Prime Minister Patrick Manning delivers his address at the second British Gas (T&T) energy luncheon series at the Hilton Trinidad.

That is the name of the game. That’s the tension between oil companies and host countries and if that is not understood then host countries will pay in blood.

Late last month Prime Minister Patrick Manning delivered a wide-ranging address at the second British Gas (T&T) energy luncheon series at the Hilton Trinidad. The audience included members of the British Gas board, energy officials and technocrats.

The energy sector in T&T—and particularly our gas development—has been quite successful; something of which we are proud.

And it has been successful largely because we took the precaution in 1974 to bring all the stakeholders together to discuss in a dispassionate way the future directions that the energy sector should take, with the government listening very carefully.

We invited people from the private sector, state enterprises, some of the stakeholders resident overseas and some of the international companies operating here.

I think in that year it took place in Tobago and we sat and discussed. I was not present, if it sounds like I was, it is not so. I was in political short pants at the time. And the directions that the industry subsequently took were directions that were largely adumbrated at that forum and represented the conclusions to which that forum had come.

We are in a position 33 years later to examine whether the forum was successful or not and come to our conclusions. And I can say, without any fear of contradiction, that not only was the forum successful but that T&T today, as a result of the implementation of some of the deliberations of that forum, has found itself as the largest exporter of ammonia in the world. I think that is now well known: the largest exporter of methanol in the world, the fifth largest exporter of LNG and a critical player in the energy security of the United States of America and in the satisfaction of that market.

It was Sir Robert (Wilson, the chairman of British Gas) who talked about 70 per cent to 75 per cent of that market being satisfied by energy from T&T.

It is even better in methanol. For the first 11 months of last year, we supplied 77 per cent of the methanol market in the United States and about 57 per cent of the ammonia market.

As we expand into some other industries that are of strategic importance—particularly aluminum that is strategic to the aerospace sector—you are going to see the significance of T&T in the energy security of the US increasing.

We believe that 33 years later, with all the new developments that have taken place, with the changing energy balance in the world and the rise of new players in the hemisphere and worldwide—particularly the rise of Russia and the policies they are now pursuing in oil and gas, making themselves, as they put it, the new superpower but based not on missiles and military might but based on energy—the time has come for T&T to pause once again and to decide whither we will go.

We have agreed that within the next few months—and we are trying to minimise how many months (no more than three)—we hope to meet again probably in T&T, bringing together the key stakeholders, including the oil companies, the state enterprises, the Government as distinct from the state enterprises.

We will take a view of what is taking place internationally, where we have reached in T&T and in what new direction we should go.

And while I do not want to prejudice the outcome of those deliberations, there is one thing, one idea whose time for T&T may have come.

We resisted it in the 70s; we resisted it in the 80s and 90s and we saw a lot of countries in similar situations do it. It was done by Saudi Arabia, Kuwait, Venezuela and others.

The time has come when T&T has to consider integrating its oil industry with the establishment of an integrated oil company that goes international.

It will mean, if we agree on such a direction, one company arising out of petroleum, the National Gas Company, National Energy Corporation, NP. Is there anybody else I may have forgotten?...Put them in, too. Everybody. Toute monde.

It is not without its dangers and there are two to which I would like to advert here today.

1. The first is trade union activity. We just have to be careful about trade union activity and irresponsible trade union activity. I am not saying that is what the case is. I am saying if the trade union is irresponsible then it will not only affect T&T in a big way because such a company as we are talking about is going to have a very heavy input and make a very heavy contribution to economic activity in the country, but it will then affect what the country does abroad, the image. And as you know, the reliability of an oil company is one of the bases on which the oil company thrives. That’s the first one.

2. The second big danger that you see arising from such an approach was recently demonstrated very well in Venezuela.

A new direction

Atlantic LNG, Point Fortin

Whereas BG, BP or BHP Billiton has a clear mandate to its executives that if you get involved in political activity you wouldn’t last as long as the Red House fire. That is clear. Am I correct? That’s the position of the company. These companies are not from here initially but they understand the rules of the game.

A state enterprise has no such constraints. And the bigger the state enterprise gets, the more dangerous such a state enterprise can become. And that is why in many of the countries in which that model has been followed the state enterprise reports directly to the head of government.

It is so in Malaysia. In the case of Venezuela the Minister of Energy, I think, is the president of Petroles de Venezuela. And the Minister of Energy, as you know, is appointed by the president in his own deliberate judgment and at his pleasure and all that goes with that. T&T is now reaching the position where we are going to have to consider that very carefully. I am not saying that we have decided on that but it is an idea whose time has come for proper consideration.

So we will meet over the next few months and we will see the new directions in which we ought to go. We will see the new developments in the international industry and we will carve out for ourselves a course of action that will more closely meet with the aspirations of our national community as adumbrated in our determination to become a developed country by the year 2020, recognising that the Government has been put in power for one purpose and one purpose only; and that is to give the largest number of our citizens the highest standard of living and the best quality of life in the shortest possible time. That is all that government is about.

Secondly, there is a growing importance of T&T in the international community, based on energy. Some time ago, the Rio Group met in Georgetown, Guyana and, at the invitation of the president of Guyana, I was present. I had a chance to interface with some of the leaders and we held discussions with the president of Panama, the president of Chile and had extensive discussions with the president of Brazil. President of Venezuela was not there.

The Minister of Energy of T&T also has visited Mexico and the one story that is coming through very strongly is the shortage of energy in these countries and the need to enter into secure arrangements to satisfy their energy deficit. In most cases, the deficit is for natural gas.

T&T is the only country that exports natural gas in the western hemisphere by way of LNG. And it puts us in a particularly advantageous position as we discuss with some of these countries their needs and what contribution T&T might make to satisfy those needs. And, therefore, when Sir Robert spoke a few moments ago about the need for more exploration and gas discovery, it is a view, of course, well endorsed by this Government.

One point that I would like to make today has to do with technical assistance to countries in the region and further afield. Belize has discovered oil. The inaugural well produced at the rate of some 5,000 barrels a day of light, sweet crude. And Belize asked T&T for assistance. And some people will ask: what kind of assistance can T&T give to Belize? There are those who say that, you know.

We sent one man to Belize. We discovered two things. The first is that the rate of taxation by which the company involved was being taxed was one per cent. I notice I get no reaction from the oil executives here.

The second thing we discovered when the question was asked of the Belizean authorities: what arrangements do you all have in place for checking the oil produced for fiscal purposes? And they said: well, we don’t need to check, the oil companies make a return. Again, I notice oil executives are now amused.

Two further missions went to Belize and the upshot of it is they now have a tax arrangement in place. They have gone the route of a petroleum profits tax with a taxation rate of 40 per cent. That’s the first thing. And nobody has left Belize.

Secondly, we instituted a training programme using petroleum inspectors from T&T to advise on what arrangements they should set and I understand they have now discovered they produced much more oil than they thought they produced prior to those arrangements.

That is the name of the game. That’s the tension between oil companies and host countries.

At last month’s meeting in Caracas there was a fairly long meeting between President Chavez and myself. We started at around 5:30 and eventually left the Mira Flores Palace at 9:30 in the night. Very interest meeting, to put it mildly.

We signed what has been described as the first unitisation arrangement in the western hemisphere; a framework unitisation arrangement between Venezuela and T&T, arising out of a Memorandum of Understanding signed between the energy ministers of the two countries in 2003.

We now have to agree on the unitisation of the individual fields beginning with the Loran/Manatee which has reserves of about 10 trillion cubic feet. And we have to agree on the use to which those resources will be put. This is the particular field in respect of which we felt there was an opportunity for Jamaica to get LNG and the specific proposal of the T&T Government is that Loran/Manatee be developed, gas be produced in T&T and form the basis of a new LNG Train X.

Notice I did not say Train Five, I said Train X, ensuring that Jamaica will be able to access the 160 million cubic feet a day of gas as is the requirement for the expansion of their aluminium manufacturing facility.

Incidentally, some of which will be exported to T&T for utilisation in a smelter contemplated by Alcoa.

And, therefore, our first proposal was collaboration with Venezuela on the petroleum aspects of PetroCaribe. That has become necessary because a number of countries in the region have themselves signed on to the PetroCaribe arrangement which, as you know, threatens to displace T&T as the dominant supplier of petroleum products to the region. With the position of dominant supplier comes the responsibility to guarantee energy security. And if T&T is displaced as the dominant supplier, then T&T cannot accept responsibility for guaranteeing energy security to Caricom countries. It is as plain as that.

May I say that in the face of what has been taking place we have taken the decision to upgrade the Pointe-a-Pierre refinery at a cost of US$850 million.

First phase is gasoline optimisation: you raise the octane number of the gasoline pool and otherwise make the gasoline acceptable on the east coast of the United States; and secondly, the gas/oil optimisation, part of which is the construction of a gas to liquids plant and emerging with a gas/oil pool that has a high cetane number and therefore is able to meet the specs of all the markets in which we propose to sell gas/oil.

One of the big flaws of that approach is that it still needs the refinery and that about 35 per cent of its output is fuel oil. None of the refineries in the US or elsewhere does that. To be able to deal with that will require an investment of about US$2 billion. We have taken a conscious decision in T&T that we will not move to step three.

We will seek to attract to T&T a second refinery of about 250,000 barrels a day capacity: modern, but which will have the capacity to treat with the fuel oil coming out of the refinery at Pointe-a-Pierre and the two operate as one integrated refinery.

The proposal was put to the government of Venezuela to partner with us to construct here a 250,000 barrel a day refinery. Among other things both Venezuela and Brazil are countries that supply crude to the Pointe-a-Pierre refinery at this time. Brazil constitutes a big market in Latin America.

In respect of gas, we proposed Loran-Manatee Train X in T&T. I wish to say that because of the location of that gas field the economics of bringing gas to shore favours T&T as opposed to Venezuela itself.

Venezuela is contemplating, as you know, an LNG plant on the Paria Peninsula and that is a long distance from Loran/Manatee to Paria, as opposed to Loran/Manatee to onshore Trinidad where the 56-inch pipeline, which was recently put down, has been designed to take another 800 million cubic feet or so for up to Train X if that decision is taken. It is already in place.

So what we have advanced is a comprehensive MOU to the Venezuelan government for collaboration between Venezuela and T&T in energy development.

They have agreed to study it and President Chavez has agreed to come to T&T to sign whatever arises out of the technical discussions that will now follow the submission of that MOU.

We were invited to attend a gas forum that Venezuela is convening in Margarita about the April 16 or 17. And we will attend.

No discussion on gas in the Western Hemisphere will take place without an involvement of T&T.

Western Hemisphere will take place without an involvement of T&T.