By David Jessop
News Americas, LONDON, England, Fri. June 8, 2012: In March 1980 David Renwick, the Trinidadian journalist, and I wrote an extended feature for the Caribbean Chronicle about the future outlook for the Caribbean as an oil producing region.
In it we observed that although nobody expected the Caribbean to ever become oil or gas rich on the scale of Venezuela, it had been known for many years that two broad strata of rock of a kind likely to bear oil, run the length of the Caribbean Basin. Up to then little interest had been shown in this fact apart from where such strata coincided with island masses; the reason being that the high cost and technical problems of recovery were far beyond the value of such relatively small quantities of crude.
The article went on to say that although there were existing sites in shallow water probably capable of exploitation, most geological structures of interest were far below the Caribbean Sea. Few nations, we observed, had continental shelves and most dropped off very rapidly to depths between 600 to 3,000 feet. Somewhat presciently, we then suggested that ‘new drilling techniques and methods of platform construction now mean that it is possible to drill and – by the turn of the century – operate in depths of up to 4,000 feet.’ This meant, we argued, that it will be possible for Caribbean nations to begin to encourage offshore oil exploration.
Reading these words now it is clear that much of what we forecast has come to pass. The technology to drill and recover oil and gas from huge depths now exists. Oil prices have risen to levels previously thought unthinkable, making the cost of deep sea recovery viable. Demand for energy has surged and will continue to expand as the industrialization and wealth of advanced economies continues to grow. The potential contradictions between tourism, fisheries and oil and gas recovery have been recognized and spills and environmental disasters of the kind experienced in the Gulf of Mexico have made clear the need for the legal and regulatory frameworks in all nations in or bordering the Caribbean Sea.
There have also been other issues added to the mix, making the region strategically more attractive as an energy supplier: the possibility of greater instability around the world’s major producers in the Middle East as a result of any conflict with Iran; the widening of the Panama Canal making the Caribbean a North South and East West transit a key transhipment point in the Americas; and the opportunity the regions new deep sea ports and anchorages offers for storage and transhipment.
The level of exploration now taking place in the region makes it quite possible to Imagine a Caribbean, a decade from now, that is energy rich, a net exporter of oil and gas and in some cases trying to address the problems associated with wealth that hardly anybody is thinking about.
Some may say this is far-fetched as the US and other nations are beginning to supply an ever greater amount of their energy needs from shale gas and there is the high probability that there are huge quantities of oil and gas beneath the pristine wastes of the Canadian Arctic. However, the pace at which an ever increasing number of global oil corporations have begun actively to invest huge sums in prospecting for oil and gas in the Caribbean Basin suggests that before long more than one Caribbean nation will become an oil or gas producer.
As matters stand there is oil exploration underway, planned or licensing being considered in blocks off the coasts of French Guiana; Suriname; Guyana; Belize; Barbados; the Bahamas, Cuba, Jamaica; and Grenada and it seems in other islands in the Windward chain.
If there is a significant find, and it remains an if as only last week Spain’s Repsol announced that its exploratory well of Cuba’s north coast was dry, the Caribbean will be faced with a range of issues that no regional nation other than Trinidad has faced.
Finding oil is challenging especially for small economies with small populations. It raises questions about security, stability, governance, accountability, the control of corruption and the management of rapid change. It also requires new forms of macro-economic management, a tough and independent regulatory environment and the creation of well managed sovereign wealth funds or the like to invest wisely for a nation’s future. It also challenges every politician’s relationship to their electorate in respect of the equitable distribution of such wealth through to the provision of social programs and the management of taxation.
For this reason, if oil in substantial quantities were to be found in one or another of the countries above, they would be wise to study closely for best (or worst) practice the experience of countries or regions as diverse as Norway, Ghana, Alaska, or Nigeria.
For the Caribbean there are also important issues relating to the environment and tourism. As the Bahamas is finding, there is a need before agreeing to exploration to reconcile – ideally through an independent and respected national body – the conflicting interests of tourism, the environment and an industry which while essentially safe, will always carry with it recognized risks.
Other issues arise as well. As some Governments like Jamaica and Cuba have already realized, the appearance of an oil industry, even nearby, offers much broader economic opportunity through the huge secondary economic demand the oil sector creates for offshore services, storage and transhipment, let alone, if the size of the find is big enough, refining and downstream industries.
Oil in significant quantities would also bring significantly greater political and strategic attention to the region from the wider world, an issue that the Caribbean if wise would address on a regional basis.
The probability is that oil and gas will be found before too long off one or another Caribbean nation.
The implications require sober thought and careful analysis.
David Jessop is the Director of the Caribbean Council and can be contacted at [email protected]. Previous columns can be found at www.caribbean-council.org.
