WELCOME TO CHARLES RUSSELL SPEECHLYS.
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Coconut palms gently swaying in the breeze, or nodding donkeys in the midst of the sugar cane? The rays of the setting sun streaking across the sea, or the glow of gas flares colouring the evening sky?
Which of these images are ones from the Caribbean? Well, all of them of course.
We all have our perceptions of certain regions and the Caribbean is particularly evocative for those of us in northern, chillier climes. In addition, the effects of events in Europe and the Middle East have translated to increased tourism in the region. But could life in the Caribbean be on the cusp of change? Let us all hope not too much.
When considering the Caribbean it is important to recognise its geographic breadth and diversity. CARICOM, the region’s economic co-operation organisation, includes the island states that you’d expect, but it also includes as full members the adjacent countries of Belize, Suriname and Guyana, each of which contributes to the mix of natural resources, with oil and gas in particular. The range of associate members and countries with observer status spreads even wider.
There are three significant factors that are now starting to bring changes in the way Caribbean countries source their much needed energy supply.
First, is the new race to find hydrocarbons, and the leader of the pack is arguably Guyana with Exxon. In 2015 an Exxon led consortium made a significant oil discovery. Their second appraisal well confirmed a giant oil find announced to be in excess of a billion barrels. They are now starting the lengthy process of development planning and environmental applications and expect first oil in 2019/20.
Other oil and gas majors are now jockying for position in the region as the potential for a new large hydrocarbon basin has been unleashed. These include BHP Billiton who have secured blocks in the deepwater of Trinidad and separately across the border in Barbados. Repsol is also known to be securing blocks west of Barbados close to St Lucia. This August BHP Billiton announced the discovery of gas in the first of an eight well programme in the southern sector of Trinidad’s deep water blocks close to the Venezuelan border. Their next well is planned in the northern area close to Barbados and should be completed by year end.
The second factor is the advent of new technology and low global natural gas pricing allowing the economic distribution of LNG in small volumes using cryogenic ISO tanks. The USA is now exporting LNG into the region. The majority of the Caribbean countries are now pushing new strategies, driven by the Paris Agreement under the UN Framework Convention on Climate Change, to turn away from expensive high CO2 fuels for power generation, to low emission cleaner natural gas. Specifically Barbados and now Jamaica have started to import LNG in small quantities.
Third, and related to the second factor, is the increasing determination for the island states in particular to journey toward a vision of energy sourced from renewables. A US-Caribbean-Central American Energy Summit held in Washington earlier this year set out an extensive programme of US and multilateral support aimed at diversifying the Caribbean’s energy sources.
With volcanic activity a feature in the history of some island states it is not surprising that some are exploring the potential to produce geothermal energy. For example, St Kitts & Nevis’ goal is to become the “first green country in the world” with the government setting the goal to produce 100% of the country’s energy needs from renewable sources by 2020. French engineering company Teranov is currently conducting exploration activities in the country. Whilst the size of the local market in some of these islands adds challenges to the economic viability of these schemes, inter-island cables and pipelines have a long (if sometimes variable) track record.
Meanwhile, Jamaica will be producing 80 MW of energy from renewable sources by the end of 2016. The government there is also determined that the island must reach a level where the use of renewables outpaces that of fossil fuels. Jamaica, with support from the World Bank, is involved with the GreenTech Accelerator Program. This initiative promotes eco-friendly business solutions across the Caribbean.
Further south, Canada-based Emera Inc, is nearing completion of the BBD$43m (US$21.5m) photovoltaic farm in Barbados, and is currently exploring the possibility of building another facility elsewhere in Barbados.
These three factors are creating opportunities for those involved in energy and related industries. Specifically, in the area of legal services the advent of hydrocarbons within the region creates the need for traditional operating and service agreements but also more complex arrangements between host countries due to the likelihood of cross maritime reservoirs and pipeline routings. History has shown the complexity and protracted processes involved in country-country border unitisation and joint development agreements, as evidenced by Venezuela and Trinidad & Tobago. Caribbean countries new to hydrocarbon resource development, need to develop strategic plans which may include establishing new state companies with associated legislation - extractive laws, fiscal regimes, state participation, operating agreements, environmental protection, and the list goes on.
No country can stand still too long, the Caribbean region needs to remain competitive and to the extent that development of hydrocarbon or renewable resources helps, then there plenty of opportunities.
The overriding concern for all would be to ensure development does not go ahead to the detriment of the environment and the values that make the Caribbean the vibrant, diverse and attractive place it is today.
I’m indebted to Geoff Ingham, oil & gas consultant, Port of Spain, Trinidad for his insights and contribution to this article.