GOVERNMENT–LED STRATEGICDEVELOPMENT OF A LIQUEFIED NATURAL

GAS INDUSTRY: THE TRINIDAD ANDTOBAGO EXPERIENCE –

David SmallThe National Gas Company ofTrinidad and Tobago Limited

Trinidad and Tobago, West Indies

GOVERNMENT–LED STRATEGIC DEVELOPMENT OF A LIQUEFIED NATURAL

GAS INDUSTRY: THE TRINIDAD ANDTOBAGO EXPERIENCE –

David SmallThe National Gas Company ofTrinidad and Tobago Limited

Trinidad and Tobago, West Indies

2

Importance of Hydrocarbon Sector to Country

(*) Assumptions and sources:1. Exchange rate US$ 1 = TT$ 6.3.2. Source of GDP data: Ministry of Finance.

The energy sector has historically represented approximately a quarter of the TT economy.

Total TT GDP (1996-2001)

23%

77%

Petroleum Sector Other Sectors

PETROLEUM

OTHER SECTORS

The petroleum sector is 23% (av. 1996-2001) of GDP at market prices

$9.7 billion of $42.6 billion

21.2% of total government revenue is energy sector related

71% of foreign exchange earnings are energy related

3

Trinidad and Tobago Natural Gas Reserve Position

The Ryder Scott audited natural gas reserves figures now stand as follows:

TcfProved 20.8 Probable 8.3 Possible 6.1 Total 35.2In addition, identified leads point to reserves of approximately 30.7 Tcf and unidentified resources estimated at 28.0 Tcf.

Gas Supply Sources

• 3P Reserves 35.2 TCF• Resource Potential 91.3 TCF

0 50 km

Venezuela

Trinidad

Tobago

Port of Spain

VenezuelaColumbus Channel

GaleotaPoint

Poui

Immortelle

Flamboyant

Cassia

SBM

Mahogany

Amherstia

Pt. Fortin

Pt. Lisas

30”

Beachfield

AbyssiniaPicton

San-Fernando

Dolphin

ALNG

Sparrow, Parangand Renegade

Block 5ABG/Texaco

Future Bombax gas pipeline

Kapok

NCMA gas pipeline

DAB

IrisOrchidPoinsettia

Chaconia

Hibiscus

5

Oil and Gas production projection 1970-2015 (BOED)

1970 1978 1985 1990 1995 2000 2005 2010 2015

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Oil &

Gas

Sales

, BOE

PD

GasOil

6

Gas Utilization 2003

Petrochemicals

28%

Metal Industries

3%

Power Generation

9%

Other 1%

Gas Processing 1%

Refining <1%

LNG 57%

Total2585 MMscf/d

7

Existing Gas Based Plants

• 1 Natural Gas Liquids Processing Facility (46 MBPD)• 3 Liquefied Natural Gas Plant (1600 MMscfd)• 9 Ammonia Plants (4,485 MTPA)• 1 Urea Plant (550 MTPA)• 5 Methanol Plants (2,960 MTPA)• 4 Iron and Steel Mills (2,560 MTPA)• 4 Power Generation Plants - Powergen (3) & Inncogen• Other

- Refinery- Cement Manufacture- Light Industrial/Commercial Consumers - 96- 2 Gas Fired Air Cooling Projects- 4000 CNG powered vehicles

8

Early Government Strategy

�The National Gas Company (NGC) formed in 1975 �Government invested in ammonia and methanol

facilities. �In effect, natural gas was used as a vehicle of

industrialization�Early 1980’s shift signaled a step-change in

Government thinking, �Monetize natural gas to offset the fall in gross

national revenue as the oil sector to showed signs of decline

9

Atlantic LNG Background

�LNG considered since1970’s

�Atlantic LNG train 1 has been heralded as a

highly successful, model project

�At US$950 Million one of the largest ever in

the Caribbean

�First Greenfield LNG plant in the Americas

�Constructed on time and within budget

10

Atlantic LNG LNG Train 1

� Modest Entry into LNG : 3 million tpy (425 MMcfd)�Utilized Phillips Optimized Cascade Process�Amoco (now BP) sole gas supplier�Commissioned - 1st Q 1999�Government Taxes- US$3 Billion over 20 yrs�Project “fast-tracked” by simultaneously seeking and finding gas reserves and identifying markets. �Tax holiday granted to facilitate development

11

Atlantic LNG Train 2/3 Expansion Project� The construction of 2 Liquefaction Trains together with storage and related facilities. Liquefaction of 1 billion standard cubic feet per day of natural gas

� Gas to be supplied from fields in the North Coast (BG) and East Coast Marine Areas (BP) .

�GORTT to receive US$6 Bn in revenues

�Expenditure commitment of US$160 million minimum in goods and services

� A US$1.1 Billion investment in the domestic economy

� No Tax holidays granted this project

12

World Top LNG Producers

Exp to 9.9 in 20056.6Oman (29.3 tcf)9

Exp to 15.1 in 20069.9Trinidad and Tobago (20.8 tcf)5

5.7

7.2

7.5

9.1

14.3

15.8

22.35

30.6

Capacity(MTPA)

Abu Dhabi (212 tcf)10

Brunei (13.8 tcf)8

Algeria (159.7 tcf)2

Exp to 23.5 in 2003Malaysia (75.0 tcf)3

Exp to 19.0 in 2004Qatar (508.5 tcf)4

Exp to 17.3 in 2005Nigeria (124 tcf)6

Indonesia (92.5 tcf)1

7 Exp to 11.7 in 2004Australia (90 tcf)

ExpansionCountry (Reserves)

(Proven Reserves in Trillion Cubic Feet)

13

Atlantic LNG Train 4

�June 2003,Government approved Train 4 project�Processing capacity of 800 million cubic feet per day. �Largest single LNG train in the world with capacity of 5.2 mtpy when completed in January 2006�Different equity holdings�Tolling arrangement�Marketing to new destinations�Government capture of upside

14

Exports to USA

Trinidad and Tobago as a site

#1in export to

North AmericaTrinidad & Tobago

78%

Oman2%

Qatar1%

Algeria10%

Nigeria9%

Australia0%

Total North America Import 2003(10.6 Million Tonnes)

T&T is now the 5th

Largest producer of LNGIn the WorldSource:US Department of Energy

15

USA LNG Imports 1994-2003

0

100

200

300

400

500

600

BCF

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Trinidad and Tobago Algeria Nigeria Qatar United Arab Emirates Oman A

Total US Import in 2003

(10.6 MM T)

T&T Supplied77%

Of USA Imports in 2003

Source: US Dept. of Energy

16

Atlantic LNG Plant

17

Map showing Cross border fields/discoveries

18

Trinidad and Tobago Stability

�Continuity of Trinidad and Tobago’s political institutions and its adherence

�Stable, democratic governmental process and political environment

�Investment strategies and policies have been towards fair treatment for any investor

�Success in attracting FDI is proof of stability

19

Comprehensive Gas Market Development

�Multiple gas development options pursued

�Initial development of downstream industry

�LNG followed

�Orchestrated by Government policy

20

Potential for Ethylene

� Establishment of an Ethylene - Based Petrochemical Complex

� Critical mass of ethane available with T4� World-scale plant of 800,000 tonnes� Development of downstream plastics

industry. � Creation of Additional Businesses � New Jobs for our Citizens in Manufacturing

associated with Polyethylene

21

Vertical Integration

� LNG chains are complex and costly. � Vertical integration of some of the key

project partners throughout the entire LNG value chain.

� More than one ‘bite’ of the pie� Participation in more than one element

helps to provide a higher level of confidence about the integrity of the chain

22

T&T Natural Gas Industry- Growth and Diversification

• During the period 1996 - 2002 over US$6 Bn. has been invested in the sector- On a per capita basis, highest level of FDI in the

Americas

• Relatively Diversified Gas Market- Internationally classified the *Trinidad Model* for

natural gas development- Other countries have shown considerable interest

in seeking to emulate our success

23

Conclusion

• Atlantic LNG helped to change industry fundamentals

• Trinidad and Tobago has emerged as an important player in the industry

• Role of Trinidad and Tobago LNG in USA market

• Overarching Government influence

24