CEIS Petroleum Update September 2011

Caribbean Energy Information System (CEIS) September 2011

A Trinidad & Tobago without Oil and Gas Like many other Caribbean territories, T&T was once a British colony. However, after gaining independence in 1962 T&T severed ties with British Monarchy in 1976 and became a Republic. During the time of colonization under the British Trinidad earned its revenues from agriculture crops such as cocoa and sugarcane. However, these crops were hampered by disease and labour issues thereby resulting in widespread depression among agriculture workers. The failure of the sugarcane industry led Trinidadians to focus on new ways of earning. This resulted in the rise of the oil economy in the 1950s which led to changes in the social structure of the country. The proceeding years saw petroleum becoming Trinidad's main export, and lead to the growth of the middle class among all sections of the Trinidad population. One might wonder what would happen if Trinidad and Tobago’s economy had no oil and gas. In this issue of the CEIS Petroleum Update we will try to look at the possibilities.

Petroleum has dominated the economy of Trinidad & Tobago, with offshore production of Crude Oil and Natural Gas. Since the 1950s, over 30 oil and gas companies have been involved in oil and gas exploration while the stateowned Petroleum Company of Trinidad and Tobago has been involved in extraction and refining at its refinery located in Pointe-a-Pierre. The Oil and Gas Industry in T&T directly contributes approximately 36% - 40% of GDP with the other spin-off industries such as manufacturing and service industries accounting for the balance. The To access

population of T& T is approximately 1.3 million with approximately 50% of that amount forming the National Labour Force. However, only about 5% of the employed persons work in the Oil and Gas Industry while the remainder of the labour force is employed through other industries that have thrived through the oil and gas industry.

The oil and gas industry is the mainstay of Trinidad with tourism and public service being the backbone behind Tobago’s economy. The development of the Oil and Gas Industry in T&T has created numerous opportunities for the country and has facilitated the development of several industries such as methanol and ammonia production, manufacturing, construction, quarrying and other services. These industries have thrived as a result of low energy costs and high earnings from having natural petroleum energy recontinued on page 2/

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

CEIS website CARIBBEAN PETROLEUM UPDATE

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 : September 2011

A Trinidad & Tobago without Oil and Gas continued from page 1/

sources. The Electricity rate in the country is approximately US$0.05/Kwh, in comparison to other Caribbean countries that are averaging between U$0.25/ Kwh to US$0.40/Kwh. Transportation fuels are between 70% – 80% below the prices seen in other countries. At these rates T&T is able to draw investors into all sectors of the economy thereby creating an environment of consistent economic growth. Many investors in the manufacturing sector depend heavily on the low rates available for energy. These manufacturers are able to produce at rates that are far lower than their Caribbean competitors thereby giving Trinidad manufacturers the competitive edge.

The country is also a regional financial centre, and the economy has a growing trade surplus. In recent times there has been an expansion of Liquefied Natural Gas processing which has created sustained economic growth in Trinidad and Tobago for a number of years.

The twin island republic as become the leading exporter of LNG to the United States and now supplies some 70% of U.S. LNG imports. Recent growth has

been fueled by investments in liquefied natural gas (LNG), petrochemicals, and steel. Additional petrochemical, aluminum, and plastics projects are in various stages of planning. Had there been no oil and gas in T&T the situation would not necessarily be the same as the countries non-oil and gas industries would be faced with the same issues that are facing other Caribbean countries (high energy costs, low production, low employment rates and the list goes on‌).

GDP from Agriculture in T&T is currently contributing less than 1%, while other oil and gas spin-off industries including construction and quarrying accounts for approximately 57%. These industries depend heavily on the low rates of electricity and transportation fuels made available through the availability of oil and gas locally in Trinidad. Looking at the past statistics in the agriculture sector, it is safe to say that the sector has not done very well particularly as it relates to crops such as sugarcane and cocoa and their contribution to the county’s GDP has been minimal. A look at the performance of Agriculture over the past decade in other Caribbean countries, shows that the sector has not done well either in these countries and the contribution to GDP has also been minimal. As such, the issues that have restricted other Caribbean nations growth in the sector would most definitely affect T&T. It would be unwise to say that T&T could earn enough from agriculture to sustain their economy in the absence of natural resources of oil and gas. In order for agriculture to contribute significantly to GDP, the sector would require low rates for, continued on page 3/

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Tourism being Tobago’s main contributor to GDP is a growing sector, although not proportionately as important as in many other Caribbean islands. However, this sector although growing would not in the short-term be able to substantially contribute to GDP due to several factors including the lack of physical infrastructure to sufficiently accommodate visitors (hotels, airports, ports, etc.). Added to those factors is the geographical location of the country in relation to the distance from North America and other tourist markets. Many of the visitors to Trinidad and Tobago in most instances visit the country for business purposes and expatriates who work in the oil and gas industry usually live in private residences. A large percentage of the tourist to Tobago, are locals from Trinidad. This means that a non existent O&G industry would further impact on the visitors to the country who are enjoy special rates at hotels as a result of low energy cost. Competition would be nonexistent between countries such as Jamaica and Bahamas who are closer to the North and already have infrastructure in place to accommodate visitors. Although tourist would still visit T&T to enjoy its world famous carnival, steel band and calypso music, Hindu and Muslim festivals, and the unspoiled natural beauty of Tobago this sector without cheap fuel could not efficiently and significantly contribute to the economy and would also be faced with similar problems as other Caribbean countries who despite the challenges already have a competitive edge due to their geographic location.

A Trinidad & Tobago without Oil and Gas continued from page 2/

fertilizer, water, energy, labour and adequate land to be able to produce sufficiently to compete within the global market place.

The Manufacturing sector in Trinidad contributes approximately 5.5% to GDP. Evidence shows that investor interest in the country thrives on or is driven by the low rates available for energy and other dependent services. Not having access to these low rates would possibly have deterred investors as they would not be able to produce at rates that would allow for competitive pricing of their products. Methanol, ammonia, cement and production of consumer goods are very dependent on the availability of cheap fuel. This means that earnings from manufacturing which comes mainly from export of products to large countries and to other Caribbean countries would have been significantly less as Caribbean neighbours and other buyers would seek to purchase products from countries that sell at lower rates in the global market place.

Petroleum News & Happenings Guyana grants extension to offshore drilling>> 30/9/2011 Grand Bahama Power Company Customer Informational Evening >> 28/9/2011 Barbados energy bill tops $500 million >> 22/9/2011 Cautious oil companies to restore Libyan production>> 14/9/2011 'Petrojam's high prices to blame for 65 per cent of JPS's electricity bills' >> 14/9/2011 JPS clarifies disconnection policy >> 9/9/2011 Seminar facilitates closer links with Korea >> 9/9/2011

With all of that said, it would appear that a Trinidad and Tobago economy without oil and gas would have been bleak. However, like many other Caribbean economies that are dependent on the scarce resource and not

Gas prices down, marginal increase for diesel >> 9/9/2011 KEPCO facilitates closer collaboration between Korea and Jamaica >> 8/9/2011

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Call: 1-876-927-1779 | Caribbean Petroleum Update : September 2011 Other high-end services in ICT and Financial services could also see less dependence on the oil and gas industry and could propel growth in other sectors. In addition, focus on increased use and production of renewable energy equipment such as LEDs, Solar Water Heaters and Photovoltaic Panels could create various avenues and open new markets for Caribbean A Trinidad & Tobago without Oil and Gas continued from page 3/ neighbours thereby assisting with increasing the use of renewable energy in the region and hence reducing having any natural petroleum resources of their own, dependence on fossil fuels. Partnerships can be formed T&T would have had to find innovative and creative ways with countries such as Barbados who already produce to survive. Although not a significant contributor to GDP, Solar Water Heaters and are looking towards manufacthe Agriculture sector has some potential for increasing turing of LEDs. the revenue base of the country if focus is shifted to production of other crops such as ginger and aloe. T&T could use these crops to tap into the markets being fed by South America. In addition, placing greater emphasis on agro-processing and development of value added products by SME’s could also reap significant benefits.

In order for tourism to be more viable for Trinidad, emphasis could also be focused on increasing or providing transportation services to and from neighbouring islands.

Trinidad can be used as “quatro–destination” meaning that visitors to Barbados and Grenada (countries that are in close proximity to Trinidad and Tobago) could easily island hop between the four islands if sea transportation is provided at low rates. This would boost the number of visitors to the country with the possibility of creating jobs through the development of other support services. In addition, this sector has barely been explored and has enormous potential, especially with the country's proximity to South America.

In conclusion it is evident that T&T’s economy is strongly influenced by the petroleum industry and the benefits derived from this industry have been enormous. However, there is an old saying - “necessity is the mother of invention” which comes to mind when I think of Trinidad. This is said this to say that if Trinidad & Tobago was faced with the same barriers to petroleum energy as their Caribbean neighbours they would have had to find ways outside of the gas and oil industry to create employment for their people and to generate revenue for the economy. The thinking for T&T should be diversification for the future good and well-being of the country and its people. The time has long passed for action on diversifying the revenue base of the economy and to focus on building other nonpetroleum based industries. The survival of Trinidad and Tobago is dependent on the actions taken now otherwise the future for the country will be filled with unsolvable social and economic problems .

National Gas Company of Trinidad and Tobago Limited at Orinoco Drive, Point Lisas Industrial Estate, Couva, Trinidad and Tobago

Petrotrin

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REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP January - September 2011 Although in September World Crude Oil prices averaged US$85.42/BBL, the consumers in the region did not get any significant relief in the retail prices for refined petroleum products. Retail prices remained relatively high in comparison to prices seen at the beginning of the year when Oil prices were approximately US$90/BBL. Of the 16 countries reviewed at the end of September, retail prices for regular unleaded gasoline in 2 Caribbean countries showed increases when compared to the previous month while 5 countries showed slight declines and the other 9 countries remained relatively stable.

Table

Regular Unleaded Gasoline Average Retail Price (US$/Litre) 2011

COUNTRIES

JAN FEB

MAY

JUN

ANTIGUA/ BARBUDA

1.00

1.00

MAR APR 1.07

1.15

1.25

1.33

JUL AUG SEP AVG 1.30

1.30

1.30

1.57

BAHAMAS [91 OCT]

1.24

1.25

1.30

1.46

1.47

1.47

1.45

1.43

1.44

1.19

BARBADOS

1.47

1.48

1.49

1.59

1.59

1.59

1.59

1.66

1.66

1.21

BELIZE [87 OCT]

1.33

1.34

1.48

1.50

1.54

1.51

1.49

1.51

1.44

1.39

B.V.I [87 OCT]

1.12

1.13

1.20

1.26

1.26

1.27

1.25

1.22

1.22

1.46

DOMINICA

1.01

1.05

1.06

1.11

1.21

1.24

1.22

1.22

1.22

1.15

GRENADA (95 OCT)

1.05

1.06

1.17

1.23

1.29

1.32

1.29

1.29

1.31

1.23

GUYANA

0.99

0.99

1.06

1.08

1.08

1.12

1.15

1.14

1.14

1.08

JAMAICA 87 Octane[E10]

1.17

1.18

1.25

1.28

1.29

1.29

1.31

1.29

1.28

1.26

MONTSERRAT

1.13

1.14

1.18

1.27

1.38

1.42

1.35

1.32

1.32

1.28

ST. KITTS/ NEVIS

1.04

1.07

1.20

1.13

1.14

1.23

1.27

1.28

1.28

1.18

ST. LUCIA

1.14

1.14

1.16

1.22

1.27

1.28

1.28

1.27

1.25

1.22

ST. VINCENT/GRENADINES 0.99 1.21 SURINAME [95 OCT]

0.98

1.00

1.06

1.10

1.17

1.24

1.24

1.23

1.11

1.32

1.34

1.47

1.55

1.51

1.48

1.48

1.45

1.42

TRINIDAD/[92 OCT]

0.42

0.42

0.42

0.42

0.42

0.42

0.42

0.42

0.42

0.42

TURKS/ CAICOS

1.36

1.36

1.42

1.42

1.45

1.55

1.61

1.60

1.60

1.49

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.

CHART

See prices for other products at www.ceis www.ceis--caribenergy.org .

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Call: 1-876-927-1779 | Caribbean Petroleum Update : September 2011 Average Weekly & Monthly Crude Oil Prices (Jul - September 2011)

120

US$/BBL US$/BBL

115 110 105

105.89

104.39

100

Jul

Aug

95

88.93

90

Sep

85

International Crude Oil prices for the first time in several months went below US$100/BBL mark in September 2011. The highest price seen during September was in the second week (US$88.93). In comparison to the previous months of July and August the average price seen in September (US$85.42/BBL) was respectively 23% and 20% below those months.

With prices on the decline, countries in the region should be feeling a bit of relief not having to find as much foreign exchange to purchase the necessary products and by-products. Many countries are anticipating increased productivity if the declining trend continues. ď‚Ą

80

WK 2

WK 3 Period

WK 4

Mth Avg

US$/BBL

WK 1

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