New trade and investment agreements are expected to help Trinidad and Tobago offset lower hydrocarbons revenues, while helping the country extend its reach beyond the region.
T&T has continued to feel the weight of falling energy earnings, with the central bank lowering its GDP forecast for 2016 from an expected contraction of 2.3% to 2.5%. However, the trend is expected to reverse in 2017 on the back of increases in energy prices and production, the bank said.
Meanwhile, T&T looks to strategic deals with regional partners as well as new markets to boost foreign trade.
New trade agreement
Venezuela is set to deepen its trade relations with T&T after leaders from both countries signed a raft of trade and energy agreements during President Nicolás Maduro Moros’ visit to T&T in late May.
Under the deal T&T will begin importing Venezuelan natural gas in a move that is expected to offset lower domestic production and provide feedstock for the local petrochemical and liquefied natural gas (LNG) industry.
T&T’s oil and gas production has declined as of late, pushed down by the maturing of some of its fields as well as ongoing maintenance programmes. Output had dropped from an average of 88,262 barrels per day (bpd) and 4.2m standard cubic feet per day (scfd) between 2010 and 2013 to 74,710 bpd and 3.8m scfd early this year, according to data from the central bank.
The two countries agreed to establish a joint venture to market LNG produced at Trinidad’s Atlantic facility, utilising gas from Venezuela’s offshore Loran-Manatee field. The two countries share the rights to the basin lying between their coastlines, with T&T controlling 26.3% of the reserves and Venezuela owning the balance. Reserves at the Loran-Manatee cross-border field have been estimated at 11.5trn cu feet.
The state-owned National Gas Company (NGC) of T&T has also proposed constructing a gas pipeline linking Venezuela’s Dragon field, which is estimated to hold between 2.4trn and 4.3trn cubic feet of gas, to T&T. The two countries are expected to discuss the pipeline further in coming weeks. According to Gerry Brooks, chairman of NGC, the field could be developed within a three-year horizon.
As part of the recent trade deal, on June 23 T&T started exporting food staples and locally-manufactured consumer products to Venezuela, which is battling shortages for many basic goods. Flour, meat, rice and butter are among the items to be exported over a three-month period for an approximate amount of 12.6 tonnes in weight and $24m in value, according to local media reports. The shipments are expected to bring relief to 4m Venezuelan citizens located in the country’s eastern cities of Cumana, Carupano and Guiria.
T&T is also looking to increase market penetration of its petroleum products in East Asia, particularly after the Panama Canal’s expansion was opened on June 26th enabling the canal to accommodate larger vessels, including LNG carriers.
As the world’s sixth-largest LNG exporter – exporting more than three times the amount of Peru, the only other LNG exporter in the Americas aside from the first cargoes being exported from the US – T&T stands to benefit significantly from the canal upgrade, as it is one of the primary LNG players able to serve Asian markets, which accounted for about 70% of global LNG imports in 2015
In 2015 LNG exports from T&T amounted to over 600bn cubic feet. With the majority of these exports directed to South America, only 4% of T&T’s LNG exports reached the Asia-Pacific region. The expansion project will enable T&T to ship LNG cargo directly to Asia, as well as gain greater access to Asian-Pacific markets for petrochemical products.
Gas tankers are expected to see their travel time from the US or the Caribbean to Asian markets cut by up to half, while avoiding the stormy passage around the Cape of Good Hope. Shorter routes and turnaround times will help reduce costs and are expected to make T&T’s gas and petrochemical products more attractive to Asian buyers.
“Up until now, only about 8% of the worldwide fleet of LNG tankers can use the Panama Canal, but with the expansion, the canal will be able to accommodate in excess of 90% of LNG tankers,” Nigel Darlow, CEO of T&T-based LNG exporter Atlantic, told OBG.
While its position as a top gas exporter will be challenged when US shale gas production ramps up, T&T is currently well placed to take advantage of market demand in Asia, as well as other key markets closer to home, such as Argentina and Chile, which rely on LNG imports to meet energy needs.
T&T already benefits from several bilateral trade agreements, many of which focus on hydrocarbons exports and related downstream products.
Through its membership in CARICOM, T&T has sealed trade and investment agreements with regional partners such as the Dominican Republic, Costa Rica and Colombia. T&T’s partnership with Cuba is also seeing renewed focus as the country opens up to foreign direct investment.
Trade partners are further afield, too. Recently, T&T signed a general cooperation agreement with Ghana during Prime Minster Keith Rowley’s visit to the country in May. Closer cooperation in the energy and tourism sectors were among the key areas discussed.
In May Alvin Hilaire, governor of T&T’s central bank, noted that T&T’s tighter economic climate would help prepare firms for operating in a tougher environment.
“In this regard, measures already being taken by some business organisations to extend deeper into CARICOM markets and wider towards Latin America and further abroad are steps in the right direction,” he said, when launching the bank’s latest monetary policy report.
“Such efforts have been in the works for some time, and in the present circumstances a redoubling of energies in a coordinated fashion could lead to substantial dividends,” he added.
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