Trinidad looks to LatAm, Caribbean for natural gas exports

PORT OF SPAIN, Trinidad Tue Feb 26, 2013 11:01am EST

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PORT OF SPAIN, Trinidad Feb 26 (Reuters) - Trinidad and Tobago is turning to markets in Latin America and the Caribbean for sale of its natural gas as its exports to the United States, once its major customer, quickly decline in the face of the North American shale gas revolution.

Energy Minister Kevin Ramnarine said Trinidad and Tobago has a lucrative role to play in regional energy security through the export of its natural gas.

"Our Caribbean and Latin American neighbors are buckling under the weight of high oil prices that have impacted on their balance of payments and contributed to high prices for electricity and transportation fuels," he told an energy conference in Port of Spain last month.

Gasfin, a U.K.-based company that develops mid-size LNG plants, signed a Memorandum of Understanding with the Trinidad and Tobago government last year to build a $400 million LNG plant producing 500,000 tons annually to supply Caribbean markets.

Centrica, another British firm, plans to begin development of its Block 22 acreage which is estimated to contain up to 1.3 trillion cubic feet (37 million cubic meters) of gas, and the proposed option for the commercialization of the gas includes a compressed natural gas (CNG) plant.

Ramnarine said the CNG facility gives smaller markets in the Caribbean the option of moving out from diesel or fuel-oil based power generation.

Trinidad and Tobago's energy sector contributes more than 40 percent of GDP and 70 percent of foreign exchange earnings, selling natural gas to the Dominican Republic, Puerto Rico and recently to Argentina and Chile.

The twin island republic is also eyeing Panama and Costa Rica which are both preparing to build re-gasification terminals as they make the switch to LNG.

Trinidad and Tobago's LNG exports to the United States used to account for 80 percent of its exports, but that is falling fast.

LNG shipments to the United States accounted for only 19 percent of total exports from October 2011 to May 2012, declining from the 22 percent in the corresponding period a year earlier, according to the government's Review of the Economy 2012.

Trinidad and Tobago, however, still provided 50 percent of all U.S. LNG imports in the 2011/2012 period.

The decline in exports was blamed on the increasing extraction of shale gas in the United States, as well as the consequent softening of the Henry Hub pricing point for natural gas futures contracts traded on the New York Mercantile Exchange (NYMEX).

Trinidad and Tobago, which currently holds 6 percent of the LNG market and ranks sixth in the world for LNG exports, also sells on the spot markets in Europe and Asia to diversify its LNG export markets and benefit from higher prices in other regions.

Dr. Anthony T. Bryan, a senior associate at the Washington-based Center for Strategic and International Studies (CSIS), said as U.S. access to its own natural gas resources increases, there will be less need for LNG from Trinidad and Tobago.

Once the United States has satisfied its domestic needs, it will also be in a position to compete with Trinidad and Tobago in the 21 countries across the E.U., Asia and Latin America that the Caribbean country now supplies.

"The only U.S. threat to Trinidad and Tobago in the short term is Cheniere Energy which is the only company that has permission from the U.S. Department of Energy to build LNG trains at Sabine Pass," he told Reuters, referring to the deep water Gulf Coast terminal at Port Arthur, Texas.

Bryan said lower demand for U.S. LNG has turned out to be a blessing by allowing Trinidad and Tobago to seek deals and much higher prices from energy-hungry customers in Asia and South America.

"The global gas market's increasing demand will be another blessing for Trinidad and Tobago. Natural gas is the fuel of the future," he said.

Global LNG production is growing significantly at 4.3 percent per annum and is expected to account for 15.5 percent of global gas consumption by 2030, according to Andy Hopwood, chief operating officer for Strategy and Regions for BP Plc.

Hopwood notes that there has been a trend of diversification of LNG trading partners for both exporters and importers.

"This is good news for Trinidad and Tobago as diversified LNG markets reduces your dependence on any single market. In hindsight, diversifying away from the U.S. was a very wise move, one that will give the country much greater stability for its export revenues going forward," he said at the energy conference.

"This country's importance in the world's energy markets has not been blown away by the 'shale gale' or any other change in the global energy market," he added.

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