Opinion
- Editorial- Commentary
STCIC: Energy
survey says: Optimism
remains strong …
but
fears over foreign competition threaten expansion
The results of the Energy Service Sector Survey
(ESSS) for Q2 2007 were broadly similar to Q1 2007.
Levels of optimism remain about the same as have
trends in prices, cost, profitability and employment.
There was, however, some decline in expenditure
on training while capital expenditure trends remained
healthy. While the general trend is positive and
optimistic, there remain concerns with factors
that could constrain the ability to expand business
in the sector. One such factor that emerged from
this survey, when compared to previous quarterly
surveys, was the increased presence of international
competitors.
Level of optimism
In terms of optimism, 55 per cent of respondents
were more optimistic than they were about the business
situation three months earlier while 45 per cent
said that they was no change in their optimism.
This level of optimism is about the same level
expressed in the Q1 2007 survey when 57 per cent
of respondents said that they were more optimistic
and 35 per cent reported no change. It is important
to note that no respondent reported that they were
less optimistic about the future.
Value and volume of business
Thirty two per cent of respondents reported that
the value of their business was up in Q2 2007 while
68 per cent reported no change. In comparison,
in Q1 2007, 48 per cent of respondents reported
that the value of their business was up while 38
per cent reported no change. When respondents were
asked about their expectations for the value of
business in the next three months (Q3 2007), 45
per cent indicated that they expected this metric
to increase while 55 per cent expected it to stay
the same.
On the volume side of business, 36 per cent of
respondents reported an increase in this metric
in the past 3 months (Q2 2007) while 59 per cent
reported no change.
When asked to indicate their expectations for
the volume of business in the next three months
(Q3 2007) 57 per cent said that they expected an
increase while 43 per cent expected no change.
Charges, cost and profitability
With respect to average selling prices, 33 per
cent of respondents said that this metric had increased
in Q2 2007, while 57 per cent indicated no change
in average selling prices and ten per cent reported
a decline. The results for average selling prices
in Q2 2007 are almost exactly the same as those
reported in Q1 2007 when 35 per cent of respondents
indicated an increase and 50 per cent no change.
In terms of cost per employee, 70 per cent said
that this metric had increased in Q2 2007 while
30 per cent reported no change. This is an increase
over what was reported in Q1 2007 when 57 per cent
of respondents had reported an increase in this
metric.
Twenty nine per cent of respondents reported that
overall profitability was up in Q2 2007; 33 per
cent said there was no change and 38 per cent reported
a decline. Overall profitability was marginally
more positive in Q1 2007 when 33 per cent of respondents
reported increases and 43 per cent reported no
change.
Employment and training
With respect to employment and training, 37 per
cent of respondents said that the number of people
employed with their companies had increased in
Q2 2007, while the same percentage indicated that
there was no change in this metric. Twenty six
per cent of respondents indicated a decline in
number of employees. A comparison of employment
in Q2 2007 and the three previous quarters is included
in the table below (Table 1).
When the employment data for Q2 2007 is disaggregated
into full time and part time workers the results
show that 21 per cent of respondents report an
increase in full time employment while 68 per cent
reported no change and 11 per cent a decline. In
terms of temporary employment, 26 per cent reported
an increase in this metric, 42 per cent no change
while 21 per cent reported a decline.
Eleven
per cent of respondents reported that “temporary-employment” was
not applicable to them. This indicates that temporary
employment is the larger contributor to the decrease
observed in overall employment in the energy service
sector. This observation is most likely reflective
of projects or components of projects coming to
end. When asked to comment on the trend in employment
for the next three months (Q3 2007) 68 per cent
of respondents indicated that they expected to
increase employment.
With respect to training, 53 per cent percent
of respondents indicated that their training expenditure
had increased in Q2 2007 while 42 per cent said
that there was no change. This is a decline over
what was reported in Q1 2007 when 71 per cent of
respondents had indicated an increase in training
expenditure. When asked to comment on their expectations
for training expenditure in the next three months
(Q3 2007), 63 per cent of respondents reported
that they expected to increase expenditure on training.
Capital expenditure (Capex)
Capital expenditure (Capex) trends for Q2 2007
are overall positive.
In the three areas surveyed: land and buildings;
information technology and plant, equipment and
vehicles respondents indicated that they expected
increases in capex. With regard to land and buildings,
47 per cent of respondents said they expected to
increase capital expenditure in this area while
the same percentage expected no change.
Seventy four per cent of respondents indicated
that they would increase capex in information technology
while 68 per cent said that they would increase
capex on plant, equipment and vehicles. These results
are almost similar to what was reported for capex
in the previous quarter Q1 2007. Respondents indicated
that the main reasons for capital expenditure authorisations
in the next 12 months were to expand capacity and
for replacement. The main factors that were reported
as likely to limit their expected capital expenditure
programme in the next 12 months were uncertainty
about demand and shortages in labour. These two
factors were also cited as the two main limiting
factors in Q1 2007.
Expansion of business in
the next 12 months
Eighty four per cent of respondents indicated
that they expected to expand their business more
in the next 12 months than they did in the previous
12 months. In the previous quarter (Q1 2007), 88
per cent of respondents had indicated that they
planned to expand more in the next 12 months than
they did in the previous 12 months. These figures
indicate a generally positive attitide as it relates
to the business climate.
The factors that are likely to impede expansion
of business in the sector are factors outside of
the discretionary environment of the business.
These are factors over which the business has little
or no control.
According to respondents the main factors that
limit their ability to increase business in the
next twelve months are: the level of sales/demand
and the availability of technical and professional
staff. Another significant factor that was flagged
by some respondents was the impact of international
competition.
In
recent surveys respondents from the local energy
service sector have been indicating that the increasing
competitive presence of international companies
in the T&T market has been having a negative
impact on their ability to expand their business
in the future.
Overall, the positive trend in the survey that
had been observed in Q4 2006 and Q1 2007 continued
in Q2 2007. This is reflecetd in expectations to
increase employment, increase capital expenditure
outlays and to expand business more in the next
12 months as compared to the previous 12 months.
The expansionary trend observed in the energy
service sector is related to increased activity
in the upstream sector through current and/or expected
drilling activity as it relates to Canadian Superior,
Petro-Canada and Kerr-McGee. Growth-related activity
in the downstream sector includes the ongoing construction
of the Ammonia-Urea-Melamine complex at Point Lisas
and the expected start of the construction of the
Alutrint smelter and the Essar Steel complex.
In
terms of factors that constrain the expansion
of business,the emergence of international competitors
in the energy service sector is largely a function
of the current attractiveness and openess of the
T&T energy sector as an investment destination.
The increasing presence of international competitors
in the energy service sector needs to be monitored
by the Permanent Local Content Committee and the
Ministry of Energy and Energy Industries, to determine
the possible impact on the local energy services
sector.
The Energy Services Sector Survey (ESSS) is a
quarterly business confidence survey conducted
by the STCIC among our membership. The detailed
results of the Q2 2007 ESSS can be downloaded,
in PowerPoint format, by STCIC members from the
members-zone of www.stcic.org
STCIC is Trinidad's
South Chamber of Commerce and Industry-STCIC
(deven@southchamber.org).
Petroleumworld not necessarily share these
views.Petroleumworld
not necessarily share these views.
Editor's
Note: This article was first publish in Trinidad
Guardian,Thursday
9th August, 2007 .
Petroleumworld reprint this article in the interest
of our readers.
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Petroleumworld
08/15/07
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