Unfinished business:
Reshaping the energy agenda
PORT SPAIN
Trinidad & Tobago Express
Petroleumworldtt.com
12 31 08
It may be time to rethink some of the solutions to the energy sector issues affecting Trinidad and Tobago.
At first, this was the point of view expressed as finance, oil and gas gurus chatted over coffee and mid-morning snacks when they met at the Hyatt Regency Hotel in Port of Spain last Wednesday for the start of a high-powered international energy meeting.
By day two of the IBC Energy Caribbean conference, it had become an underlying theme of the conference.
One executive who argues that Trinidad and Tobago has distinct advantages as an oil and gas supplier but nonetheless has more lessons to learn is former Finance Minister Wendell Mottley.
Mottley, a top banker at Credit Suisse in New York, points out that the country's transparency and flexibility in contracts, as well as its energy security, permitted billions of dollars in State revenue from the gas energy chain in past years.
He made the comments as he delivered an address entitled "Lessons to be learned from gas-based development in a small petroleum economy" at the energy conference last week.
But what goes up, must, inevitably come down and Mottley said an important economic lesson, given the current environment of crude prices that have plunged more than 65 per cent since July, is that every dollar spent in up times delivers only 75 cents but a dollar spent during a downturn extracts $1.50 cents to make something work.
"It is an absolutely crucial and significant role of government to provide a favourable climate and infrastructure," for the continued development of energy, he said.
While he noted that Trinidad and Tobago's favourable investment climate had led to its GDP climbing from $15 billion in 1981 to $130 billion in 2007, Mottley noted that the development of ammonia, methanol and other natural gas industries had not led to the development of downstream businesses.
"It is an area of unfinished business," he told delegates. "It has disappointed in employment and the standard of living for citizens."
The gas producers still use prices as an advantage to exploit and maximise profits at the highest commodity price to high end foreign markets, he said, adding that they were willing to forego the proximity advantage of a local downstream operation because of high prices they could get for gas around the world.
Therefore, the idea of downstream plants producing galvanised iron and aluminium pots and pans is still a ways off.
To make Trinidad and Tobago a more attractive location, a potential downstreamer would have to obtain the lowest export price for minus 15 per cent, Mottley said.
"Government has to find a way to advance industrial policy," he suggested, adding that the State might have to carve out a favourable price of production or take a stake in gas platforms.
The country's energy services sector, which employs 8,000 people and contributes 3.5 per cent of GDP, also has ideas to advance energy policy.
Paul Hosein, general manager at Schlumberger in Trinidad, recalled that the country had a long history of growth and expansion and there continued to be "huge potential" for the energy sector.
But he also told delegates that "all is not well" as demand for gas has tripled from 2000 to 2007 but there remained a need to focus on revenues replenishment.
"We are facing a situation of declining gas and declining revenues," he said.
In the next 100 years of oil and gas development in the country, Government will have to be focused on long-term and balanced fiscal regimes to be competitive, Hosein suggested.
One issue in the sector that seems to have just been resolved was the delay in signing production sharing contracts following Government 2005 bid round for offshore blocks.
After three years, only two of six contracts had been signed for exploration of shallow and deep waters.
Four PSCs were with the Attorney General's office and were vetted last week, Helena Inniss King, director, Resource Management at the Ministry of Energy said.
She said the contracts might be signed before the end of the year for exploration and said that in the future, bids for exploration blocks will be configured in a more efficient way.
Previous bidders have complained that there were too many variables in the available information and the there was a lack of clarity in the process.
"There is an improved bid process and the time will be shortened between the call to tender and the bid submission," she said at the conference last week.
Story by Curtis Rampersad from Trinidad & Tobago Express
Trinidad & Tobago Express
Wednesday, December 17th 2008
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