Tuesday, January 16, 2018

A 'snapshot' energy outlook

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Donstan Bonn

BY sheer coincidence, while Trinidad and Tobago and Grenada are seeking; to resolve a disagreement over the boundaries limiting their common continental shelf in the exploration for oil, there has come quite an interesting article on the future of oil and natural gas that has implications for Trinidad and Tobago.

As the sole energy-based economy within the Caribbean Community and a significant exporter of liquefied natural gas (LNG) to the US, Trinidad and Tobago would naturally have an interest in the analysis that points to an unfolding shift from traditional domination of energy by the Organisation of Petroleum Exporting Countries, (OPEC), to nations in the Americas.

The analysis, published in the latest online edition of Business Journal was by the well known Trinidad-born scholar Dr Anthony Bryan and the focus of today's column is based largely on his perspectives.

Of immediate interest is Bryan's observation that despite a complex and capital intensive value chain, LNG is now regarded as a competitively-priced energy commodity where "once rigid sales contracts are being replaced rapidly by short-term arrangements and arbitrage."

Consequently, with companies in the US investing in shale gas for export, Bryan gives the alert that, as he said, "T&T now faces the prospect of US exports of LNG into its own traditional Caribbean markets…"

Intriguingly, Bryan's point of entry was a quotation from a Venezuelan founder of OPEC, Juan Pablo Perez, who had described oil as 'the excrement of the devil' because for countries blessed with the resource, easy wealth appeared to be the definite path to state economic failure…

Yet, as Bryan, notes, this "resource curse" has not affected all oil-producing countries …but today there are new challenges.

Currently a non-resident Senior Associate for Strategic and International Studies in Washington and Senior Fellow of the Institute of International Relations of the UWI (St Augustine Campus), he writes:

"Frequent spikes in oil prices at the pump in many developed countries have prompted debates about "peak oil", forecasts that uncertainty in the oil and energy industries will continue for the short term future because of a weak global economy; that the continued dependence by the Organisation for Economic Corporation and Development economies on OPEC and states that are under political pressures in the Middle East do not augur well for global oil security; and, further, the rise of aggressive China and India competing in oil and gas markets is a driver of global price security…"

Noting that shale gas is one of the most important revolutions in energy and supply, Bryan writes that the explosive growth in this resource puts a spoke in the wheel of the economics for renewable energy companies which are still far away from viability.

And, as geologists know, countries in the Americas are home to plentiful hydrocarbons—land shale rock, oil sands and heavy oil formations. The problem was always how to unlock the deposits in the Americas economically.

Now, however, Brazil for one is believed to have the capacity to pump two million barrels a day from "pre-salt'' deepwater resources (deposits of crude found more than a mile below the surface of the Atlantic Ocean) that until the last couple of years were technologically inaccessible.

Of particular interest is Bryan's assessment of what he calls "the Caribbean connection—an LNG export pendulum". He recalled that back in the 1990s, Trinidad and Tobago had moved forward with the construction of liquefied natural gas export facilities, a definite first in the Latin American and Caribbean region.

By the first decade of the 21st century, this small Caribbean nation was providing at times as much as 89 per cent (in 2005) of all United States imports of LNG.

In stark contrast, currently T&T's LNG exports to the US have dropped to 17 per cent and some 81 per cent of its LNG export now go to South America, Europe and Asia where prices for the commodity are higher…"

Bryan concludes his assessment by contending that the world energy system places a burden on individual countries to "shape their strategies to meet their energy needs. They also have to be concerned about the manner in which their actions have implications for other countries in the international system…"