bpTT CEO Robert Riley

Last week’s decision by the Government to approve the sale by bpTT of its Teak, Samaan and Poui oilfields provides the local private sector with perhaps its best chance of getting further involved in the risky, but potentially very rewarding, business of oil production.

Personally, I am extremely excited by the opportunity that the BP decision, whether made in Port-of-Spain or London, presents.

For the last year, consistent calls have been made in this space for us to come up with ways to ensure that more of the wealth generated by our energy sector is distributed among T&T shareholders.

As recently as last month, (BG Feb 17) I wrote in this space, “The State can encourage foreign private investors in T&T’s energy sector to divest a portion of their T&T holdings onto the local stock market so that individual investors, pension plans, mutual funds and credit unions can invest in the companies.”

Two weeks ago, (BG March 3), it was suggested, “We need a new institution, a joint venture between the State and our local private sector, which will pool the billions in savings held by individuals, mutual funds, credit unions and companies.”

At the news conference to announce the divestment on Friday, chairman and CEO of bpTT, Robert Riley, failed to make use of the ideal opportunity provided by the announcement to state BP’s commitment to increasing local ownership of T&T’s energy resources.

It seems, to me at least, that BP is committed to an ownership paradigm which sets aside a token 15 per cent stake for the Government and people of T&T.

It is a paradigm, no doubt, which originates from the London desk of BP chief executive John Browne (Lord Browne of Madingley, if you please) but is completely embraced by Riley—who received both his first degree (agriculture) and his legal training at UWI.

According to that paradigm, 85 per cent of the profits from the Teak, Poui and Samaan fields should continue flowing out of T&T to enrich investors in London, New York, Amsterdam or Tokyo.

The paradigm mandates that T&T investors, some of whom are full of cash but starving for new investment opportunities, should always be excluded from owning the commanding heights of the T&T economy.

The paradigm dictates that T&T nationals should always remain providers of services and workers (however highly paid) but never the owners of OUR assets.

I reject that paradigm completely and utterly and I hope that the Government, technocrats like Prof Ken Julien, business groups, trade unionists like David Abdulah and intellectuals like Lloyd Best and Mary King reject it.

I hope CEOs like RBTT’s Jerome Sooklal, CL Financial’s Lawrence Duprey, GHL’s Peter Ganteaume, Ansa McAl’s Norman Sabga and Neal & Massy’s Bernard Dulal-Whiteway reject it.

And I especially hope that Central Bank Governor Ewart Williams and academics like Gregory McGuire, Patrick Watson, Karl Theodore, Dennis Pantin and Dan Mahabir reject it.

It would be nice if Queen Street were to reject it.

Riley also said the company was in the process of establishing criteria for the divestment, which would be done by a competitive process.

If one may be so bold, this column has some criteria of its own:

The Government should get the ball rolling by making a statement in Parliament that it would “prefer” if these assets were owned by locals. The Government should be prepared to amend the petroleum tax legislation to impose an extremely heavy tax burden on BP for disposing of the assets to non-nationals;

We clearly need an operator with a track record of investing in, and extending the life of, mature hydrocarbon assets. But this operator should be limited to 49 or 50 per cent which would spread the risk involved in owning an oil field;

The 51 or 50 per cent balance should be made available to the T&T public through the local stock exchange;

A locally-incorporated company should be formed (perhaps it could be called TSP Ltd—short for Teak, Samaan and Poui) and an initial public offering (IPO) be made available to T&T nationals. The IPO should encourage the widest possible participation of T&T nationals;

A suitable distribution of the shares in the new company could be: State—30 per cent; individuals—30 per cent; institutional investors—30 per cent; corporate—10 per cent. The State’s 30 per cent could be ceded in NGC, Petrotrin and NP;

Let us put a value of US$360 million ($2.3 billion) on the three fields, which contain 40 million barrels of proven reserves, assuming the reserve figure is correct. This is not an unreasonable value given the fact that Riley said similar oil reserves are being sold internationally for between US$8 and US$10 a barrel;

The operator would be responsible for bringing US$180 million to the table (50 per cent) and the local company—with local shareholders—a similar amount;

This would mean that the Government would put US$54 million ($340 million), individuals US$54 million($340 million), institutional investors US$54 million (340 million) and corporates US$18 million ($113 million);

Payment for the assets should be in TT dollars so that we do not have an export of foreign currency which might put strain on the exchange rate.

Finally, it might be appropriate for an entity like the South Chamber to convene a meeting of all interested parties.

At the meeting, to which Energy Minister Eric Williams and Prof Julien should be invited, a blueprint for increasing local equity ownership in the energy sector should be put on the table.

Last year, I argued that maybe it’s time that we here own the plantation. With due respect to pioneers like Krishna Persad and Mora Ven, BP’s decision gives us the opportunity.

Are we up to the challenge?