caricom energy policy

8/8/2019 CARICOM Energy Policy

1/43

CARICOMENERGYPOLICY

JANUARY 2007


2/43

2

TABLEOFCONTENTSPAGE NO

ACRONYMS and ABBREVIATIONS 04

INTRODUCTION

MANDATE/TERMS of REFERENCE 05

OUTLOOK on ENERGY and the ECONOMY

(i) Global Perspective 07(ii) Regional Setting 08

CARICOM ENERGY POLICY

POLICY GOAL 11

OBJECTIVES OF CARICOM ENERGY POLICY 11

CHAPTER 1.0 SECURITY OF SUPPLY 13

CHAPTER 2.0 DEVELOPMENT and DIVERSIFICATION of ENERGY

SOURCES and MARKETS 15

2.1 PETROLEUM SECTOR 15

2.1.1 Specifications for Petroleum Products

2.1.2 Transportation of Petroleum and petroleum-related

Products 16

2.2 NATURAL GAS SECTOR 16

2.2.1 Optimize Use of Natural Gas

2.2.2 Transport and Trading of Natural Gas

CHAPTER 3.0 RENEWABLE ENERGY 18

3.0 Renewable Energy Sources

3.1 Development of Hydro Power 19


3/43

3

CHAPTER 4.0 ELECTRICITY SECTOR 21

4.1 Power Generation

4.2 Transmission and Distribution of Electricity

4.3 Electricity Regulation 22

CHAPTER 5.0 ENERGY CONSERVATION AND EFFICIENCY 23

CHAPTER 6.0 ENERGY INVESTMENT 24

CHAPTER 7.0 INTRA-COMMUNITY TRADE IN ENERGY 25

6.1 Petroleum6.2 Natural Gas6.3 Pricing 26

CHAPTER 8.0 ENERGY and the ENVIRONMENT 27

CHAPTER 9.0 ENHANCEMENT of HUMAN and INSTITUTIONAL 28

CAPACITY

8.1 Human Resources Development

8.2 Institutional Strengthening8.3 Research and Development 298.4 Public Education and Outreach 30

CHAPTER 10.0 ENERGY AND POVERTY ALLEVIATION 31

CHAPTER 11.0 CONCLUSION 32

~.0~0.~0.~


4/43

4

ACRONYMS AND ABBREVIATIONS

ALBA Bolivarian Alternative for the Americas

Boepd Barrels of oil equivalent per day

BTU British Thermal Unit

CAIC Caribbean Association of Industry and Commerce

CARICOM Caribbean Community

CARILEC Association of Caribbean Electric Utilities

CEIS Caribbean Energy Information Systems

CET Common External Tariff

CREDP Caribbean Renewable Energy Development Programme

CROSQ CARICOM Regional Organisation for Standards and Quality

CSM CARICOM Single Market

CSME CARICOM Single Market and Economy

HOVENSA Subsidiary of Hess Oil Co. and PDVSA

IADB Inter-American Development Bank

IPP Independent Power Producers

LNG Liquefied Natural Gas

Mts Metric Tonnes

Mmbtu Million British Thermal Unit

OPEC Organization of Petroleum Exporting Countries

PETROCARIBE Energy Agreement between Venezuela and Caribbean States

PETROTRIN Petroleum Company of Trinidad and Tobago

PDVSA Petroleos de Venezuela SA

SHELL The Shell Group

SOL SOL Limited

WTO World Trade Organization

WTI West Texas Intermediate


5/43

5

INTRODUCTION

MANDATE/TERMS OF REFERENCE

1. At its Fourteenth Inter-Sessional Meeting held in Port of Spain, Trinidad andTobago, in February 2003, the Heads of Government of the Caribbean Community

Agreed to establish a Task Force, comprised of Barbados, Grenada, Guyana,

Jamaica, Suriname and Trinidad and Tobago1 , to develop recommendations for a Regional

Energy Policy, which would address issues such as-

(i) Security of energy supplies;

(ii) Energy pricing policy and the impact on relative competitiveness in the

CARICOM Single Market and Economy;

(iii) Purchasing and transportation arrangements2

2. When the Task Force began its work, it recognized that in addition to petroleum

and petroleum product pricing, it would also need to consider issues pertaining to3:

a. Natural gas;

b. Renewable energy;

c. Investment requirements and coordinated investments in the Regional Energy

sector;

d. Energy efficiency;

e. Environmental Impact;

f. Rationalization of the Regional Energy Sector.

3. The Heads of Government, at their Twenty-Fourth Conference, held in July 2003

in Montego Bay, Jamaica, agreed to the Task Forces expanded Terms of Reference.

4. In the process of drafting this Policy, the Task Force faced three significant

challenges. The first challenge was encountered with the signing of the Energy Cooperation

1 Bahamas participated as an observer2 Regional Energy Policy For The Caribbean Community Initial Report of the Task Force3 Ibid.


6/43

6

Agreement (PETROCARIBE) between certain Member States of CARICOM and the Bolivarian

Republic of Venezuela. Under the heading Institutional Platform, the PETROCARIBE

Agreement assumes de facto responsibility for coordination of relevant policies, strategies and

plans for participating States. The Task Force is of the view that this responsibility ought to be

carried out collectively by and within the relevant Councils of the Caribbean Community. This

CARICOM Energy policy, however, does not consider any of the bilateral arrangements agreed

under the PETROCARIBE Initiative.

5. The second challenge stemmed from the unavailability of timely and relevant

data. In 2003, the First Meeting of the Task Force, held in Port of Spain, agreed that it was

important to conduct a Study on the Rationalisation of the Regional Energy Sector. Given the

diverse nature of the sector in the region, such a study was expected to lead to a betterunderstanding of its operation and to provide valuable information to support the elaboration and

implementation of a regional energy policy as well as domestic energy policies. The Conference

urged the Governments concerned to use their influence to encourage their petroleum-based

companies to make resources available for the conduct of the Study. However, since all required

resources were not received, the Study was not carried out. The absence of the Rationalisation

Study has constrained the ability of this Task Force to establish related timelines and targets

pursuant to the Policy set out hereunder. This study is still required, but the original Terms of

Reference will need to be amended in light of the implementation of the PETROCARIBE

Agreement.

6. Pricing was an important part of this Task Forces mandate and it represented the

third challenge. The issue of pricing with respect to non-discrimination and national treatment

under the Revised Treaty of Chaguaramas was referred to the CARICOM Secretariat for an

Advisory Legal Opinion. The CARICOM Secretariat drew the Task Forces attention to the

specific process outlined in the decision of the Conference on this matter. Specifically, the

Conference had decided that the Secretariats Advisory Legal Opinion should be submitted to the

Community Council, in accordance with Article 13.4(f) of the Revised Treaty. In its

deliberations the Task Force did not have the benefit of any conclusive opinion on pricing for

inclusion in this CARICOM Energy Policy.


7/43

7

OUTLOOK on ENERGY and the ECONOMY

GLOBAL PERSPECTIVE

7. Over the last three to five years, as the international economy experienced a surge

in benchmark prices for both oil and natural gas, fears have grown over the stability of global

energy markets. With respect to petroleum, benchmark WTI oil prices increased from US$26.00

per barrel in 2002 to over US$70.00 per barrel in early 2006, averaging US$60.00 per barrel in

2006. With respect to natural gas, in the North American market, benchmark Henry Hub prices

escalated from US$2.26 per mmbtu in early 2002 to approximately US$12.00 per mmbtu at the

end of 2005, averaging US$7.00 per mmbtu in 2006. In the European Market, average

Zeebrugge gas prices of US$3.00 per mmbtu in 2002, increased to US$7.00 per mmbtu by late

2005, averaging US$7.00 in 2006.

8. Several factors have been responsible for the increase in oil and natural gas prices

since 2002 and principal among them are continuing geopolitical tension in the Middle East;

political instability in some major exporting countries; minimal spare capacity among OPEC

members; supply disruptions in other parts of the world; and rapidly increasing global demand.

9. The 2006 editions of International Energy Outlook and World Energy Outlook

project that by the year 2030 total primary energy demand will increase by over 50%. In

particular, increased international demand for oil and natural gas is directly attributable to

burgeoning consumption in countries like China and India, where the use of oil and gas has

increased at an average rate of 8% per annum over the last three years.

10. Generally, it is noted that existing world energy resources may be adequate to

satisfy this projected demand, provided that approximately US$17 trillion is invested in the

improvement and capacity enhancement of petroleum supply. However, the current and urgent

challenge confronting the international community is the identification of plausible ways to

maintain reasonable energy prices, mitigate the adverse effects of high petroleum prices and

minimize petroleum supply disruptions.


8/43

8

REGIONAL SETTING

11. The Caribbean Community consists of developing small island States and low

lying coastal States, all of which exhibit unique and peculiar characteristics, including, inter alia,

varying topographies, limited natural resources, small populations and fragmented markets with

different energy product specifications.

12. CARICOM countries consume approximately 240,000 boepd and approximately

95% of this amount is derived from fossil fuels. With the exception of Trinidad and Tobago and

to a lesser extent Belize,4 CARICOM countries are essentially net importers of crude oil and

refined products, largely from extra-regional sources. Specifically, CARICOM Member States

source petroleum products from Trinidad and Tobago (PETROTRIN), Curacao (PDVSA), andmore recently Puerto Rico (Shell), and St. Croix (Hovensa). Table 1 illustrates CARICOM

Petroleum Demand and Supply Balances as at 2006.

TABLE 1

13. Owing to increasing international demand for petroleum and rising petroleum

prices, CARICOM countries are grappling with critical issues relating to security of supplies andpricing and transportation arrangements for petroleum products traded in the region. With a view

to ameliorating the deleterious economic effects of high petroleum prices, many CARICOM

States have availed themselves of support available from Trinidad and Tobagos Petroleum

4 Belize recently began exporting crude but still imports refined products.


9/43

9

Stabilization Fund implemented in July 2004, and the Energy Co-operation Agreement

(PETROCARIBE) signed in June 2005. As adumbrated in the Energy Co-operation Agreement,

the primary purpose of the PETROCARIBE arrangement is to contribute to the social and

economic development of Caribbean countries, through the principles of integration outlined in

ALBA.

14. In June 2005, eleven (11) CARICOM Member States5 signed the Energy Co-

operation Agreement (PETROCARIBE), while so far nine (9) CARICOM Member States6 have

signed bilateral agreements with Venezuela. With respect to the Trinidad and Tobagos

Petroleum Stabilization Fund, TT$750 million of grant funds have been disbursed as at the end

of December 2006.

15. With respect to the refining capacity of the CARICOM region, there are three (3)

refineries with a total capacity of 202,000 bpd. The total expenditure for planned refinery

upgrade projects for all 3 refineries has been projected to exceed US$1.5 billion. In light of the

scarce resources available to the Governments of the region for economic development,

opportunities exist for integration or rationalization of regional refining industry and production

capacities in the energy sector.

16. Currently, a CET of 10% to 20% is applied on petroleum products imported from

extra-regional sources. Products originating from refineries within the CSM and imported crude

oil are zero rated. At the Seventeenth Inter-Sessional Meeting of the Conference of Heads of

Government of the Caribbean Community, the Heads

Welcomed the expression of willingness of Trinidad and Tobago to facilitate

PETROCARIBE and to support the application for suspension of the Common External

Tariff by Member States when made to the COTED7

5 Eleven Members of CARICOM signed the Framework Agreement - Antigua and Barbuda, The Bahamas, Belize,Dominica, Grenada, Guyana, Jamaica, Suriname, Saint Lucia, St. Kitts and Nevis and St. Vincent and theGrenadines6 Nine Members signed bilateral agreements - Antigua and Barbuda, Belize, Dominica, Grenada, Guyana, Jamaica,Suriname, St. Kitts and Nevis and St. Vincent and the Grenadines7 Summary of Recommendation and Conclusions of the Seventeenth Inter-Sessional Meeting of the Conference ofHeads of Government of the Caribbean Community, Port of Spain, Trinidad and Tobago, 9-10-February 2006


10/43

10

17. In 2006 CARICOM implemented the CSM, with plans for the CSE to come on

stream in 2008. With a view to achieving one of the principal CSME objectives of accelerated,

co-ordinated and sustained economic development and convergence, it is incumbent upon

Member States to secure adequate energy supplies; increase renewable energy sources; ensure

environmental protection, particularly of the marine environment; and promote measures for

solidarity among Member States in times of energy crises.


11/43

11

CARICOM ENERGY POLICY

POLICY GOAL

18. The goal of the CARICOM Energy Policy is:

(a) Provision of sustainable and secure supplies of energy, accessible to allCARICOM citizens;

(b) Fundamental transformation of the energy sectors of the Member States of theCommunity so that they can contribute to the sustainable development of the

Community;

(c) Optimization of domestic production of energy in an environmentally soundmanner;

(d) Facilitating the growth of internationally competitive regional industries.

OBJECTIVES OF CARICOM ENERGY POLICY GOAL

19. In fulfilment of the goal of the CARICOM Energy Policy and to assure access to

adequate, safe and clean energy products necessary for the development and consolidation of the

CSME established by the Revised Treaty of Chaguaramas, the Community will develop a

programme of regional action in a coherent and comprehensive way in pursuit of the following

objectives:

(a) sustainable security of supplies of energy in and for the Community;

(b) accelerated development and restructuring of sources of supply of energy,

(c) sustained growth of intra-Community trade in energy;

(d) enhanced energy conservation and efficiency, and cleaner production

in the Community;

(e) increased investment in production, transformation and distribution of viable

energy resources;

(f) strengthening and enhancement of the human and institutional capacity in the

Community in the energy sector;

(g) programmed expansion of electricity generation, transmission and trade;


12/43

12

(h) access to affordable energy by the poor and vulnerable;

(i) greater use of renewable energy; and

(j) establishment and facilitation of an institutional framework for financing

mechanisms for the development of viable energy resources.


13/43

13

CHAPTER 1.0 SECURITY OF SUPPLY

20. In the context of this CARICOM Energy Policy and the need for research and

investment in the production of energy, essential for the sustainable market-driven development

of the Community, security of supply means the availability of and timely access by Member

States to energy resources of an acceptable quality, and at prices that are both affordable for

consumers and reasonable for producers.

21. The Task Force acknowledges that because Member States exert limited influence

on developments in the international energy markets, the CARICOM Energy Policy must be

inherently flexible, so as to enable Member States to respond to the extra-regional developments

that affect the regional energy market.

In order to ensure timely access to adequate supplies of energy, Member States will 8:

(a) Determine local and regional capacity to supply oil and gas products;

(b) Determine local and regional capacity to supply renewable energy;

(c) Diversify the energy supply mix;

(d) Determine optimum supply strategy for the Community (Petroleum Supply

Optimization Study and Database);

(e) Assure access to regional resources to other Member States;

(f) Devise and institute a CARICOM Charter to develop and maintain strategic

regional reserves of crude oil and energy products to be accessed in time of

emergency or crisis;

(g) Devise a Community strategy for solidifying internal energy markets of Member

States;

(h) Collaborate in pooling individual efforts to exert leverage on pricing and

marketing arrangements in the region;

8 In this CARICOM Energy Policy actions by Member States refer to actions by these States acting individually orcollectively.


14/43

14

(i) Promote structured cooperation and collaboration among energy firms and

agencies through Associations of CARICOM National Hydrocarbon Companies,

electric utilities and renewable energy agencies;

(j) Develop and implement shipping arrangements for petroleum products in the

region that take account of the special need of the region.


15/43

15

CHAPTER 2.0 DEVELOPMENT and DIVERSIFICATION of ENERGY SOURCES

AND MARKETS

2.1 PETROLEUM SECTOR

22. The current dynamics of the international petroleum market, notably continuing

robust demand, constraints in refining capacity and escalating prices, require an urgent co-

ordinated effort by concerned States to explore alternatives with the aim of diversifying the

product mix and sources of supply in order to secure affordable petroleum-based products.

Member States will:

a)

Encourage dialogue among national oil companies, with the aim of increasingsupplies of and access to supplies of energy resources among CARICOM

Member States;

b) Encourage private and public entities within the region to seek opportunities to

explore and develop potential crude oil and natural gas reserves within the wider

Caribbean; and

c) Enhance participation by Community enterprises in exploration, production,

refining and shipping of petroleum and petroleum products.

2.1.1 Specifications for Petroleum Products

23. It is accepted that many CARICOM States may already have domestic national

specifications for petroleum products traded and consumed within their jurisdictions. Where

specifications do not exist, Member States are encouraged to provide for their establishment and

implementation.

Member States will, in association with CROSQ:

a) Identify those specifications that can be standardized; and

b) Adopt such standards;


16/43

16

2.1.2 Transportation of Petroleum and Petroleum Related Products

24. Currently, the transportation of petroleum and related products into and within the

CARICOM region is effected through an established distribution network of vessels, trucks and

retail outlets which are owned and operated predominantly by private firms, but with some State

involvement.

25. This distribution network has kept the region supplied with petroleum products,

but at a high cost to Member States. It is imperative that steps are taken, not only to reduce such

high transportation and distribution costs, but to implement measures which ensure that a more

efficient cost effective transportation network is put in place.

Member States will:

(a) Improve and optimize the efficiency of the transportation network for petroleum

and related products;

(b) Reduce transportation costs for petroleum and related products;

(c) Develop centralized storage systems for petroleum and related products;

(d) Develop transshipment hubs;

(e) Create strategic reserves where feasible;

(f) Establish mechanisms for protecting consumers and assuring affordable

petroleum products to consumers; and

(g) Establish regional control of appropriate shipping services.

2.2 NATURAL GAS SECTOR

2.2.1 Optimize Use of Natural Gas

26. Natural gas is a cheaper and cleaner fossil fuel which can be used not only to

generate electricity efficiently (by deploying advanced technologies) but also as a feedstock for

the manufacture of petrochemical products. Unlike the case of crude oil at the present time, the

potential exists for the Community to be able to satisfy its demand for natural gas from the

resources of Member States.


17/43

17

In order to realize this potential, Member States will:

a) Develop and implement programmes and projects which aim to

incorporate, expand and optimize the use of natural gas in the energy mix;

b)

Establish natural gas as a key energy source for the region; and

c) Encourage research into natural gas utilization and transportation through

the Natural Gas Institute of the Americas.


18/43

18

CHAPTER 3.0 RENEWABLE ENERGY

3.1 RENEWABLE ENERGY SOURCES

27. There are numerous commercially viable renewable energy sources availablewithin the CARICOM region, including, solar, wind, biomass, bio-gas, landfill gas, bio-ethanol,

hydro, and geo-thermal. At present, other renewable energy applications such as bio-diesel are

becoming more commercially and financially viable and are worthy of further development.

Member States are urged to keep abreast of developments in renewable energy resources such as

ocean waves, tides and currents, as well as hydrogen.

In order to reduce the dependence on fossil fuels, Member States will:

a) Develop comprehensive national energy policies that seek to increase the use of

commercially viable renewable energy sources to 10% of primary energy by the

year 2010;

b) Draft and implement legislation and regulations to promote the use and

development of renewable energy sources;

c) Draft and implement regulatory and legislative enactments to require utilities to

use or increase the utilization of renewable energy sources in the electricity

sector;

d) Ensure that the synergies between agricultural production and the renewable

energy sector are optimized (e.g. for bio-energy sources such as bio-ethanol, bio-

diesel and biomass);

e) Identify available renewable energy sources and technologies that are practical,

commercially viable and suited to particular Member States;

f) Encourage the substitution of renewable energy technologies that may be

damaging to human health (e.g. charcoal and wood stoves) with more benign

commercially viable renewable energy technologies;

g) Encourage short and long term programmes for active research, development and

training in renewable energy technologies and designs;


19/43

19

h) Establish South-South cooperation programmes as a means to harness existing

expertise from outside the region;

i) Encourage the use of carbon trading opportunities as a means of enhancing the

financial returns of renewable energy projects;

j) Strengthen the Energy Desk of the CARICOM Secretariat, inter alia, to:

(i) Research, advise on, recommend, co-ordinate and conduct educational

programmes on renewable energy;

(ii) Promote commercially viable renewable technologies;

(iii) Develop model laws and fiscal policies to support renewable energy;

(iv) Update CARICOM renewable energy targets, identify sources of grant

financing and establish links between regional renewable initiatives (e.g.:

the Caribbean Renewable Energy Programme, the Wigton Wind Farm

Centre of Excellence, Barbados Renewable Energy Centre and other

national agencies of excellence.

3.2 DEVELOPMENT OF HYDRO POWER

28. In contrast to energy produced from hydrocarbons, energy produced by

hydropower cannot be stored. Transportation of hydro originated energy can only be achieved

through fixed infrastructure (i.e. power lines). Notwithstanding, the development and utilization

of hydropower potential can be achieved by establishing energy intensive industries near to a

hydropower source.

29. Within the CARICOM region, some Member States have engaged in hydro-

electric power generation, particularly Guyana, Suriname, Dominica and Jamaica. Potential

exists for significant expansion in this sector in the future.


20/43

20

Member states will:

a) Explore and utilize viable technologies for commercial long distance

transportation of hydro- electric energy; and

b) Encourage private and public entities within and outside the region to seek

opportunities to establish energy intensive operations near to hydropower sources

within the region.


21/43

21

CHAPTER 4.0 ELECTRICITY SECTOR

4.1 Power Generation

30. Electricity rates in Member States are among the highest in the world and thereasons for this include: lack of economies of scale; isolation of utilities due to the lack of

an interconnecting transmission system; over capacity as a result of the isolation; lack of

collective buying arrangements for fuel and power plants; and the historical use of cost

of service and rate of return regulations which encourages over investment. To

achieve a sustainable reduction in such rates, Member States will need to intervene in the

electric sector in a manner that goes beyond the narrow traditional role of regulating the

generation, transmission, distribution and pricing of electricity.

Member States will:

a) Identify, develop and promote alternative or renewable energy sources,

technologies and systems for electricity generation;

b) Promote advanced high-efficiency power generation technologies such as

combined cycle, cogeneration, and hydro-power;

c) Promote competition in power generation to encourage non-utility or independent

power producers (IPPs);

d) Cooperate in the observance of best practice industry standards and employment

of mechanisms, which reduce system losses in the electricity sector;

e) Encourage utilities to participate in collective purchasing programmes with other

utilities through regional networks such as CARILEC;

f) Encourage institutional collaboration aimed at the production of electricity from

municipal solid waste.

4.2 Transmission and Distribution of Electricity

31. The Community can only benefit economically if the demand for electricity in the

single economic space can be satisfied by the supply of electricity from the single economic

space, and if any shortage in one area can be satisfied from a surplus in another.


22/43

22

Member States will:

a) Explore the opportunities for import, export and cross-border trade in electricity ;

b) Encourage the deployment of new technologies that promote higher energy

efficiencies in electric power generation, reduce transmission and distribution

losses, and reduce commercial losses.

4.3 Electricity Regulation

32. The creation of a transparent and independent enabling regulatory system is

critical to the development of the electric sector. However, this is constrained by a shortage of

qualified personnel in the smaller Member States.

Member States will:

a. Establish appropriate regulatory agencies;

b. Promote regulation of the electricity sector and introduction of relevant regulatory

and legislative enactments.


23/43

23

CHAPTER 5.0 ENERGY CONSERVATION AND EFFICIENCY

33. To optimize the use of energy for development, it is important to implement

measures to minimize energy consumption and increase energy efficiency. Often, these

measures are low or no cost and therefore should be implemented immediately.

Member States will:

a) Promote energy conservation, energy efficiency, reductions in energy intensity

and establish appropriate measurement and monitoring standards and guidelines;

b) Promote energy saving measures through introduction of fiscal incentives and

other incentives;

c)

Implement intensive energy saving and energy efficiency programmes, whichinclude energy audits of residential and commercial properties;

d) Promote the use and installation of renewable technology in the construction,

refurbishment and upgrade of public, commercial and residential buildings;

e) Establish regional energy efficiency institutional networks and energy efficiency

testing facilities;

f) Establish electric utility and other Demand Side Management programmes;

g) Develop regional public sector energy efficiency programmes;

h) Establish training capacity in national and regional agencies;

i) Develop a CARICOM Charter on Energy Efficiency.


24/43

24

CHAPTER 6.0 ENERGY INVESTMENT

34. Energy related projects are capital intensive, and as a consequence require

considerable capital investment from both public and private sectors of CARICOM Member

States.

35. In order to create appropriate conditions to attract much needed capital from

domestic, regional and international sources, Member States will:

a) Provide the requisite policy, legislative and regulatory frameworks, including

fiscal and economic incentives, to encourage and increase private and public

sector investment in the development and commercialization of relevant energy

related projects in, inter alia:

(i) Petroleum resources;

(ii) Natural gas resources;

(iii) Renewable energy resources;

(iv) Energy efficiency

b) Establish energy investment promotion units to:

(i) record and monitor public and private investments in energy and

renewable energy related projects;

(ii) identify local, regional or international agencies which provide funds for

energy or renewable energy projects and assist prospective investors in

satisfying the application criteria.

c) Encourage membership in relevant regional and international organizations in

order to maximize access to resources, assistance and support.


25/43

25

CHAPTER 7.0 INTRA-COMMUNITY TRADE IN PETROLEUM

7.1 Crude Oil and Petroleum Products

36. All Member States except Trinidad and Tobago are net importers of petroleum.CARICOM Member States expend approximately US$2.54 billion per annum on petroleum

imports. Twenty-one percent (21%) of this sum represents imports into the region, while

seventeen percent (17%) represents export receipts in the Community.

37. The supply of petroleum products is constrained by several factors, including the

availability of appropriate shipping services and issues relating to parcel size and product

specifications.

38. In pursuit of the primary objective of regional security of supply, it is important

that the application of CET to imports of refined petroleum products, except imports under

PETROCARIBE, be maintained.

7.2 Natural Gas

39. Given the increasing demand for natural gas among some CARCIOM Member

States, the establishment of a more efficient transportation, distribution and marketing network

for natural gas is required.

40. Natural gas supply options and the costs thereof vary, depending on whether it is

transported, distributed or traded in the following forms:

CNG;

LNG;

Piped natural gas; or

Electricity transmission lines.

Member States will:

a) Identify and implement alternative methods and measures aimed at:

(i) creating more efficient means to transport natural gas; and


26/43

26

(ii) expanding the transportation and trade network for natural gas within the

CARICOM region;

b) Co-ordinate shipping arrangements to minimize transportation costs.

7.3 Pricing

41. The prices of petroleum products in the region are volatile and subject to the

vagaries of the international market-place. Recent developments in global energy markets have

led to surging oil and, to a lesser extent, natural gas prices. With CARICOM demand for and

supply of petroleum estimated at less than 1% of world demand and world supply respectively,

CARICOM Member States have little or no capability to influence prices of crude oil and

petroleum products which are traded internationally in the global market.

42. Determination of basic petroleum prices will remain a function of demand and

supply in the global market-place and by extension within the Community. Pricing of regional

energy sources should conform to the Revised Treaty of Chaguaramas, where applicable.

Member States need to focus on and positively affect both demand and supply and Member

states will:

(a) Increase energy efficiency, enhance energy conservation and reduce the demand

for petroleum per unit of output;

(b) Increase energy supplies from all viable sources of energy;

(c) Establish regional control over access to appropriate shipping on a long-term

basis;

(d) Create strategic stockpiles of petroleum and petroleum products;

(e) Encourage and increase collaboration and coordination among national petroleum

companies, so as to maximize their leverage in the market;

(f) Identify mechanisms which mitigate the adverse effects of escalating prices for

crude, petroleum products and natural gas; and

(g) Utilize developments in technology which allow for the commercial distribution

of energy among Member States in an efficient manner.


27/43

27

CHAPTER 8.0 ENERGY and the ENVIRONMENT

43. The production, transportation and use of energy have considerable impact on the

environment. It is important to ensure that economic growth, sustainable and secure energy

supplies and a clean environment are compatible objectives. The challenge for the Communityis therefore to ensure that the solutions for ensuring sustainable and secure energy supplies do

not exacerbate problems in the environment.

44. The integration of environmental considerations within the Community energy

policy needs to take place in a balanced way taking into account the goals and objectives of the

policy. A key objective of this policy is to ensure that good environmental practices are observed

in accordance with national, regional and international environmental standards and legislation.

To achieve these objectives, action at all levels is required.

Member States will:

a) evaluate and disseminate information on the environmental impacts of various

energy options;

b) develop and implement information and education programmes for end users;

c) ensure the exchange of information, the dissemination of best practices and shared

analyses to facilitate cooperation among Member States;

d) adhere to existing national, regional and international environmental legislation

and Standards;

e) introduce economic and fiscal incentives and measures, which promote good

environmental practices in the energy sector;

f) introduce programmes for self-regulation of energy producers and suppliers;

g) develop appropriate plans for liability and compensation regimes for cases of

environmental acts and omissions negatively affecting the environment


28/43

28

CHAPTER 9.0 ENHANCEMENT OF HUMAN and INSTITUTIONAL CAPACITY

9.1 Human Resource Development

45. It is important that CARICOM Member States train and develop skilled personnel

to satisfy the human resources demands of the energy industries.

Member States will:

a) Identify and promote mechanisms to develop a regional pool of human resources

to provide the requisite professional expertise and skills needed in the energy

sector;

b) Establish regional mechanisms to provide for training and technical assistance in

the energy field;c) Encourage public and private schools, technical colleges and universities, to

conduct programmes and courses and offer overseas student or job

trainee/internship exchange energy programmes in subjects including, inter alia:

petroleum value chain; renewable energy; energy efficiency; energy policy,

programming and research and development;

d) Offer scholarships and funding for the training of skilled personnel in energy and

energy related fields.

9.2 Institutional Strengthening

46. CARICOM Member States should ensure that the appropriate legal, fiscal and

regulatory frameworks are established in order to aid the development and implementation of the

Community Energy Policy.

Member States will:

a) Explore, create, develop and promote institutional capabilities in the energy and

electricity sectors, including:

(i) Energy Policy formulation

(ii) Management, assessment and audit of energy systems;

(iii) Resource monitoring;


29/43

29

(iv) Design of legislative and regulatory frameworks pertaining to the energy

and electricity sectors;

b) Strengthen the capacity of CEIS to provide harmonized data on the energy sector

and establish a central Regional Energy Database, which serves as depository for

regional energy or energy related information for use by Member States;

c) Provide, on a timely basis, the requisite information that the central depository

requires to fulfil its function;

d) Develop a mechanism for facilitating intra-Community technical cooperation;

e) Encourage all electricity generating utilities and other associated public and

private sector entities in CARICOM to participate in CARILEC;

f) Convene regular meetings of the Ministers with responsibility for energy matters

to oversee the implementation of the CARICOM Energy Policy;

g) Encourage dialogue among national oil companies with the aim of enhancing

access to energy resources within the Community and to establish a CARICOM

Energy Committee to coordinate inter-governmental energy dialogue and

planning;

h) Support the establishment of CARICOM energy desk.


30/43

30

9.3 Research and Development

47. Market-led research, technological development, adaptation and

commercialization of technology in the energy sector should be directed to enhancing the

competitiveness of regional industries and improving the quality of life of the people of the

Community.

Member States will:

a) Encourage research and development primarily in natural gas, solar fuels and

other renewable resources by public and private sector agencies, research

establishments and tertiary institutions and assist in identifying sources of funding

for such activities;

b) Establish guidelines for the adaptation, diffusion and transfer of appropriate

technologies in the fields of priority interest for research and development;

c) Promote research and development of appropriate energy related technology

programmes;

d) Promote cooperation in research and technological development among Member

States; and

e) Facilitate cooperation:

(i) in training;

(ii) in the exchange of scientific and technical information among competent

institutions; and

(iii) among private sector enterprises to integrate the results of research and

development

9.4 Public Education and Outreach


31/43

31

48. Taking into account significant changes occurring in the global energy sector, it is

imperative that the public be sensitized and encouraged to play an active role in the

implementation of the programmes and projects emanating from the CARICOM Energy Policy.

49. Member States will undertake to create and implement programmes and course

curriculum which ensure the availability and public dissemination of adequate information on the

benefits of energy conservation and efficiency.

CHAPTER 10.0 ENERGY and POVERTY ALLEVIATION

50. In most CARICOM Member States, the majority of the population is connected to

an electricity grid, while in some territories, a significant minority of households have no access

to the national grid or affordable energy supplies.

Member States will:

a) increase access to electricity in remote areas and where applicable, deploy

alternative technologies (photovoltaic technology, micro-hydro and biogas) in

rural farming communities;

b) establish and expand programmes to provide affordable energy to the poor and

vulnerable in the Community.


32/43

32

CHAPTER 11.0 CONCLUSION

51. The Member States of the CARICOM Community have for some considerable

time evinced an interest in the formulation of a CARICOM Energy Policy and the

implementation of measures which could insulate Member States from the vagaries of the

international oil market. It is noteworthy, however, that interest in the formulation of the policy

has tended to increase when international prices of petroleum were high and to wane when prices

fell to more acceptable levels.

52. Today, however, industry experts generally agree that a fundamental shift in the

oil market has occurred, which will prevent prices from returning to the more acceptable levels

experienced in the past. If regional Governments accept this assessment for the future direction

of the petroleum market, it is crucial that previous inaction is not repeated and immediate steps

are taken to implement this policy, with the ultimate goal of assuring the vitality of regional

integration movement and avoiding serious economic difficulties among the more vulnerable

Member States of the Community.

53. This CARICOM Energy Policy has been so formulated as to lend itself to targeted

and programmatic implementation of its constituent elements, whether for example, such

elements relate to the creation of strategic reserves of petroleum products and the modalities

associated with that exercise; the need for establishment of some measure of control over

shipping of petroleum products to disparate island markets and low lying coastal States in the

Community; or desirability for diversification of the energy mix and increase in the proportion of

renewables in the production of energy.

54. Taking due cognizance of the significance of energy in the everyday life of the

citizens of the Caribbean Community and its importance in the sustainable economic

development of Member States, it is of critical importance that regional Governments seek to

adopt, incorporate and implement the objectives and programmes outlined in this CARICOM

Energy Policy.


33/43

33

55. In pursuit of the sustainable economic development of the Community and the

enhancement of the quality of life of the people of the region, acting individually and in concert,

Member States are required now, beginning with the adoption of this Policy, to cooperate and

collaborate on measures designed to ensure provision of affordable, ample, clean and high

quality energy to the consumers of the region and to engage in purposeful and concrete actions

that minimize, reduce and mitigate any economic distress caused by high petroleum prices. The

ability of regional governments to exert positive influences on petroleum pricing in the

Community will be a function of the collective willingness of Member States to confront those

peculiarities and weaknesses in the petroleum market in the Community that conduce to the

maintenance of high prices in the region for petroleum products.

56. To assist the Conference and Member States in charting the way forward in the

implementation of this Policy, the Task Force submits for the attention of Conference an Annex

which groups a range of measures and action items culled from the Policy. The Task Force is

confident that action on the Annex can impact positively on the achievement of the overall goal

and objectives of Policy outlined above. The Task Force commends for the timely consideration

of the Conference the elements of the CARICOM Energy Policy set out above.


34/43

34

ANNEX

WAY FOWARD

The following action items are recommended for consideration by the Conference:

SECURITY OF SUPPLY

In order to ensure timely access to adequate supplies of energy, Member States

will:

a) Determine local and regional capacity to supply oil and gas products;

b) Determine local and regional capacity to supply renewable energy;

c) Diversify the energy supply mix;

d) Determine optimum supply strategy for the Community (Petroleum

Supply Optimization Study and Database);

e) Assure access to regional resources to other Member States;

f) Devise and institute a CARICOM Charter to develop and maintain

strategic regional reserves of crude oil and energy products to be accessed

in time of emergency or crisis;

g) Devise a Community strategy for solidifying internal energy markets ofMember States;

h) Collaborate in pooling individual efforts to exert leverage on pricing and

marketing arrangements in the region;

i) Promote structured cooperation and collaboration among energy firms and

agencies through Associations of CARICOM National Hydrocarbon

Companies, electric utilities and renewable energy agencies;

j) Develop and implement shipping arrangements for petroleum products in

the region that take account of the special need of the region.


35/43

35

PETROLEUM

Member States will:

a) Encourage dialogue among national oil companies, with the aim of

increasing supplies of and access supplies of energy resources among

CARICOM Member States;

b) Encourage private and public entities within the region to seek

opportunities to explore and develop potential crude oil and natural gas

reserves within the wider Caribbean; and

c) Enhance participation by Community enterprises in exploration,

production, refining and shipping of petroleum and petroleum products.

Specifications for Petroleum Products

Member States will, in association with CROSQ:

a) Identify those specifications that can be standardized; and

b) Adopt such standards;

Transportation of Petroleum and Petroleum Related Products

Member States will:

a) Improve and optimize the efficiency of the transportation network for petroleum

and related products;

b) Reduce transportation costs for petroleum and related products;

c) Develop centralized storage systems for petroleum and related products;

d) Develop transshipment hubs;

e) Create strategic reserves where feasible;

f) Establish mechanisms for protecting consumers and assuring affordable

petroleum products to consumers; and

g) Establish regional control of appropriate shipping services.

Optimize Use of Natural Gas

In order to realize the potential for natural gas usage in the Community, Member States

will:


36/43

36

a) Develop and implement programmes and projects which aim to incorporate,

expand and optimize the use of natural gas in the energy mix;

d) Establish natural gas as a key energy source for the region; and

e) Encourage research into natural gas utilization and transportation through the

Natural Gas Institute of the Americas.

Renewable Energy Sources

In order to reduce the dependence on fossil fuels, Member States will:

a) Develop comprehensive national energy policies that seek to increase the use of

commercially viable renewable energy sources to 10% of primary energy by the

year 2010;

b) Draft and implement legislation and regulations to promote the use and

development of renewable energy sources;

c) Draft and implement regulatory and legislative enactments to require utilities to

use or increase the utilization of renewable energy sources in the electricity

sector;

d) Ensure that the synergies between agricultural production and the renewable

energy sector are optimized (e.g. for bio- energy sources such as bio-ethanol, bio-

diesel and biomass);

e) Identify available renewable energy sources and technologies that are practical,

commercially viable and suited to particular Member States;

f) Encourage the substitution of renewable energy technologies that may be

damaging to human health (e.g. charcoal and wood stoves) with more benign

commercially viable renewable energy technologies;

g) Encourage short and long term programmes for active research, development and

training in renewable energy technologies and designs;

h) Establish South-South cooperation programmes as a means to harness existing

expertise from outside the region;

i) Encourage the use of carbon trading opportunities as a means of enhancing the

financial returns of renewable energy projects;

j) Strengthen the Energy Desk of the CARICOM Secretariat, inter alia, to:


37/43

37

(i) Research, advise on, recommend, co-ordinate and conduct educational

programmes on renewable energy;

(ii) Promote commercially viable renewable technologies;

(iii) Develop model laws and fiscal policies to support renewable energy;

(iv) Update CARICOM renewable energy targets, identify sources of grant financing

and establish links between regional renewable initiatives (e.g.: the Caribbean

Renewable Energy Programme, the Wigton Wind Farm Centre of Excellence,

Barbados Renewable Energy Centre and other national agencies of excellence.

Development of Hydro Power

Member states will:

a) Explore and utilize viable technologies for commercial long distance

transportation of hydro electric energy; and

b) Encourage private and/or public entities within and outside the region, to seek

opportunities to establish energy intensive operations near to hydropower sources

within the region.

Power Generation

Member States will:

a) Identify, develop and promote alternative or renewable energy sources,

technologies and systems for electricity generation;

b) Promote advanced high-efficiency power generation technologies such as

combined cycle, cogeneration, and hydro-power;

c) Promote competition in power generation to encourage non-utility or independent

power producers (IPPs);

d) Cooperate in the observance of best practice industry standards and employment

of mechanisms, which reduce system losses in the electricity sector;

e) Encourage utilities to participate in collective purchasing programmes with other

utilities through regional networks such as CARILEC;

f) Encourage institutional collaboration aimed at the production of electricity from

municipal solid waste.


38/43

38

Transmission and Distribution of Electricity

Member States will:

a) Explore the opportunities for import, export and cross-border trade in electricity ;

b) Encourage the deployment of new technologies that promote higher energy

efficiencies in electric power generation, reduce transmission and distribution

losses, and reduce commercial losses.

Electricity Regulation

Member States will:

a) Establish appropriate regulatory agencies;

b) Promote regulation of the electricity sector and introduction of relevant regulatory

and legislative enactments.

Energy Conservation and Efficiency

Member States will:

a) Promote energy conservation, energy efficiency, reductions in energy intensity

and establish appropriate measurement and monitoring standards and guidelines;

b) Promote energy saving measures through introduction of fiscal incentives and

other incentives;

c) Implement intensive energy saving and energy efficiency programmes, which

include energy audits of residential and commercial properties;

d) Promote the use and installation of renewable technology in the construction,

refurbishment and upgrade of public, commercial and residential buildings;

e) Establish regional energy efficiency institutional networks and energy efficiency

testing facilities;

f) Establish electric utility and other Demand Side Management programmes;

g) Develop regional public sector energy efficiency programmes;

h) Establish training capacity in national and regional agencies;

i) Develop a CARICOM Charter on Energy Efficiency.


39/43

39

Energy Investment

Member States will:

a) Provide the requisite policy, legislative and regulatory frameworks, including

fiscal and economic incentives, to encourage and increase private and public

sector investment in the development and commercialization of relevant energy

related projects in, inter alia:

(i) Petroleum resources;

(ii) Natural gas resources;

(iii) Renewable energy resources;

(iv) Energy efficiency

b) Establish energy investment promotion units to:

(i) record and monitor public and private investments in energy and

renewable energy related projects;

(ii) identify local, regional or international agencies which provide funds for

energy or renewable energy projects and assist prospective investors in

satisfying the application criteria.

c) Encourage membership in relevant regional and international organizations, in

order to maximize access to resources, assistance and support.

Natural Gas

Member States will:

a) Identify and implement alternative methods and measures aimed at:

(i) creating more efficient means to transport natural gas; and

(ii) expanding the transportation and trade network for natural gas within the

CARICOM region;

b) Co-ordinate shipping arrangements to minimize transportation costs.

Pricing

Member states will:


40/43

40

a) Increase energy efficiency, enhance energy conservation and reduce the demand

for petroleum per unit of output;

b) Increase energy supplies from all viable sources of energy;

c) Establish regional control over access to appropriate shipping on a long-term

basis;

d) Create strategic stockpiles of petroleum and petroleum products;

e) Encourage and increase collaboration and coordination among national petroleum

companies, so as to maximize their leverage in the market;

f) Identify mechanisms which mitigate the adverse effects of escalating prices for

crude, petroleum products and natural gas; and

g) Utilize developments in technology, which allow for the commercial distribution

of energy among Member States in an efficient manner.

Energy and Environment

Member States will:

a) Evaluate and disseminate information on the environmental impacts of various

energy options;

b) Develop and implement information and education programmes for end users;

c) Ensure the exchange of information, the dissemination of best practices and

shared analyses to facilitate cooperation among Member States;

d) Adhere to existing national, regional and international environmental legislation

and Standards;

e) Introduce economic and fiscal incentives and measures, which promote good

environmental practices in the energy sector;

f) Introduce programmes for self-regulation of energy producers and suppliers;

g) Develop appropriate plans for liability and compensation regimes for cases of

environmental acts and omissions negatively affecting the environment.


41/43

41

Human Resource Development

Member States will:

a) Identify and promote mechanisms to develop a regional pool of human resources

to provide the requisite professional expertise and skills needed in the energy

sector;

b) Establish regional mechanisms to provide for training and technical assistance in

the energy field;

c) Encourage public and private schools, technical colleges and universities, to

conduct programmes and courses and offer overseas student or job

trainee/internship exchange energy programmes in subjects including, inter alia:

petroleum value chain; renewable energy; energy efficiency; energy policy,

programming and research and development;

d) Offer scholarships and funding for the training of skilled personnel in energy and

energy related fields.

Institutional Strengthening

Member States will:

a) Explore, create, develop and promote institutional capabilities in the energy and

electricity sectors, including:

(i) Energy Policy formulation

(ii) Management, assessment and audit of energy systems;

(iii) Resource monitoring;

(iv) Design of legislative and regulatory frameworks pertaining to the energy

and electricity sectors;

b) Strengthen the capacity of CEIS to provide harmonized data on the energy sector

and establish a central Regional Energy Database, which serves as depository for

regional energy or energy related information, for use by Member States;

c) Provide the requisite information that the central depository requires to fulfil its

function, on a timely basis;


42/43

42

d) Develop a mechanism for facilitating intra-Community technical cooperation;

e) Encourage all electricity generating utilities and other associated public and

private sector entities in CARICOM to participate in CARILEC;

f) Convene regular meetings of the Ministers with responsibility for energy matters

to oversee the implementation of the CARICOM Energy Policy;

g) Encourage dialogue among national oil companies with the aim of enhancing

access to energy resources within the Community and to establish a CARICOM

Energy Committee to coordinate inter-governmental energy dialogue and

planning;

h) Support the establishment of CARICOM energy desk.

Research and Development

Member States will:

a) Encourage research and development primarily in natural gas, solar fuels and

other renewable resources by public and private sector agencies, research

establishments and tertiary institutions and assist in identifying sources of funding

for such activities;

b) Establish guidelines for the adaptation, diffusion and transfer of appropriate

technologies in the fields of priority interest for research and development;

c) Promote research and development of appropriate energy related technology

programmes;

d) Promote cooperation in research and technological development among Member

States; and


43/43

e) Facilitate cooperation:

(i) in training;

(ii) in the exchange of scientific and technical information among competent

institutions; and

(iii) among private sector enterprises to integrate the results of research and

development.

Public Education and Outreach

Member States will undertake to create and implement programmes and course

curriculum which ensure the availability and public dissemination of adequate information on the

benefits of energy conservation and efficiency.

Energy and Poverty Alleviation

Member States will:

a) Increase access to electricity in remote areas and where applicable, deploy

alternative technologies (photovoltaic technology, micro-hydro and

biogas) in rural farming communities;

b) Establish and expand programmes to provide affordable energy to the poor

and vulnerable in the Community.

caricom energy policy

Documents