Trinidad and Tobago: An energy sector in transition

Jan 11, 2004 01:00 AM

With the very notable exception of the agreement for the construction of Atlantic LNG Train IV, 2003 was a year of promises, policy development and planning. If the energy sector is to play the pre-eminent role the government of Trinidad and Tobago intends in the delivery of "developed country status", 2004 needs to be a year of delivery.
The major issues that exercised the minds of policy makers and of the industry in 2003 remain unresolved. Resolving these issues is not an easy task, but the future of the energy sector and indeed the wider economy of Trinidad and Tobago is at stake. The much anticipated fiscal reform for the on-shore and Gulf of Paria oil sector was a major issue of concern for the industry in 2003.

In the face of consistent lobbying from the South Trinidad Chamber, the government had promised to deliver these reforms by January 1, 2004. Obviously we do not know exactly what the package of reform will include at this stage, but from the South Trinidad Chamber's perspective, the indications look positive.
We anticipate that the direct and immediate impact of these fiscal reforms will be to make a large number of oil wells in the more mature fields economically feasible and hence a big increase in activity on-shore and in the Gulf of Paria. This will result in new opportunities for local service companies, many of whom have faced a very rocky 2003, and greater confidence, new jobs and investment.

Fiscal reform alone, however, will not ensure a new dawn for the traditional oil sector. The Ministry of Energy and Energy Industries and Petrotrin urgently need to advance the release of un-utilised assets to the independents and farm-out operators. The Honourable Minister of Energy has revealed ambitious plans for a new 3-D seismic programme for the southern basin, as a precursor to a new bid round on-shore.
The provision of new accurate geological data will greatly assist future licensing rounds and ensure proper planning and the sustainable management of our hydrocarbon reserves, but the Honourable Minister must ensure that progress with this programme is rapid over the coming months.
The whole issue of the future of the traditional oil sector is a key theme for the South Trinidad Chamber/Geological Society annual Trinidad and Tobago Petroleum Conference (TTPC), taking place on February 2-4.

The major bid round for ten blocks off-shore has been delayed again, with bids now set to close on January 14 2004, and with the final announcements due to be made on March 10. The bid round includes a mix of shallow water blocks off the west coast, and deeper water blocks off the east and north coasts. The results of this bid round, and the interest shown by the industry majors, will be a good indicator of how widely the government's optimism about the future of the sector is shared.
In 2003, hopes for further off-shore development were given a boost by the announcement that Trinidad and Tobago and Venezuela were to sign a memorandum of understanding on the unitising the reservoirs across our borders. In general, however, the industry is reserving judgment on the outcome of this process, especially given the continued political machinations in Venezuela.

The reality is that little concrete appears to have been achieved since the fanfare of President Chavez's visit. Current off-shore operations and the potential of cross-border activity will both be explored in detail at TTPC 2004.
In numerous presentations over the past year, including two to the South Trinidad Chamber in September and October, the Minister of Energy has pointed to the persistent gap between Trinidad and Tobago's gross domestic product and our gross national product-put simply the gap between the amount of wealth created in the country and the amount of wealth that stays in the country.
He has rightly pointed to the energy sector as a major source of this gap and has committed the Ministry of Energy to implement policies to ensure that the gap is narrowed. The South Trinidad Chamber has lobbied the government, and the multi-nationals, hard over the past year to ensure that the level of local content in major energy sector projects is significantly increased.

This issue will remain firmly on the front burner during the coming year. The Minister of Energy has announced that he has a technical team working on a new local content policy and the industry is anxiously awaiting news on the new proposals, which we expect will be a major debating point at TTPC 2004. In the meantime the South Trinidad Chamber will continue to work with all of our members, including the multi-nationals, to understand and address the barriers that exist for local firms in winning business in the sector.
A good indication of the sort of policy direction that might be proposed by the government is the local content strategy negotiated with Atlantic LNG for the construction of Train IV. The strategy earmarks specific activities which should be undertaken by local companies, instead of just giving the project a target percentage spend figure, which allowed projects to meet the local content target by simply spending money in Trinidad, rather than building local capacity to supply core services.

The government's decision to publish the local content strategy for Train IV was a positive signal of the commitment to transparency in the energy sector. One of the many proposals made by the government in 2003 was the commitment to implement the UK Government-backed Extractive Industries Transparency Initiative.
The South Trinidad Chamber understands that the government has established a technical team to look into how the initiative can be implemented in Trinidad, but we believe that the government needs to make a clear indication on whether if is taking this initiative seriously. The South Trinidad Chamber will continue to advocate greater transparency and accountability in the energy sector in 2004 and we have organized a session on this issue at TTPC 2004.

Overall 2003 has been a year of much promise and little delivery.
The industry is well set to make the sort of transformation that the government wants to see in the sector, but we need the government to do their part and start delivering early in 2004 -- courtesy the South Chamber of Industry and Commerce.

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