Trinidad and Tobago Budget Addresses Crippling Fuel Subsidies with CNG

| Trinidad and Tobago

The Government of Trinidad and Tobago (GORTT) is desperate to reduce the huge fuel subsidy which accounts for some two-thirds of the country’s budget deficit, by moving the transportation sector to compressed natural gas (CNG) and away from diesel fuel. This has been an open agenda for the past two years, but the slow transition means the government is seeking to introduce new measures to progress the uptake of CNG. The national budget presented for the 2012/2013 year contains such measures.

According to a Business Guardian article, the subsidy cost rose to $3.2 billion (USD 0.5 billion) in late 2010. Now that subsidy costs the country a massive $4.8 billion (USD 0.75 billion) per annum. Diesel fuel accounts for half of that subsidy, according to Raymond Franco, Ministry of Energy and Energy Affairs CNG Task Force Manager. Diesel, which costs the government $6.50 litre, is being retailed at $1.50 local currency, in itself a disincentive to move to other fuels.

Additionally, even though the comparative CNG retail price per litre is $1.07, the recovery on investment time for cost of conversion was too long for vehicle operators, Franco reportedly said.

GORTT published its State Enterprises Investment Programme 2012 – From Steady Foundation to Economic Transformation – in 2011, which detailed proposals for increased CNG supply and refueling infrastructure, including new stations and upgrades of existing stations to multifuel. The document noted Trinidad & Tobago National Petroleum Marketing Company Limited (NP), operator of the largest network of service stations, “has embarked on a rationalisation programme with the construction of five (5) multi-fuels New-to-Industry sites”.

According to news on the Vehicle Maintenance Centre of Trinidad and Tobago (VMCOTT) website from May 2012, the Government will open seven Compressed Natural Gas (CNG) stations over the next year with two stations expected to open in the next two months. Work has subsequently commenced on a new multifuel station on VMCOTT’s Beetham Highway Compound.

Infrastructure development thus far has not been stimulus enough, with the target of 20% (approximately 100,000 vehicles) of the projected 2015 vehicular population in T&T to be converted to CNG fuel, declared in a government press release 25 August 2011, unlikely to be realised at the current rate of conversion. High mileage vehicles were to be targeted, such as maxi taxis, taxis, buses, commercial vehicles, GORTT and state vehicles etc. Franco said transportation sector vehicles and luxury vehicles were the prime users of diesel.

An immediate removal of the fuel price subsidy, which has just occurred for premium gasoline, would impact heavily on cost of living and export competitiveness. Franco told the Business Guardian that a range of measures and fiscal incentives will be required to transition the fleet to CNG. Trinidad and Tobago has oil and natural gas resources, but has increasingly become a gas-centred economy as oil reserves decline.

In an August 2012 Business Guardian interview Franco confirmed there was a note before the Cabinet for the formation of a billion-dollar new state enterprise that will be mandated to construct new CNG service stations and implement a plan to give CNG conversion kits to maxi-taxi drivers, with them having to pay for the kits over time.

National Budget 2012/2013

The national budget (2012/13), presented Monday last week, contains allocation of funds for new CNG-related measures. Naming an inadequate refuelling experience, the requirement for frequent refuelling and, from an economic perspective, the substantial disincentive from the fuel subsidies as constraints to the government’s goals for fuel transition to CNG, the budget contains “a comprehensive business plan which will invest $1.5 billion [USD 0.23 billion] in converting gasoline vehicles to compressed natural gas as an alternative transportation fuel. Initially, we envisage a five-year conversion period during which multi-fuel stations would be constructed and pipeline infrastructure to stations would be installed. This business and operational model is based on a target group of approximately 90,000 vehicles, covering diesel, maxi-taxis, gasoline taxi vehicles and private high-mileage gasoline vehicles.”

It was emphasised the new measures will only be effective if the fuel subsidy is addressed, with reduction providing for re-allocation of fiscal resources for CNG developments.

Additionally, the budget promises “100 new CNG-powered buses will be added to the existing fleet ensuring that the cost of the service remains cost-effective; a further 300 buses will be converted from diesel to CNG fuel”.

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