Half a millennium ago, Spanish colonialists put this tiny Caribbean land on the international trade map by putting the indigenous Amerindians to work growing cocoa.
When the natives died and the beans withered, French settlers imported African slaves to plant cotton, a crop that never flourished on the hilly, tropical terrain.
By the beginning of the 19th century, it was the British ruling the two islands and luring indentured workers from India and China to tend sugar cane, which sustained the population until an oil boom in the 1970s.
Now running out of oil and dependent on natural gas that may last only another generation, Trinidad is taking steps to diversify its economy and break its long cycle of boom and bust.
When Prime Minister Patrick Manning penned a deal with Jamaica this month to trade cut-rate liquefied natural gas, or LNG, for alumina, the move signaled what analysts see as a promising approach to development: converting a finite resource into sustainable industries.
The agreement, which assures a steady supply of the key ingredient for producing aluminum, means Trinidad can move ahead with plans to build a smelter. The project would employ at least 3,000 during construction and create 700 jobs in production, chipping away at a 10% unemployment rate and perhaps at the nation’s rampant crime, committed in part by idle and disenfranchised citizens.
“LNG might be producing 70% [of petroleum revenues], but it only employs about 200 people. KFC employs more people here,” said Richard Dawe, a professor of petroleum engineering at the University of the West Indies.
The aluminum plant is just one of more than a dozen industrial projects on the drawing board to exact the most long-term benefit from Trinidad’s rich reserves of natural gas, which until now has been extracted and sold, mostly to the United States, for quick profit.
“We need a better balance between revenue levels and employment levels,” said Frank Look Kin, president of National Gas Co. of Trinidad and Tobago.
With job creation in mind, the state-owned company is negotiating with an array of private industries in hopes of settling them into the Union Estate industrial park, an 800-acre compound planned near the port of La Brea in southwestern Trinidad.
It’s not that exporting LNG hasn’t benefited the country. Signs of prosperity abound, from the housing estates springing up along wide highways to the sleek new office towers in Port of Spain rising from a forest of cranes. Trinidad’s economy grew more than 13% last year and is predicted to expand an additional 7% this year -- and maintain that rate for the foreseeable future, said Ronald Ramkissoon, chief economist for Republic Bank Ltd. in Trinidad.
But proven reserves of natural gas will last only 24 years at the currently planned rate of extraction. Industry stewards are in a race against time to create a more viable and diverse economy for the nation’s 1.3 million people before the commodity runs out.
“One of the approaches to a wasting asset is that you save some part of that income for the day when you may not have it anymore,” said Ramkissoon. He noted that the government had established a stabilization fund, through which oil and gas revenues above a certain level are invested for future generations.
Unlike oil exports, whose prices fluctuate with the market, LNG deliveries are typically made under long-term contracts, giving the supplying country a more reliable profit stream.
Plans in Trinidad include offering attractive energy packages to companies that make plastics and chemicals from gas and to firms that use those materials to produce consumer goods. Aluminum from the planned smelter could supply a plant that manufactures car parts or appliances. Investors are looking at creating a dishware factory to use the melamine that is a “downstream” product of natural gas, said Look of Natural Gas Co.
In the five years since Trinidad began exporting LNG, prices have more than tripled in the American market. Two additional plants have come on line, and a fourth is under construction that will allow Trinidad to increase U.S. exports while also tapping more fuel for its own industries. Currently, Look said, domestic producers use less than 1% of the gas extracted in Trinidad.
In addition to exports, Trinidad has used LNG byproducts to support nine ammonia plants, six methanol units, a urea production facility and an iron and steel complex.
Economic planners are weighing the pros and cons of building two natural gas pipelines for supplying Caribbean neighbors whose import needs are too small to justify the costly investment in LNG facilities. The undersea conduits that could link Trinidad with nine other islands, at a projected cost of $688 million, would provide a common energy system to ease the economic integration of the 15-member Caribbean Community, or Caricom, which is expected by the end of next year.
With an eye on the record world oil prices stifling the economies of Caribbean trading partners, Manning announced this month the creation of a special fund of up to $50 million “to cushion the harsh impact of such prices on the lives of the people of our region.”
The Caricom region represents the second-most important export market for Trinidad after the United States.
“Stimulating the economic development and export capacity of Caricom increases the capability of the region to purchase goods manufactured in Trinidad and Tobago,” Manning said, trumpeting what some analysts viewed as a charitable gesture toward poorer neighbors as a win-win proposition.
The deal signed with Jamaica involves construction of a $236-million re-gasification plant at the receiving port, a project that will employ thousands of construction workers in Jamaica and ensure access to fuel that will generate electricity for homes and for the plants that refine bauxite into alumina, Jamaica’s most lucrative export.
Unlike oil, which can be stored and transported easily, natural gas isn’t economical to ship. Before the LNG plants were built, natural gas encountered during oil extraction was regarded as a nuisance and usually burned off, Dawe noted.
“There are several large countries with many times the reserves we have, but Trinidad has an advantage in geography,” Look said of competitors in Algeria, Venezuela, Qatar and Russia. Compared with Trinidad, Algeria has to pay twice as much to get its LNG to the East Coast of the United States; Qatar’s costs are five times more.
According to the latest U.S. Energy Institute forecast, Trinidad has about 26 trillion cubic feet of national gas in proven reserves but could have as much as 90 trillion cubic feet in unexplored areas of its territorial waters. The forecast notes that political leaders will be challenged in their push for industrial development by rising international demand for natural gas, particularly from the United States.
The government in Port of Spain has stepped up the issuance of licenses for oil and gas exploration in hopes of finding further reserves to feed both growth engines: LNG exports and job-creating domestic industries.