Trinidad and Tobago, Venezuela mull over Caribbean-US natural gas pipeline

Curtis Williams
OGJ Correspondent

PORT OF SPAIN, Sept. 29 -- Trinidad and Tobago and Venezuela have agreed to look into the feasibility of a natural gas pipeline that would be constructed under the Caribbean Sea to the US. The two countries reached the agreement following efforts by members of the Venezuelan government, led by President Hugo Chávez, to convince the Caribbean twin-island nation that it should give some consideration to the project.

Trinidad and Tobago has already announced that it will be proceeding with an intra-Caribbean natural gas pipeline project, which would provide gas to seven southern Caribbean islands (OGJ Online, Oct. 18, 2002). That pipeline would extend from Trinidad and Tobago and possibly Venezuela to the French dependents of Martinique and Guadeloupe. But Chávez said the larger project—which would carry gas to the northern Caribbean, including Cuba—would help the Communist island reduce its energy cost by providing inexpensive gas.

"I am very pleased that [Trinidad and Tobago's] Prime Minister Patrick Manning agreed to consider the proposal. There is a need to work together in the region because we are one Caribbean and this project has tremendous potential," Chávez told OGJ.

Feasibility studies
Chávez said studies conducted by the International Monetary Fund and the World Bank concluded his preferred pipeline project was a possibility. "This is not a 'pie-in-the-sky' proposal [that isn't] grounded in reality. It is a doable project, which we must work on," he said.

But while Trinidad and Tobago has agreed to look into the line's feasibility, it is reportedly very skeptical about its chance of success. It was careful not to have mentioned the project in the recently signed memorandum of understanding it signed with Venezuela regarding the exploitation of joint hydrocarbon reserves and energy-related cooperation.

Trinidad and Tobago's Energy Minister Eric Williams said, "There's no specific mention of the pipeline project in the MOU. The document establishes a framework for future discussions on the development of the cross-border resources of both Trinidad and Tobago and Venezuela.

"The Caribbean gas pipeline in the context of the MOU will have to be the subject of discussion. The energy ministers of Trinidad and Tobago and Venezuela together with technocrats from each country will continue discussion on the optimum ways of monetizing the resources of both countries to the benefit of both nations," Williams said.

The project
The intra-Caribbean gas pipeline project is expected to cost $510-600 million and would be 596 miles long, which would include shore approaches and the lateral line to Barbados.

The pipeline would vary from 20-in. for the southern trunk route between Trinidad and Grenada, and 10-in. for the Barbados lateral.

The pipeline would be used to generate electric power in the concerned territories, where demand for electric power is expected to rise by at about 3%/year. Energy cost reductions would be as high as 40-50% for power companies using No. 2 fuel oil to generate electricity.

Serious consideration?
Pressed further on whether the Venezuela proposal was being given serious consideration or if it would affect Trinidad and Tobago's own pipeline project, Williams said, "It does not affect the plan. The project [ending in the French dependents] continues to have the full support of the government of Trinidad and Tobago as it was initially conceptualized. National Gas Co. (NGC) is the lead agency representing the state on that project. Any modification of the project to incorporate the desires of the Venezuelans would have to be subject of analysis and discussion."

It is understood that the Trinidad and Tobago government is worried that it would lose control of a larger project and was also concerned that a grandiose project would have too many financing and technical difficulties.

Sources in the Trinidad and Tobago government told OGJ that the Caribbean island has had the experience in the development of Atlantic LNG Co. Trinidad & Tobago's Train 1, which showed it was better to start with smaller projects and incrementally build up capacity. The sources say the fact that Venezuela still does not have an LNG plant is due to the country's inability to see the wisdom in such an approach and Trinidad and Tobago would not be caught in the same position.

In addition, major operators including BP Trinidad & Tobago LLC and British Gas have been advising Trinidad and Tobago that a pipeline to Miami was not as economically advantageous as continued expansion of the country's LNG capacity.

However even as consideration is being given to the larger project, Trinidad and Tobago is having its own difficulties in pursuing its intra-Caribbean gas pipeline project.

Further convincing needed
It is understood that the Caribbean island has not been able to convince French national power company, Electricité de France (EdF) that it should come on board the project.

Sources indicate that so far the French have not indicated a willingness to become part of the trans-national pipeline. Further, if they abstain, the Manning administration "could as well kiss the project goodbye."

Furthermore the study is more than 4 months behind schedule. Its delay was due in part to difficulties in raising the money needed for a second feasibility study bearing in mind the lack of commitment from the French for the project.

Proponents of the project have all acknowledged it was only possible if the pipeline ends at the French dependents of Martinique and Guadeloupe, since those islands have the size of population and potential gas use to make it feasible.

France's involvement is limited by the fact that Total SA only has interest in BHP's Greater Angostura find, which BHP has already indicated would be an exclusively oil-producing find for the first few years. Currently, gas produced by the field is being used to lift the crude; only afterwards would the gas be sold commercially.

NGC Pres. Frank Look Kin admitted that the French are yet to be brought on board. "I am not at liberty to talk about the project because of an agreement we have signed with Inter-Caribbean Gas Pipeline Co., but it is true to say that the French dependents have not yet been convinced that they should be part of the project and you know it is important that they are part of it since we are talking about an expenditure of $500-600 million. So it's a lot of money," Look Kin said. He added, however, that he "remained optimistic the project would succeed."

Trinidad and Tobago has been trying to convince the French that it could significantly reduce the price of electricity in the French islands while providing it with cleaner fuel. It is understood that Trinidad and Tobago has suggested that piped natural gas could be transported in the French dependents at cost of $3/MMbtu as oppose to the $5.58/MMbtu being paid for fuel oil.

But while the intra-Caribbean pipeline project appears to be in flux, Trinidad and Tobago is concerned that it would take too much time going after such a large venture and lead to the continued deterioration of the its economic infrastructure reflected in a slowdown of economic activities and therefore hurting local manufacturers.