Trinidad sees steady decline in servicing of oil and gas wells business

During the oil boom of the 1980s service companies involved in the Trinidad energy sector did thriving business. The boom created opportunities for many small and medium sized entrepreneurs in the industry, but in recent times despite the increased production in gas from offshore wells there is a steady decline in the business of servicing oil and gas wells -- at least for home-grown companies who find they are being left behind as the oil firms use a great deal of foreign expertise provided by the multinationals in the service sector.
As Dr Jim Lee Young, president of the South Trinidad Chamber of Industry and Commerce, said recently: "Energy service companies are finding it difficult to make ends meet and if something is not done by Government to change the tax structure many companies will be going out of business."

Lee Young should know, he is CEO of Venture Production Trinidad, one of the country's largest service companies in the energy sector. In all, there are more than 100 small andmedium sized companies engaged in fabrication, catering, instrumentation and general engineering services in the sector. The majority are based in South Trinidad. They employ some 8,000 people. The Government has acknowledged that these companies need incentives to bail them out of their predicament.
Prime Minister Patrick Manning recently said the Government was in the process of amending the Petroleum Taxes Regulations, but "in the meantime, we are looking at interim measures to assist the small companies involved in energy operations."

Manning's promise was followed up by another initiative from Eric Williams, Minister of Energy and Energy Industries, who announced at an energy luncheon of the Couva/Point Lisas Chamber of commerce, that he had established a committee to set up guidelines for the use of local goods and services for Government and Government related projects.
"Such a committee is critical at this time, and their mandate is to develop local expertise, and to ensure that a significant portion of the capital expenditure for investment in energy sector projects was channelled into the local economy," Williams said.

Williams said the committee was mandated to learn from the lessons of the past. He said: " It was reported that a substantial number of contracts, which could have been undertaken locally, were still awarded to overseas contractors." Because of this situation, he said, the Government was pursuing a number of initiatives aimed at not only increasing the value added from the local energy sector," but also leveraging the proceeds from the sector for sustainable development."
An example of the local service sector's capability of handling even the most complex of jobs was demonstrated last month when Damus, a La Romaine based fabricating company, reached a milestone when it successfully completed construction of an offshore platform for BHP Billiton, an Australian and US joint venture oil company.

At the commissioning former Government minister and now Chairman of Damus, Errol Mahabir noted: "In recent times the government has taken positive steps to enhance the capability of local manufacturers to provide some of the services hitherto imported into the country."
South Trinidad Chamber, regarded as the "energy chamber" has been in the forefront to achieve sustainable development for service companies Its CEO Thackwray Driver said the reduction in operating income of the service companies has to do with the change in the structure of the energy industry.
"Most of the contracts are offshore and contractors are finding it difficult to get into the market because of a shortage of skilled labour and access to capital," he said.

Driver said the area in which the service companies currently could be most effective is in onshore operations and in the Gulf of Paria. He predicted that the decline in business over the last three months would continue if there are no fiscal reforms.
"It could go flat with the rising cost of operations and high Government taxes," Driver said. He said the chamber acknowledged that the Government was aware of the issue and was looking for a solution. "They are committed to deal with it if the industry is to survive," Driver said.
He added: "Members of the chamber are of the view that the introduction of the Free Trade Area of the Americas should open up new opportunities for exporting technologies to other countries." He said at present many of the service companies have been sending some of their employees to work in Venezuela.

Another opportunity to give the sector a boost was taken when San Fernando Mayor Ian Atherly led a team of 100 business people to the Conference on World Energy City Partnership in Houston, Texas. He told that the visit should yield big dividends for service companies.
"At that conference they will have the opportunity to interact with many companies involved in the energy industry," Atherly said.
That and the Government's initiatives should bring about a brighter future, according to the companies.