The Trinidad Energy Experience - Its Wider Relevance

• Author: Wendell Mottley
• Profession: New York-based Investment Banker having previously served as executive director of the company which eventually became the pivot of Trinidad and Tobago s natural gas-led industrialization and as Minister of Finance, credited with playing a decisive role in setting Trinidad and Tobago on a sustained path of growth from 1994 onwards
• Pages: 168-186

168

TRINIDAD AND TOBAGO INDUSTRIAL POLICY 1959–2008

THE TRINIDAD ENERGY

EXPERIENCE –

ITS WIDER RELEVANCE

Trinidad and Tobago is a work in progress. The country’s

successful energy industrial activism practised over decades has

contributed to economic development. Yet, the country faces

significant challenges in the future which, if mismanaged, could

still ruin the enterprise.

However, the Trinidad experience is a hopeful one. In its

example, it at least partially deflates the theorem advanced by so

many highly regarded economists that, written into the genetic code

of resource-rich states — especially petro-states — is long-term low

growth, civil commotion and resource exhaustion, no matter what

these states do.

Unchallenged, such an outlook would indeed be bleak for the

increasing number of states seeking to develop on the strength of

their natural resource endowment. The issue is especially relevant

at this time. Energy security may well emerge as the number one

global politico-economic issue of the coming decades.

Because of world population increase and rising prosperity,

especially in China and India, the International Energy Agency

(IEA) calculates that world energy demand will increase by one-

third to approximately 240 million barrels per day of oil equivalent

(MBDOE) by 2015.

Renewable forms of energy will not meet the growth in demand.

Renewables currently supply 2.5 per cent of the world’s energy

demand. For the next 20 years or so, their growth is technologically

constrained. The IEA estimates renewables will meet 3.3 per cent

of world demand by 2015.

Nuclear power provides seven per cent of world demand at

present. It does have the capacity to provide a lot more over the

Chapter Nine

169

THE TRINIDAD ENERGY EXPERIENCE

next decade. Because of unusually long lead time, investment

decisions would have to be taken now to materially impact nuclear

supply in ten years. However, continuing worries about the dangers

of nuclear weapons proliferation and the terrifying experiences of

the accidents at Chernobyl and Three Mile Island are likely to

forestall any rapid increase in nuclear generation. It is estimated,

therefore, that nuclear energy would meet nine per cent of world

demand in 2015.

This leaves fossil fuels (coal, oil and gas) to meet the demand.

‘Primary demand for natural gas will grow fastest among the fossil

fuels at 2.4 per cent per year. Oil demand is expected to rise by 1.6

per cent per year and coal use by 1.4 per cent,’1 predicts the IEA.2

The IEA in its 2003 publication, World Energy Investment Outlook,

estimates that in the period 2001–2030, ‘total investments in the

(global) oil and gas sector will amount to more than $3 trillion or

about 19 per cent of global energy investment.’3

Because most oil and gas reserves are located outside the major

consuming countries, (i.e. outside the OECD), it is estimated that

40 per cent of this investment will take place in the developing

world.

By any standard, these are large capital flows that will, and must

take place in the developing world to assure the energy security of

countries like the U.S. It would indeed be pathetic if the ‘dismal

science’ were to merely predict that these flows are going to be

corrosive of their host economies and that there is precious little

that can be done in mitigation. The Trinidad and Tobago experience

suggests the possibility of managing for a positive outcome.

It is encouraging to note that BP, the world’s second largest

private petroleum company, believes that there may be an

evolutionary pattern to the development of the gas business.

Applying systematic thinking to the nature of the gas business in

the more than 100 countries in which they have operated for several

decades, BP traces through several stages the multiple reforms

needed to put market forces to work to get upstream E&P and

downstream gas use invigorated (see Figure 9.1, ‘Stages of Gas

Industry Development’, which reflects BP’s thinking in 2001). BP

sees Trinidad at Stage II in terms of industry development. In that