A
political response to an economic problem
By Driselle Ramjohn
Trinidad Express
Port Spain
Petroleumworldtt.com
08 26 07
RESULTS of the recent Ryder Scott audit of local
natural gas reserves indicated that Trinidad and
Tobago only has about 12 years of natural gas supply
left.
The
Government, however is confident that more gas
will be found and urged the public not to panic
but have "faith" as money is being pumped
into the further exploration of this driver of
the local economy.
Economist and University of the West Indies lecturer
Dr Dhanayshar Mahabir, told the Business Express
that Government's response to the issue is not
a viable one.
"It appears to me that the current sticky
situation of the Government is one in which they
are using a political response to an economic problem.
The political response is really one of gambling.
They are gambling on the assumption that we have
(natural gas) when in fact the experts have said
that we are not so sure. We're not saying from
the economic angle that we don't have (natural
gas), but we are saying that we are not so sure
and that one should therefore not gamble with the
future of the country given the fact the uncertainty
exists," the economist said.
He added that Government needs to develop numerous
policies governing the natural gas sector with
a strong economic base.
"First off, what we have is really an independent
report commissioned by the Government and undertaken
by international experts. That much is not under
dispute, what the experts have found, given their
own technical expertise, is that really there is
an economic problem in Trinidad and Tobago and
the economic problem revolves around two issues.
One, scarcity and two, uncertainty," Mahabir
said.
"With respect to scarcity, the report has
indicated quite clearly that at current utilization
rates we have limited supply, estimated at 12 years.
What the report also has indicated is that there
is a great deal of uncertainty as to what will
transpire beyond the 12-year period. Uncertainty
in the sense that we may or may not find the natural
gas supplies in the quantities that we would like
to have. Uncertainty in the sense that we will
spend a great deal of money and we will end up
increasing with dry wells as we did in the Ibis
field," he added.
Mahabir said that given the level of uncertainty
which exists and given the fact that the economics
of mining is such that we have basically exhausted
the rich wells and the rich loads of gas and that
we are going to have to expend more and more to
really obtain basically less and less.
It means that the diminishing returns are suggesting
that we may be in 12 years in a position that England
is in right now with respect to coal where it has
an abundance supply of coal in the ground but it
is very expensive to mine for the coal so much
so that coal cannot be considered a viable alternative
to oil in the United Kingdom and therefore the
issue of supplies does not really arise, Mahabir
explained.
"It is the economics of the supply, how easy
or how cheap it is to get the supplies out in relation
to unnatural resources and the economics again
suggest that we have to compare our own situation
with say not only the British, but with the tar
sands of Athabasca. Athabasca has millions of barrels
of oil trapped in tar sands but at the current
rate of technology you cannot consider them as
part of your oil reserves because it is much more
expensive to drill there than say the Saudis are
able to do," the ace economist said.
"So that given this current situation, the
economic response is that we should act as though
the reserves that we know that we have are temporary.
If we act as though the reserves are temporary,
the Government then has to articulate a clear policy
on fiscal surpluses. That is if it acts as though
the reserves are temporary then it would be incumbent
upon the Government to generate huge fiscal surpluses
over the next 12 years".
So the economic response needed for the current
natural gas situation is that there has to be a
fiscal position.
Mahabir's advice, on the first hand is for the
Government to clearly articulate a position on
the stock of the Heritage and Stabilization Fund.
"So by the year 2020, we should have US$20
billion on the fund whether we find new gas or
not," he added.
The
Government also needs to put a policy in place
with regard to gas exploration, he suggested. "It
really should, and I concur with the Government
that it (the Government) should really continue
to provide incentives to firms which are expending
funds in the exploration for natural gas and so
we need to look at that fiscal regime and see what
greater incentives could be created," Mahabir
said.
Another economic position is that the country
needs to source alternative supplies of gas to
feed the existing industries and hence the diplomatic
initiatives with Venezuela now ought to be intensified.
"Whether
we find more gas or not within the next few years
given the (Ryder) Scott report,
it is incumbent of the Government to deepen diplomatic
arrangements and ties. He suggested that the Government
place a hold on other trains temporarily until
it is sure that there is more given current supplies
and then it needs to articulate a position.
For some time now the local business community
has been calling for the diversification of the
economy to move away from the country's complete
dependence on oil and gas.
"A policy on economic diversification, the
Government has to pursue a trust on services, agriculture,
tourism, manufacturing, all of which have really
been stymied over the last five years," Mahabir
added.
Trinidad
Express
Wednesday, August 22nd 2007
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©2007 Trinidad Express. All Rights Reserved.
