STCIC : Energy
service sector faces, labour
shortages, foreign competition
Port Spain
Petroleumworldtt.com
11 04 07
The
results of the Energy Service Sector Survey (ESSS)
for the third quarter 2007 showed
that some of the constraining factors that have
been identified in past surveys have begun to negatively
impact the growth of the sector. The main constraints
identified in previous surveys were availability
of technical/professional staff; the increasing
price of inputs and increasing competition from
foreign energy service companies in T&T.
Level of optimism wanes
The survey results for Q307 first indicated a
fall in optimism.
In Q307, 28 per cent of respondents indicated
that they were more optimistic about their general
business situation. This is a decline over the
level of optimism that was reported in Q207 when
55 per cent of respondents said that their optimism
had increased.
In terms of the value of business, 28 per cent
of respondents said that in value terms their business
had increased in Q307. This is about the same figure
that was reported in Q207.
In terms of the volume of business, 39 per cent
of respondents indicated that the volume of their
business had increased in Q307.
In Q207, 36 per cent of respondents indicated
that the volume of their business had increased.
When asked to indicate what they expected in the
next three months (Q407), 53 per cent of respondents
said that expected an increase in business in value
terms while 39 per cent said that they expected
an increase in business in terms of volume.
Prices, cost and profitability
Respondents were also asked to comment on trends
in charges, cost and profitability. Seventeen per
cent of respondents indicated that their average
selling prices had increased in Q307 while the
majority, 78 per cent reported no change in their
average selling prices.
In Q207, 33 per cent of respondents had reported
increases in average selling prices. With regard
to average cost per employee, 56 per cent of respondents
reported that their average cost per employee had
increased in Q307. This compared to the 70 per
cent that was reported in Q207. With respect to
profitability 28 per cent of respondents reported
that they had recorded increases in profitability
in Q307. A summary of these three metrics for the
first three quarters of 2007 is included in Table
1.
When asked to give their expectations on average
selling prices; cost per employee and increases
in profitability in the next three months ie Q407,
respondents conservatively gave responses that
did not veer far away from what they had reported
for Q307. This reflects a level of conservatism
in the outlook for the energy service sector.
Employment and training
One indicator the growth of any business organization
is expenditure on training and changes in levels
of employment. For Q307, 56 per cent of respondents
reported that they had increased the number of
persons employed by their respective companies
and 39 per cent of respondents reported no changes
in the levels of employment.
In Q207, 37 per cent of respondents had indicated
that they had increased the number of employees
in their companies.
Table 2 shows the responses for increases in the
number of persons employed in respondents companies
in the first three quarters of 2007 as well as
data on increase in expenditure on training and
retraining. The increases in training expenditure
can be attributed to Occupational Safety and Health
training as well as general training for new employees.
Capex and factors
limiting capex
Another indicator of growth is capital expenditure
(Capex). The survey divides capital goods into
there categories: land and buildings; information
technology; and plant/machine/vehicle and asks
potential respondents to indicate whether they
intend to authorise more or less capital expenditure
in the next 12 months than they authorised in the
past 12 months.
Forty-four per cent of respondents indicated that
they expected to authorise more capital expenditure
on land and buildings in the next 12 months than
they had done in the previous 12 months.
In Q2 2007 a similar percentage of respondents
said that would authorise more capital expenditure
on land and buildings. In terms of Capex on information
technology, 61 per cent of respondents said that
they would increase expenditures on this area in
the next 12 months as compared to the previous
12 months. With respect to plant/equipment/vehicles,
61 per cent of respondents reported that they planned
to increase Capex on these assets in the next 12
months more than they did in the previous 12 months.
Respondents indicated that the main factors that
could limit their plans for capital expenditure
in the next 12 months are: uncertain demand and
business prospects and inadequate return on investments.
The level of uncertainty in the general business
environment may be due to the pending November
5 general election while an inadequate return on
investment may be due to increases in cost of sales
which is related to inflationary pressures and
the increasing cost of labour.
Factors that limit business
An
indicator that the energy service sector’s
growth has slowed is the fact that only 64 per
cent of respondents indicated that they planned
to expand their business more in the next 12 months
than they did in the previous 12 months. This percentage
is a decline over the 84 per cent that was reported
for the same metric in Q207.
In terms of factors that limit the level of business
in the energy service sector in the next 12 months,
the main factor reported is the availability of
technical/ professional personnel. Other significant
factors include the level of demand/sales.
Growth slows down
The availability of technical and professional
staff is consistently cited as a limiting factor
by respondents in this survey and in past surveys.
As was the case in Q207, a significant number
of respondents also noted that the presence of
foreign competition was a factor that could limit
their level of business in the next 12 months.
In
past surveys respondents from the locally owned
energy service sector companies have indicated
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 ESSS for Q307 saw the energy service
sector climb down a bit from the robust growth
and optimism that has been a feature of the previous
two quarters. The slowing down of growth in the
sector is most likely due to the increasing unavailability
of technical personnel coupled with the increasing
price of inputs.
The increasing cost of goods and the competitive
nature of the sector may be a contributory factor
to the decline in optimism and the decline in plans
for expansion.
However, in the coming months, the energy service
sector can look forward to the continuation of
the exploration campaigns of Petro-Canada and Canadian
Superior as well as the commencement of construction
of the Essar and Alutrint plants. Members of the
STCIC can download a more detailed report on the
ESSS from the STCIC Web site at www.stcic.org
Story
by South Trinidad Chamber of Industry and Commerce
STCIC.
The
Trinidad Guardian
Thursday 1st November, 2007
Copyright
©2007 Petroleumworld. All Rights Reserved.
