Energy Trends and the Green Energy Transition in Trinidad and Tobago1
This Selected Issues Paper takes stock of the supply, transformation, and use of energy in Trinidad and Tobago.2 This allows a deeper understanding of the macroeconomic benefits, costs, and policy challenges arising from (i) declining oil and gas production due to maturing fields, (ii) the role of new exploration and discoveries of oil and gas, and (iii) the impact from climate change and the global green energy transition.
1. The energy sector in Trinidad and Tobago is at a crossroads. Traditionally, the energy sector has been a major source of economic activity, accounting for about 36 percent of the country’s nominal GDP in 2022. Also, it has been a major source of external and fiscal revenues, representing 81 percent of total exports and 55 percent of fiscal revenues in 2022. However, oil and gas fields in the country are mature, and production has been on a secular declining trend (Figure 1). This has also led to a reduction in the production of petrochemicals and liquefied natural gas (LNG) for export. The government has been very active in recent years to encourage the development of new fields, but these will take time to boost production. At the same time, climate change and the global green energy transition will inevitably shift the economy away from hydrocarbons and into renewable energy. These developments potentially have deep cyclical and structural implications for the economy and its evolution for decades to come. Therefore, it is critical to take stock of the current energy structure of the economy to understand the potential short and long-term macroeconomic implications of a rapidly transforming energy sector.
Trinidad and Tobago: Energy Production
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Sources: Trinidad and Tobago’s authorities, and IMF staff calculations.A. Energy Supply
2. The supply of primary energy in Trinidad and Tobago is dominated by natural gas, with a small share accounted for by crude oil (Figure 2). In 2021, natural gas accounted for 93 percent of the total energy supply in Trinidad and Tobago (Figure 1). Trinidad and Tobago does not source energy from coal products, nuclear, or hydropower generation to meet its energy needs. This energy profile is in stark contrast with other islands in the Caribbean or emerging market economies, and reflects differences in available energy sources. For instance, the Eastern Caribbean Currency Union (ECCU) countries have minimal domestic energy sources and rely on oil products, such as gasoline and diesel for the majority of their energy. In other emerging markets and advanced economies, the energy supply structure tends to be more diversified.
Trinidad and Tobago: Primary Energy Supply by Type of Fuel
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Source: United Nations’ Department of Economics and Social Affairs, and IMF staff calculations.Note: AEs = Advanced Economies, EMEs = Emerging Economies, ECCU = Eastern Caribbean Currency Union, LACX = Latin America and Caribbean net energy exporters, LACM = Latin America and Caribbean net energy importers. Coal is comprised of primary production and related products; oil is comprised of crude oil and oil products and includes natural gas liquids (NGLs).1/ Average 2010–2021.2/ Renewables include biofuels and waste, electricity, and heat.3. Trinidad and Tobago produces significantly more energy than it uses, so it is a net exporter of energy (Figure 3). The main source of energy in Trinidad and Tobago is domestic production of natural gas and crude oil. In 2021, the country produced 923,000 terrajoules (TJ) of natural gas, 130,000 TJ of crude oil, and 27,500 TJ of natural gas liquids (which includes propane, butane, and natural gasoline), and exported 510,000 TJ of energy.3 However, energy production in Trinidad and Tobago has declined over time. From 2010–19, natural gas production has fallen by 17 percent and crude oil and condensate production has fallen by 40 percent, and so energy exports have also fallen over this period. In contrast to Trinidad and Tobago, most other Caribbean islands are energy importers. For example, the ECCU countries rely almost entirely on imported oil products for their energy supply.
Trinidad and Tobago: Primary Energy Supply
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Source: United Nations’ Department of Economics and Social Affairs and IMF staff calculations.Note: Figures show primary energy supply (excluding electricity).1/ Comprised of international marine and aviation bunkers, and stock changes.2/ Average 2010–2021.4. In 2021, 44 percent of Trinidad and Tobago’s natural gas production was used to produce petrochemicals and 43 percent was exported directly as LNG. Trinidad and Tobago was the second largest exporter of ammonia in the world in 2021 and is the second largest producer of LNG in the Western Hemisphere after the United States. The remaining natural gas production is used for electricity generation (10 percent of primary production), and directly by end-users (e.g., industry and households, 3 percent of production). The share of natural gas used for LNG has fallen from 57 percent in 2019, reflecting reduced production of natural gas. In the case of crude oil (including condensates), production is primarily exported.4 Trinidad and Tobago also produced small amounts of energy from other sources which are used domestically (biofuels and waste, and renewable energy), but these were less than 0.1 percent of energy production.
Trinidad and Tobago: Natural Gas Use by Sector in 2021
(In Percent)
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Sources: United Nations’ Department of Economics and Social Affairs, and IMF staff calculations.Note: Other includes statistical differences, energy industries own use, and losses.5. Trinidad and Tobago produces natural gas liquids (NGLs) from its hydrocarbons (e.g., propane), and imports other oil products such as diesel and gasoline. Trinidad and Tobago produced 27,511 TJ of oil products (mainly NGLs) from hydrocarbons in 2021 and imported an additional 81,561 TJ of oil products. Of the total supply of oil products, the country reexported 56,050 TJ (to meet existing contracts), used 7,482 TJ to refuel international shipping and aviation, while domestic end-use consumption accounted for 38,885 TJ, primarily road transport.
6. Electricity generation is dominated by natural gas, and the efficiency of generation has increased over time. Trinidad and Tobago generated 33,332 TJ of electricity in 2021, of which 99 percent was produced via natural gas generators. A very small amount came from the use of oil generators and an even smaller amount from renewables. However, the production of electricity from natural gas results in large energy losses, as energy is wasted during the conversion process. As such, the country used 89,826 TJ of natural gas to produce 33,332 TJ of electricity. Electricity production was therefore 37 percent efficient in 2021.
7. Nonetheless, Trinidad and Tobago’s electricity efficiency is currently comparable to peers in the region and other emerging market economies. This reflects significant improvements in efficiency over the past decade, reflecting the replacement of some single-cycle turbines with combined-cycle turbines.5 While traditional single-cycle turbines have an efficiency of 20–35 percent, modern combined cycle turbines can have an efficiency of more than 50 percent. In the absence of this improvement, the country would have needed to use significantly more natural gas to generate the same amount of electricity.
Trinidad and Tobago: Electricity Efficiency
(In Percent, 1990–2021)
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Sources: United Nations’ Department of Economics and Social Affairs and IMF staff calculations.Note: Electricity efficiency shows the amount of electricity that is generated per unit of fossil fuel. Blue area shows the interquartile range. Outliers with efficiency above 100 percent are excluded from the sample, as are those with no data prior to 2007. EMEs and AEs are comprised of 134 and 33 economies, respectively.B. Energy Use
8. Considering the final consumption of energy, the industrial sector is the largest consumer, accounting for just under 50 percent of domestic consumption.6 Transport accounts for 30 percent, while households, businesses, and agriculture account for 19 percent. These shares have been broadly stable over time (Figure 4). Within industry, metal refining is the largest consumer of energy, while within transport, road transport is the main source of demand.
9. A greater share of energy use in Trinidad and Tobago is accounted for by industry compared to other Caribbean countries, reflecting differences in their economic structures. While 51 percent of energy consumption in Trinidad and Tobago is used in manufacturing, in the ECCU it is just 4 percent. Trinidad and Tobago’s plentiful supply of energy has allowed it to specialize in energy-intensive industries such as iron and steel, cement, and glass, and export these products. In turn, ECCU countries import almost all of their energy as well as energy-intensive goods such as glass rather than producing them domestically, and instead specialize in less energy-intensive industries such as tourism.
Trinidad and Tobago: Sectoral Use of Energy Production in Percent of Total Final
Energy Consumption (TFEC)
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Source: United Nations’ Department of Economics and Social Affairs, and IMF staff calculations.1/ Average 2010–202110. The relative importance of the fuels used in final energy consumption are different to the types of energy produced by Trinidad and Tobago. Overall, oil products are the most important source of energy, accounting for 39 percent of final energy consumption. In contrast, natural gas and electricity accounted for 31 and 30 percent, respectively. The types of energy used by individual sectors varies significantly, mostly reflecting differences in the way energy is consumed. For industry, 55 percent of total energy use is from natural gas, and this is primarily used by the iron and steel industry. The rest of the energy used by industry is from electricity and oil products which accounted for 37 and 11 percent of energy consumption, respectively. For road and air transport, all energy is provided by oil products, reflecting the reliance on internal combustion engine vehicles and minimal use of electric vehicles. For households and commerce, electricity is the primary source of energy at 62 percent of consumption and is employed for a variety of uses including lighting, heating, and cooling. Natural gas accounts for 17 percent, and oil products 20 percent, with the main uses for heating, cooking, and in generators.
C. Greenhouse Gas Emissions
11. Compared to its peers, Trinidad is particularly energy intensive and has higher carbon emissions. Energy consumption per capita was 124 megawatt hours (MWh) in Trinidad, the 6th highest in the world and higher than the ECCU average of 17 MWh (Figure 5). Similarly, carbon emissions are much higher in Trinidad and Tobago and the country had the 15th highest emissions in 2019. However, given the country’s small population, its global share of CO2 emissions was just 0.075 percent. The higher per capita energy use, particularly relative to the ECCU, are largely explained by the much greater share of manufacturing in Trinidad and Tobago, particularly energy-intensive manufacturing. It is also possible that energy use in Trinidad and Tobago is higher because energy use is less efficient than in other countries because energy is cheaper. This is likely to improve with the partial fuel price liberalization made in April and September 2022 and the adjustment of electricity tariffs (which is expected to be finalized in 2024).7 The country’s carbon emissions relative to its peers will become increasingly important going forward with the introduction of the EU’s Carbon Border Adjustment Mechanism (see accompanying Selected Issues Paper).
Per Capita Energy Consumption and Carbon Dioxide Emissions
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Source: Energy Institute – Statistical Review of World Energy (2023); OurWorldInData; and IMF staff calculations.Rebalancing the Energy Matrix
12. Trinidad and Tobago has several options to rebalance its energy portfolio to offset declining hydrocarbon production while taking advantage of the green energy transition. These include reducing domestic consumption of natural gas and oil products, boosting domestic production of natural gas, increasing renewable electricity production, and promoting the development of a green hydrogen sector. Implementing these could lead to an improved balance of payments position and boost fiscal revenues, thereby strengthening the fiscal position and external resilience. They could also help reduce the country’s greenhouse gas emissions.
Options to Optimize the Energy Matrix
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Note: Policy actions are shown in the blue boxes and the benefits are shown in the white boxes.13. Optimizing domestic consumption of natural gas could increase the amount available for export as LNG or for the production of petrochemicals. As a result of the structural decline in natural gas production, Trinidad and Tobago currently has significant excess capacity for producing LNG and petrochemicals. Reducing domestic consumption of natural gas would allow it to be used for either LNG or petrochemicals, boosting exports. This could be achieved by reducing the use of natural gas in electricity production, by either boosting the efficiency of generation or by increasing the installation of renewable energy. Other measures to reduce energy use, such as promoting energy efficiency, would have a similar benefit. The authorities have already made progress in this regard, including through the installation of new gas turbines, the use of fiscal incentives such as the waiving of VAT on new equipment for manufacturing companies utilizing alternate energy technologies or renewable energy options, and the promotion of more efficient LED lighting.
Trinidad and Tobago: Natural Gas Use in 2021 Under Different Scenarios
(In Thousand TJ)
Citation: IMF Staff Country Reports 2024, 151; 10.5089/9798400277238.002.A002
Sources: United Nations’ Department of Economics and Social Affairs and IMF staff calculations.Note: “No policies” shows the use of natural gas for LNG and electricity generation in 2021 if production was unchanged but the efficiency of electricity generation had remained at its 2010 level. “Actual” shows the real use of natural gas in 2021.14. To illustrate the impact of reducing domestic demand, in the absence of the improvement in electricity efficiency over the past decade, more natural gas would have been consumed domestically, with less available for export. If electricity efficiency had remained at its 2005 level of 26.6 percent, consumption of natural gas to generate the same amount of electricity would have been 35,000 TJ higher in 2021 (Text Figure). Assuming this natural gas was all diverted from LNG exports, it would have lowered LNG exports in 2021 by 11 percent, and total goods exports by about 2 percent, or $220 million.
15. Increasing electricity production from renewable energy sources could free up more natural gas for export use. Trinidad and Tobago is seeking to accelerate renewable energy installation. A utility-scale solar project, jointly owned by BP and Shell, is intended to generate 1,089 TJ of electricity per year—about 3.3 percent of current electricity production. This would free up about 3,000 TJ of natural gas for export as LNG (or to produce petrochemicals). In turn, that could boost LNG exports by 0.9 percent (compared to 2021 levels), or around $18 million annually at 2021 prices. If Trinidad and Tobago were to achieve a more ambitious renewable energy target in coming years, for example, achieving the authorities target of 30 percent of electricity generation from renewables by 2030, it could increase natural gas exports by about 8 percent each year (relative to 2021 levels), or just under $170 million.
16. Conversely, measures to reduce domestic consumption of oil products can reduce oil imports, which would also improve the balance of payments. The 2022 liberalization of fuel prices by the authorities will have increased incentives for consumers to use fuel such as diesel and gasoline more efficiently, reducing oil imports, while also providing significant fiscal savings.8 Increasing fuel efficiency standards for cars can similarly reduce oil imports, while encouraging the use of electric vehicles would reduce oil demand, but the impact on the balance of payments would depend on the source of electricity generation.9
17. Trinidad and Tobago also has significant potential to rebalance its energy matrix and take advantage of growing demand for green hydrogen and derivative products.10 In 2022, the authorities unveiled a 35-year roadmap to leverage Trinidad and Tobago’s comparative advantages in petrochemicals to produce green hydrogen (GH2) and downstream green products such as ammonia and methanol. The country could utilize renewable energy to produce green hydrogen as an alternative to natural gas in the production of petrochemicals. This would both free up additional natural gas for export, as well as reduce the carbon intensity of petrochemicals, making them more competitive in markets with carbon pricing. Green methanol may also be used as a future shipping fuel, which would allow Trinidad and Tobago to refuel ships with domestically produced methanol, rather than with imported oil products.
D. Policy Implications
18. Appropriate policy measures will be needed to maximize the opportunities and minimize the potential challenges facing Trinidad and Tobago’s energy sector. In the near-term, continuing efforts to reduce domestic consumption of natural gas, including through the promotion of energy efficiency and boosting the installation of renewable energy will help maintain supplies for LNG and petrochemicals. Recent initiatives in this regard are encouraging, for example, the planned electricity tariffs adjustment will promote efficient energy usage by consumers and businesses, while also relieving some fiscal pressures. Similarly, the BP-Shell utility-scale solar project represents an important first step in kickstarting the installation of renewable energy and reaching the authorities ambitious target of 30 percent of electricity from renewable sources by 2030.
19. A sharp and sustained increase in renewable energy will be needed to achieve Trinidad and Tobago’s roadmap for a green hydrogen economy. This could also help protect against the potential threat posed by the increasing use of border carbon adjustment mechanisms (e.g., EU’s Carbon Border Adjustment Mechanism—see accompanying Selected Issues Paper). Boosting investment in renewable energy could be incentivized by the use of policy tools such as subsidies or potentially a carbon price. Ensuring the regulatory framework is adequately in place is equally important, including the establishment of feed-in tariffs to simplify payments for generation.
20. At the same time, a rapid increase in renewable energy will need to be carefully integrated into the grid, given the challenges posed by intermittency of renewable production. This could require increasing the mix of renewables (particularly accelerating the installation of wind power, which can operate at different times of the day to solar), as well as incentivizing the use of storage such as batteries.11 Further, increased demand for electricity, either for the production of green hydrogen or a shift to electric vehicles and broader electrification of energy consumption (such as heat pumps) will likely require an expansion of the electricity grid, which would need substantial investment.
Annex I. Comparison of Data Sources
The data used in this analysis are taken from the United Nations’ Department of Economics and Social Affairs. This database contains information on energy production, transformation, and consumption, by fuel, for 215 countries. Table 1 compares these data to the official energy production data from Trinidad and Tobago’s Ministry of Energy and Energy Industries (MEEI). The data are broadly consistent. Any differences likely arise from challenges posed by compiling consistent datasets across countries. In particular, differences in the units used to convert the energy content in barrels of oil or standard cubic feet of natural gas to terrajoules can lead to sizeable differences across datasets. For this comparison, the conversion factors were calculated using the implied heat content of individual fuels.
Comparison of Energy Databases in 2021
Comparison of Energy Databases in 2021
| Type of Energy | Units | UN Database | MEEI | Energy Conversion Factor (from TJ) |
|---|---|---|---|---|
| Natural gas | Million standard cubic feet per day | 2524 | 2579 | 0.998 |
| Crude oil and condensates | Barrels per day | 59335 | 59850 | 166.778 |
| NGLs | Barrels per day | 16602 | 16747 | 220.264 |
Comparison of Energy Databases in 2021
| Type of Energy | Units | UN Database | MEEI | Energy Conversion Factor (from TJ) |
|---|---|---|---|---|
| Natural gas | Million standard cubic feet per day | 2524 | 2579 | 0.998 |
| Crude oil and condensates | Barrels per day | 59335 | 59850 | 166.778 |
| NGLs | Barrels per day | 16602 | 16747 | 220.264 |
Prepared by Peter Nagle and Diego A. Gutiérrez.
In the analysis, supply refers to the production of energy (e.g., natural gas), as well as the import and export of energy. Use refers to the domestic use of energy. This includes the use of an energy source in electricity generation, direct end-consumption across sectors (e.g., industry and households), and non-energy uses, primarily the production of petrochemicals from natural gas.
Throughout this annex energy is expressed in terajoules to allow for equivalent comparison between different fuels. 1TJ is equivalent to 166.8 barrels of crude oil, 0.998 million standard cubic feet of natural gas, and 34.1 tons of coal (see Annex I).
Trinidad and Tobago used to refine some of its crude oil production into oil products until the closure of the Petrotrin refinery in October 2018.
For example, the gas turbines at the Penal power plant were replaced in 2016, which increased power output from the plant by 34MW, improved heat rate and enhanced reliability (Penal Power Station (powergen.co.tt))
The use of natural gas to produce petrochemicals is not included in final energy consumption by industry.
See IMF, 2023, “Annex IV Fuel Subsidies in Trinidad and Tobago”, in “Trinidad and Tobago, 2023 Article IV Staff Report.”
See IMF, 2023, Annex IV. Fuel Subsidies in Trinidad and Tobago.
Encouraging the use of electric vehicles would shift energy consumption from imported oil products to domestically generate electricity. If this electricity was produced using natural gas, this could reduce the amount available for export as LNG and petrochemicals. This could offset the reduction in imports from reduced oil demand. If the electricity was instead produced from renewable energy it would reduce oil imports without affecting energy exports.
See IMF, 2023, Annex XIV. Roadmap to Green Hydrogen Economy in Trinidad and Tobago; and Inter-American Development Bank (IADB) and National Energy Corporation of Trinidad and Tobago, 2022, The roadmap for a green hydrogen economy in Trinidad and Tobago, November.
The potential for harnessing wind power is currently being explored. See Ministry of Energy and Energy Industries | Wind Resource Assessment Programme (WRAP)
