But Dr. Trevor Byer, Director, Intra-Caribbean Gas Pipeline Company, says while the project may be challenging, it is by no means unattainable or unrealistic.

"It's a proven technology, we feel it's competitive for nearby markets (with) a dedicated infrastructure...so it's a permanent, long-term relationship between the gas supplier and the power companies, that are off-takers," he said.

The project, which will incorporate Grenada, St Vincent and the Grenadines,

St Lucia, Dominica, Barbados, Martinique and Guadeloupe, has moved on from being an idea espoused by Prime Minister Patrick Manning to Caribbean Heads of Government at their meeting last July in Georgetown.

Manning said it is essential that the energy base country involve itself in the economic activities of other island states in the region.

"...Because if we don't, then what in fact we are doing is prejudicing our own ability to export to the region and therefore to ensure and guarantee certain levels of employment and a certain standard of living for our own people. What happens in the region is very important to us," said Manning.

The Caribbean Community (CARICOM) states are the second largest market for this country's exports, while Trinidad and Tobago is the largest market for CARICOM exports.

Dr Byer, a former Energy Advisor at the World Bank, said various deadlines have been set with a possible commissioning date for the gas pipeline by the first quarter of 2007.

He said the project has tremendous opportunity for the local private sector and they should get involved, along with their foreign partners in its financing estimated to be between US$510M-US$550M.

The project requires 70 per cent debt financing and 30 per cent equity financing.

"The energy sector is highly capital intensive and hence, is one in which the 'primacy of capital rules'. That means that if you wish to be a strategic player in the sector then you have to have a seat at the table through equity.

"Additionally, since about 70% of the financing of these projects is through debt then the local bank and non-bank financial institutions need to address which investments in the energy sector they could participate, with their foreign partners, in financing some of the debt," said Byer.

"However, since risks in parts of the energy sector are not insignificant, clearly, the local financial institutions would need to minimise their risks and in this context, there are few less risky projects in the energy sector than gas pipelines and high voltage power transmission lines, the activities that are inherently natural monopolies.

"So it's very critical when we talk about enhanced 'local content' in the energy sector that we see ourselves not only in terms of providing highly skilled professional and technical services, but also in terms of providing equity and debt financing for the sector."

Pipeline projects have been successfully implemented throughout the world. Among them, the 'Blue Stream' Caspian Sea project (part overland and part undersea) bringing gas to Turkey from the southern parts of the former Soviet Union; the Algerian-Spain deep undersea gas pipeline; the Chad-Cameroon oil pipeline overland from land-locked Chad to the Atlantic Ocean and the Bolivia-Brazil gas pipeline overland.

The Eastern Caribbean gas pipeline had its genesis in a 1995 screening study by the World Bank which was seeking to have gas resources from Venezuela and Trinidad and Tobago going into the U.S. market.

What was proposed was a pipeline starting north of the Paria peninsula, and going through the chain of islands, half onshore and offshore, running up to Miami some 2,200 miles and delivering about two billion cubic feet of gas daily.

"That particular study indicated that though there were some issues of a technical character, it was worthwhile to look at it further in some greater detail; no further work was done on the study," said Byer.

Based on the outline of the World Bank study, the team first looked at importing LNG into one island up the Eastern Caribbean chain, generating about 300 megawatts of power and exporting the power by undersea cables to its neighbours.

That analysis did not result in any satisfactory conclusion because of the constraints of selling large blocks of power into and across those island markets, which are small.

"Most of their economies are service economies and power non-interruptibility is a fundamental issue. One of the major issues is that if we have to have a significant fraction of power imports via these undersea lines, you have got to have back-up spare capacity on shore, which means the power companies will be looking at having generating assets sitting there that just serve as insurance when there is a cable failure.

"I would not like to see what the balance sheets for these companies would look like having generating assets that do no work except perhaps for a few days every three to five years, so this was one of the reasons we did not pursue this option much further."

The team also did not focus too much on the possibility of CNG imports to these islands due to the non-proven commercial nature of the sea-borne transport of CNG (from the safety, environmental, insurability and economic perspectives) into small island markets with demands of between 3-8 million cubic feet of gas daily.

The screening study therefore focused on the pipeline option with the terminal point being Guadeloupe.

"The economic and financial results of this screening study done in the middle of last year were really quite positive," Byer said.

The team then approached EOG Resources to undertake an engineering analysis of the pipeline which starts in Trinidad with a dimension of about 20 inches and trailing off on the St Lucia/Barbados leg at about 10 inches.

Total trunk line length is about 600 miles. It will initially deliver about 100 million cubic feet of gas daily to the island power companies, with the three largest off-takers Martinique, Guadeloupe and Barbados accounting for about 80% of gas demand.

Byer believes delivering gas at a price of US$3 a million btu to substitute diesel used in the power companies on the smaller islands would lead to a 40-50 per cent reduction in the cost of fuel for power generation.

He also sees it as being critical in terms of assisting the economic stabilisation of these islands which in turn impacts on the manufactured products exported from Trinidad and Tobago.

"So the issue of assisting the economic stabilisation of the Eastern Caribbean CARICOM islands is not just about generosity - it is also in the self interest of the T&T manufacturing sector, the Trinidad and Tobago Government and, in particular, trying to find ways of doing this that are commercially viable.

"One thing we have learned over the past 30 years in all parts of the world, is that assistance is not sustainable if it is based on subsidies.

"So what we are seeking to achieve is that the sustainability of the benefits is assured through the commerciality of the arrangement in other words, sustainability through commerciality."

Regarding the commercial arrangements, Byer explained one possible operational strategy could be that the pipeline company would lease the operation of the pipeline to a very experienced global operator, while the gas suppliers will have take or pay contracts with the power company off-takers.