survey (USGS) “the mean estimate for undiscovered oil reserves in the North Cuba Basin (the basin north and west of the island in the Gulf of Mexico) is 4.6 billion barrels. Cubapetroleo, or Cupet (Cuba’s state-owned petroleum company) estimates that all of Cuba’s offshore basins could contain in excess of 20 billion barrels of undiscovered oil reserves. However, actual exploratory drilling in the area has been, to date, quite limited”. In 2011, international companies operating in Cuba reported that they plan to drill five exploration wells in ultra-deep waters of the exclusive economic zone in the Gulf of Mexico, according to Global Insight. Mass investment from international partners sought to the beginning of drilling of an exploration well located in Cuba’s exclusive zone.

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Oil Geography Nobody expects the Caribbean to ever become oil or gas rich on the scale of Venezuela. It had been known for many years that the two broad strata of rock (of the kind likely to bear oil), runs the length of the Caribbean Basin. Up until the 1980’s, little interest had been shown in this fact apart from where such layer coincided with island masses and this is because the high cost and technical problems associated with the recovery of the oil were far beyond the value of such relatively small quantities of crude oil. At the time, although there were existing recovery sites in more shallow waters that were capable of exploitation, most geological structures of interest were far below the Caribbean Sea. Back then, only very few nations were observed to have had continental shelves, most of which dropped off to unreachable depths ranging from 600-3000 feet. Since then, new drilling techniques and methods of platform construction were proposed and introduced. This facilitates off-

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Caribbean Petroleum Update : March 2013 | Call: 1-876-927-1779

shored oil exploration as drilling will now be able to go beyond 4000ft. The Caribbean has become strategically and more attractive to energy investors. The factors that contribute to this are, the possibility of greater economic instability around the world, the widening of the Panama Canal making the Caribbean a north-south and east-west transit a key trans-shipment point in the Americas and the opportunity the region's new deep sea ports and anchorages offers for storage and trans-shipment. Oil prices have now increased to levels previously thought of as unthinkable, making the cost of deep sea recovery viable.

Demand for energy has increased and will continue to expand as the industrialization and wealth of advanced economies continue to grow. The potential contradictions such as spills and environmental disasters have been recognized coming from the experiences in the Gulf of Mexico in 2010. This has made clear the necessity of the legal and regulatory frameworks in all nations in or bordering the Caribbean Sea. The level of exploitation that is currently taking place indicates a bright outlook for the future of Caribbean oil. Some may say this is far-fetched as the US and other nations are beginning to supply a greater amount of their energy needs from shale gas and there is the high probability that

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there are huge quantities of oil and gas beneath the pristine wastes of the Canadian Arctic. In reality, examining the pace that the number of global oil corporations have been investing huge amounts in hope of getting oil and gas in the Caribbean Basin, suggests that very soon more than just Trinidad and Tobago will be a net exporter of oil or gas producer. Currently, oil exploration is in progress and plans for licensing have been examined in a number of Caribbean countries. At the moment, interests have peaked in areas off the coasts of French Guiana, Suriname, Guyana, Belize, Barbados, The Bahamas, Cuba, Jamaica and Grenada and in other islands in the Windward chain. ď‚Ą

Image source: http://www.flickr.com/photos/37380310@N04/3887315232/sizes/l/in/photostream/

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Call: 1-876-927-1779 | Caribbean Petroleum Update : March 2013

PETROLEUM NEWS & HAPPENINGS How Japan’s ‘flammable ice’ breakthrough could revolutionize the energy industry [...]...read more US Think Tank queries future of Alba, Petrocaribe without Chávez [...]...read more Venezuela and the C’bean after Chavez [...]...read more

Chávez Dead – Venezuela’s President Loses Battle With Cancer – [...]...read more JPS preparing report on widespread outage [...]...read more

Oil deal over a barrel? [...]...read more Chavez’s death brings hope, uncertainty to oil patch [...]...read more Energy News – Mr. Paulwell said… [...]...read more Editorial – Life After Chávez [...]...read more

Island wide blackout affecting Jamaica [...]...read more JPS urges objective evaluation of proposals [...]...read more OUR delays decision on power supply proposals [...]...read more Safety technology wins Jamaican top us Energy Industry Award [...]...read more 10% hike in light bills for March [...]...read more Shell gas stations to rebrand as rubis, ending nine decades of dominance [...]...read more C

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Caribbean Petroleum Update : March 2013 | Call: 1-876-927-1779

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REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP March 2013 Retail prices for Regular Unleaded Gasoline in eight selected Caribbean countries reviewed at the end of March 2013 showed marginal increases in prices for Dominica, Grenada, St.Kitts, St. Lucia, and Suriname when compared to the previous month while Antigua and Barbuda remained stable. Of the five countries that experienced increases, Suriname recorded the highest increase of US$0.17/litre. There were however decreases in prices in March 2013 of 16.7% and 5.6% for Montserrat and St. Vincent and the Grenadines respectively in comparison to the previous month.

Regular Unleaded Gasoline Average Retail Price (US$/ Litre) 2013 COUNTRIES

JAN

FEB

MAR

3 Mths Avg

ANTIGUA/ BARBUDA DOMINICA GRENADA (95 OCT) MONTSERRAT ST. KITTS/ NEVIS ST. LUCIA

1.23 1.18 1.29 1.38 1.35 1.26 1.22 1.42

1.23 1.20 1.29 1.47 1.33 1.26 1.22 1.47

1.23 1.28 1.35 1.23 1.35 1.28 1.15 1.64

1.23 1.22 1.31 1.36 1.34 1.26 1.20 1.51

ST. VINCENT/ GRENADINES SURINAME [95 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 C

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US$/BBL

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Average Monthly World Crude Oil Prices (2010 - 2012) 109.61

106.0

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US$/BBL

International Crude Oil prices over the three months period Jan-Mar 2013 saw prices in March averaging, US $92.24/BBL. When compared to the average prices seen in January and February, this average price was approximately 1.9% and 4.1% lower respectively. The highest weekly price seen in March for the product was US$93.05/BBL - reflected at the end of the fourth week. Crude Oil prices seen for March 2013 were the lowest seen over the three months period. An average of the three month’s average prices reflected US$94.2/BBL.

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88.14

90 80 70

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CEIS Petroleum Update March 2013  

CEIS Petroleum Update for March 2013

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