Energy
price decline won’t derail T&T - Enill
By
Curtis Williams
Trinidad
Guardian
Port Spain
Petroleumworld.com
06 25 06
Minister
in the Ministry of Finance Conrad Enill has given
the assurance that even if crude prices were to
halve in the next three years it would not derail
the Government’s economic programme.
Minister
Enill said this was because the Government’s
expenditure planning is based on a crude price of
US$35 a barrel.
Last
week, BP’s chief executive officer Lord John
Browne predicted that oil prices would half within
the next three to five years.
Minister
Enill and his Government have been accused of wild
spending, a charge the Government has constantly
denied.
He
told the Business Guardian, “At this point
in time when you look at the economy you can see
that crude production is just over 125,000 bopd
(barrels of oil per day) while natural gas production
when converted to barrels of oil equivalent is over
450,000 boepd so in real terms if crude prices are
halved you are talking about an effect on less than
20 per cent of total production. So with that in
mind I think it is clear that we will be able to
deal with it should it come.”
He
explained that the Government was committed to restraining
expenditure and said several of the construction
projects will lead to a net benefit to Government.
“We
have a Customs building which is nearing completion.
When that is finished, it will mean that the rent
of basically $250,000 a month which we are now paying
can be paid towards the loan for the construction
of the very building,” the Minister in the
Ministry of Finance explained.
Enill
said the Government was also ensuring that even
with the construction boom the macro-economic fundamentals
remain sound.
He
said on several of the major projects the Government
was looking toward foreign financing to save the
country’s foreign exchange.
“Many
of these large companies come with a financing mechanism
available to them and that is the way we are going.
Some of the projects will have to be financed from
foreign sources. A good case in point is the Social
Development building which will be financed from
foreign sources and we are looking into that same
mechanism for parts of the waterfront development,”
said Enill.
But
Republic Bank economist, Dr Ronald Ramkisson, said
that he is not convinced that the Government has
been operating on an expenditure price of US$35
a barrel of crude.
“We
know that officially the Government says it is operating
on a US$35 a barrel for expenditure purposes but
I don’t think in reality that is so. You only
have to look at some of the expenditure patterns
to determine this,” said Ramkissoon.
He
said while he was unsure that Lord John Brown is
correct in predicting such a drastic fall in crude
prices the Government would do well to heed the
warning.
“I
think it would be sound economic advice for the
Government to reduce its level of spending. If prices
half there is no doubt that the Government would
have to cut spending.
“I
won’t say it would lead to a collapse of the
economy because it is more diverse than in the late
70s and early 80s but it will certainly lead to
more foreign borrowing and a tightening of expenditure,”
said Ramkissoon.
The
economist said crude production would also be important
because the country could face the prospect of declining
crude prices and reduced production happening simultaneously.
He
advised that the Government should seek to increase
savings from the windfall so that eventually it
could draw down on some of the interest earned from
the funds.
Dr
Ramkissoon said the further development of the manufacturing
sector would also help cushion any effect lower
crude prices would have on the economy.
Trinidad Guardian
Thursday 22nd June 2006
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©2006 Trinidad Guardian. All Rights Reserved.
