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Caribbean Trade & Economy

Why buid a refinery in the Caribbean?

Author: Arjun Dave
Last Update: 7:07 AM ET July 23 2011

10:20 AM Miami The Caribbean region relies for most of its electricity and fuel needs on crude oil and derived prodcuts. The region has imported refined products for most of the last century. With the availabilities of cheaper refineries from Asia, the region can become a hub for the storage and exports of crude oil refined products.

Caribbean region with a population of more than 40 million is spread over 30 islands and has been dependednt on refined crude for more than a century from its neighbors in the Americas.

For more than a century the region in the past has imported crude from Venezuela, Mexico and the U.S.

Most of the refineries in the region are at least 30 years old and were designed to refine sweeet crude imported from the U.S. However, with the deep-drilling more and more crude available from Venezuela and Mexico is sour and heavy and the old refineries are not capable of processing.

The region can install newer refineries and become a export hub for refined crude prodcuts to the growing economies of Mexico and South America.

With the improvements in technology in the last two decades and better pollution control euipment and cheaper plants from India, China and Korea, the cost of refinery has come down in the recent yearrs.

Why buid a refinery in Caribbean?

Caribbean region import of crude oil has increased from 871,000 barrels a day in 1986 to 1.2 million barrels a day in 2009 at the same time the production has declined from 187,000 barels a day to 167,000 barrels a day.

In the last 10 years as the crude oil price has sky rocketed from $10 a barrel to $100 barrel and peaked at $150 a barrels in 2007, governments in the region have been looking to develop alternative sources of energy and increasing the refining capacity in the region with little success. Most of the electricity plants in the region are run on crude oil and coal fuel.

Also, the recent explosion of commerce between China and the U.S. has increased the flow of container ships passing through Panama Canal from 2,000 fifteen years ago to 6,000 in 2010. The flow of larger container ships is only expected to increase from 2014 after the Panama Canal expansion is completed.

Crude Oil Production

Caribbean natios located south of Florida and north of Venzuela have been net energy importers for last several decades. Though popluation has been fairly stable, the steady increase in energy consumption has kept the imports levels rising for years.

In the region, Trinidad and Tobago and Cuba are the only two nations exporting crude oil, U.S. Virgin Islands is an important refining destination and The Bahamas has the largest crude oil and refined products storage facility.

Trinidad and Tobago is the largest oil producer in the Caribbean with a total production of 147,000 barrels of which 47,000 barrels are natural gas liquids. Trinidad exports almost of all its natural gas to the U.S. but the exports have declined nearly 30% after the discovery of shale gas locations in Pennsylvania, New York and North Dakota.

The U.S. is said to have discovered 100 years of natural gas supply based on the current usage.

The Caribbean nations could benefit from the natural gas discoveries the U.S. as the prices have plummeted from as high as $13 per mBtu to $4.50 mBtu. There are very few power generation facilities in the Caribbean that are run on natural gas.

Rank Country production (Thousand Barrels per Day)
1 Trinidad and Tobago 147.00
2 Cuba 50.66
3 Guatemala 13.05
4 Belize 4.25
5 Barbados 0.74

Crude oil imports

Many Caribbean countries rely on imported crude from Mexico and Venezuela under the San Jose Pact. The favorable terms are extended to Barbados, the Dominican Republic, Haiti and Jamaica. Venezuela further offered favorable prices and credit terms as far as 30 years to all four nations in 2005.

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