New export markets for Trinidad and Tobago’s LNG

Jul 11, 2004 02:00 AM

by David Renwick

Trinidad and Tobago exporting LNG to Mexico? Sounds odd on the face of it, since Mexico is known to be an important player in the hydrocarbons business and would be presumed to be self-sufficient in both oil and gas.
Actually -- no. Although Mexican oil production is around 3.8 mm bpd, it still imports 25 % of its gasoline and 15 % of its fuel oil. In the case of gas, the position is similar: 20 % of the natural gas used in the giant North American country is imported from, of all locations, the United States, the very place that itself suffers from a gas deficit.

Strange indeed but it can be explained by geography. Mexico borders the prolific gas fields of Texas and the gas comes from there, whereas it is other parts of the US like, for example, the north eastern states, that are gas deficient. Of course, everybody has to pay the higher prices that are driven by this overall deficiency and Mexico is no exception.
That’s why it is looking for additional gas supplies which will be cheaper once it does not tie itself into the Henry Hub US benchmark pricing system and Trinidad and Tobago is as good a place as any, and better than most, from which to get them. In fact, according to Dr Raul Monteforte, commissioner of the Energy Regulatory Commission (CRE) in Mexico, "The proposed Altamira LNG receiving terminal on Mexico’s Caribbean coastline will obtain some of its LNG from Trinidad."

This is a Shell/Total project slated to go into operation in 2006. Our good friends at Tractebel, owner of 10 % of Atlantic LNG Train I in Point Fortin and marketer of no less than 310 bn cf a year of LNG in the US, is also planning involvement in Mexican LNG, with a proposed re-gas terminal in Lazaro Cardenas on Mexico’s Pacific coast but that gas is supposed to come from Peru. There are five other Mexican LNG terminals on the cards, including one or two in Baja California, which, despite its name, is part of Mexico where gas is actually destined for the US rather than the Mexican market.
Whether Dr Monteforte, who came to Port-of-Spain to speak at the Latin American and Caribbean Gas Summit organised by the CWC Group of London, will give all these applicants permission to proceed remains to be seen. He reckons that Mexico’s requirement for imported gas will be about 1.2 bn cfpd between 2004-2006, rising to 2.5 bn cfpd by 2012. It might be more, depending on growth of demand for gas, which has been 6.8 % a year to feed industrial and power plants.

The Mexican energy regulator told his audience that Mexico "welcomes gas import diversification because of our present reliance on south Texas gas," which seems to open a door for forthcoming new gas exporters in Trinidad and Tobago, like BHP Billiton/Talisman/Total, EOG Resources and the developers of the new blocks about to be handed out.
Despite Mexico’s undoubted attraction as a gas export market -- and the need for Trinidad and Tobago to have more trading interaction with that important Latin country -- its huge northern neighbour, the US, is always more likely to out-hunger it for gas and to remain top of the list of attractive LNG export markets for Trinidad and Tobago. Indeed, our Energy Minister, Eric Williams, reminded us when he delivered the welcome address at the same CWC conference that 80 % of all the LNG delivered to the US during the first quarter of 2004 came from Trinidad and Tobago.

Once this country can get its plants up and running fast enough, we will remain the favoured supplier of gas to the US in LNG form, if only because of the now terrorism-conscious US’s anxiety over "energy security." The short voyage alone means LNG shipments from Trinidad would be less exposed to any possible disruption by terrorists, should they be so minded.
Certainly, the US market is there for the taking, as far as LNG is concerned, since the country’s own gas resources are dwindling and the usual back-up supplier, Canada, is also becoming gas short (ENERGY Caribbean magazine even recently floated the idea of Trinidad LNG being exported to Nova Scotia, where it could be re-gasified and supplies surplus to Canadian needs exported south by pipeline to the north eastern states).

Guy Caruso, administrator of the Energy Information Administration (EIA) of the US Department of Energy, who also spoke at the CWC conference, estimated that more than 8 tcf of additional gas would be needed in the US by 2025 and the good news, from Trinidad and Tobago’s point of view, was that it would almost all have to come from LNG.
The big presumed sources of new North American pipeline gas -- the North Slope and Prudhoe Bay in Alaska and the Mackenzie Delta in Canada -- were not likely until 2018 in the case of Alaska and, though a little earlier in the case of Canada (2010, with luck), the Canadians themselves would want most of that gas.

Of course, though Trinidad and Tobago may be in a favoured position as an LNG supplier to the US, it is not in an exclusive position by any means. There will be gas going via Mexico, as mentioned earlier, and also directly from places like Nigeria, Qatar, Oman, Australia and Malaysia, all locations that seem far away from the target market but may not be so any longer now that LNG transport costs are falling, as much bigger ships roll out of the construction yards.
So, while the opportunities will certainly be there for us, we can’t just rest on our laurels and assume we have it made -- security considerations favour us, yes, but to succeed in maximising returns from the market, we also need to ensure that we keep our costs down too.

Source: Petroleumworld
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