Thursday 23rd June 2005

 
Professor Ken Julien remembers...Defining moments in energy
 
 
 
 
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UWI Professor Emeritus Kenneth Julien

UWI Professor Emeritus Kenneth Julien presented the nineteenth Eric Williams Memorial Lecture at the Central Bank auditorium on June 10.

In his presentation, Julien spoke about the leadership role played by T&T’s late Prime Minister, Eric Williams, in the development of the country’s energy sector.

Julien, who was the key lieutenant of Williams in building T&T’s energy sector, discussed the contribution of Williams to the energy sector by looking at the 25-year period 1956 to 1981 through the prism of ten defining moments.

Pre Independence 1956-1962

Eric Williams began laying the foundation for the creation of a national energy sector as early as 1955, a year before he assumed leadership of the country.

In his People’s Charter he made reference to the energy sector as follows:

“(1) oil, where all the evidence, from the earliest times, has indicated a subordination of local interests to those of external capital.”

No significant event that can be classified as a defining moment in the emergence of a national energy sector occurred for the next five years as the difficult process of transition from colony tonation occupied the attention and resources of all.

However, the groundwork was being laid, judging from the several pronouncements of Eric Williams.

Defining Moment No 1—1963/1964

The Mostofi Commission

In 1963, one year after Independence, a commission was established by the government with the following terms of reference:

(1) to examine the present situation and future prospects of the oil industry of T&T in the context of the economics of the world oil industry;

(2) to recommend a legal framework for the oil industry of T&T which would stimulate the operations of foreign investors while safeguarding the interests of the nation;

(3) to make recommendations designed to ensure the greatest possible stability compatible with growth in the industry, including the level of employment.

The commission was chaired by Baghair Mostofi with Hamil L Legall as secretary.

The recommendations of this report led to major changes in the legislation that governed petroleum activities in the country and broadened the mandate of the Ministry of Petroleum and Mines which had itself only been established in 1963.

Two defining moments rolled into one.

As interesting and far-reaching as the recommendations of this commission, were the questions posed to the commission by the government in its official submission are very significant:

1. Have we exploited the natural resources with diligence?

3. Has there been a just division of the proceeds of this natural heritage?

5. To what extend have we utilised the proceeds of the industry for the betterment of the national as a whole?

7. To what extent have we undertaken the training of our nationals for the further exploitation of these resources in the national interest?

8. Have we taken adequate stock of our international position in all our activities in the industry?

10. To what extent are laws which may have been appropriate for the operations of the industry under the colonial system compatible with the aims and aspirations and the status of an independent nation pledged to a democratic form of government?

11. To what extent has there been a plan of development for the industry and how far has this been coordinated in the development plan for the nation as a whole?

We glean from these questions the hand of Eric Williams as the concept of a national identity for the energy sector began to develop.

These questions are relevant today as they were 42 years ago.

Defining Moment No 2

Acquisition of BP’s assets (1969)

This acquisition of BP’s producing assets gave a clear signal that Dr Williams had begun to take the steps in the pursuit of a policy that will lead to the creation of a national energy sector.

The joint venture with Tesoro Corporation to acquire the local producing assets of BP was the first bold step of state ownership in strategic industries.

It was prompted by the concern that the closing down of BP’s local production would have led to serious economic and unemployment situation in the St Patrick area.

It tied in with the Eric Williams thinking articulated—as early as July 1955—in an address at the University of Woodford Square he stated:

“That there will come occasions when the State may have to take the initiative as an investor, without prejudice to the policy of encouraging and supporting private enterprise, in order to protect and promote the national interest.”

This bold step of investing in a complex industry such as the petroleum sector, took courage and a strong political will.

A key defining moment less to do with the size of the investment but more to do with this dramatic move.

Notwithstanding this bold move in the late sixties, one gets a sense of Eric Williams struggling to find a clear strategy and the resources to realise his dream and vision of a national energy sector.

Three five-year plans were taken to Parliament and while these hinted at this dream, the strategies so far as the energy sector was concerned, were vague and not well articulated.

In the last five-year development plan 1969-1973, we read a shopping list of petrochemicals, which became the subject of studies:

Ethylene;

Thermoplastics;

Synthetic fibers;

Methyl alcohol; etc

These were, as expected all based upon potential products from an oil-based refinery.

None of these went beyond these initial studies and none of them had little chance of being realised.

Of greater interest in that document, was the statistic that over the period 1963 to 1968, the natural gas flared was in excess of 50 per cent of the total gas produced.

This simple fact, while receiving no comment in the plan was to trigger the Eric Williams strategy into looking at natural gas for his strategy of industrialisation, rather than oil-based products.

Defining Moment No 3

Natural gas discovered off the North Coast (1971)

The story of this discovery and the subsequent commercial production of oil in 1972 is itself a fascinating one, in which Eric Williams played a significant role in persuading Amoco to have one last try, after a succession of dry holes.

That story will have to await another time, which time, persons like Charlie Carr can provide the details.

No question—another defining moment.

Defining Moment No 4

T&T National Petroleum Marketing Company established by an Act of Parliament (1972) No 41

The purchase of BP’s assets in 1969 led inevitably to the need to the national ownership, and management of BP’s marketing outlets.

The Trinidad and Tobago National Petroleum Marketing Company came into existence in 1972—as a creature of Parliament and took over the BP’s local marketing activities. ESSO followed in the same year. Then Shell. Then Texaco.

By December 1976, all the local marketing operations previously owned and operated by multinationals were assigned to National—TTPMC.

The word national appearing for the first time, associated with the energy sector.

A National Petroleum Company had also been formed but never functioned—a story featuring Ben Primus and the late George Weekes.

The Energy Crisis (1974)

On January 1st 1974, Eric Williams made the first of five nationwide addresses to the population, all treating with the energy crisis that had impacted on all countries in the world.

Oil prices had jumped overnight from US $2.00/barrel to $3.50 overnight and less than one year had reached $12.00.

The emergence of a national energy sector, which began in the sixties, in a tentative manner now began to take a more definite shape, catalyzed by discoveries of large reservoirs of natural gas and the dramatic increase in oil prices.

Natural gas had crept onto the national agenda, and Eric Williams’ clear message was that priority must be given to our domestic plans of industrial diversification, fuelled by natural gas.

Point Lisas and Point Fortin received formal attention in his second address of February 14, 1974.

Plipdeco shifted majority ownership from the private sector to the Government—a necessary decision to afford the substantial sums needed for its development.

Now there was natural gas in abundance with the producers having no interest in its value. Oil was being chased for its ready dollars. But certain critical other ingredients were needed:

Political will—always strong but fortified by the fact that he was persuaded not to give up his leadership role in 1973;

Surplus dollars for investment

Human resources to support and implement the vision

At the political level, he found ready allies in:

Errol Mahabir

Mervyn De Souza

Bunny Padmore

Patrick Manning

And at the public service and technical level, there was a group of enthusiastic technocrats:

Eugene Moore

D Alleyne

E Warner

B Ali

Ken Julien

All enthusiastic about following Eric Williams, as he took the country down this bold passage in fulfillment of the vision.

Let me describe the environment of the mid-seventies to illustrate the boldness of that journey:

Natural gas—T&T had less than 1 per cent of the natural gas reserves of the world;

We had never produced a single kg of steel;

No new habour or port facilities had been created since colonial times;

Ammonia had been produced in limited amount since 1962, but no new plant had been erected for 12 years;

nOur peak demand for electricity was 300MW the demand of the steel plant was 180MW—the peak demand of the whole country;

Methanol was a foreign word;

A single 16” gas pipeline existed between Penal and Port of Spain. There were no natural gas offshore or cross country lines;

The challenges to monetise our natural gas were forbidding and formidable, including a skeptical national community that had not historically identified with the energy sector.

Notwithstanding that environment and the challenges that which this country faced defining moments came fast and furious.

Defining moment No 5—Independence

Day 1974

Shell Trinidad became the T&T Oil

Company

The changes of names of this company were significant:

UBOT—United British Oilfields of Trinidad, Shell—Trinidad and then finally the National Identity emerged T&T OIl Company—TRINTOC—August 31, 1974.

Here is an extract from his address, on that day:

“As we proceed to lower the flag of yesterday (the honour falls to the worker with the longest service in Shell, 42 years exactly today) and hoist the flag of today and tomorrow and tomorrow, the flag of the nation as against the flag of an external corporation, as we see the flag, our flag, flying high and riding proud in the breeze, symbolising the ascent of the nation and the higher destiny of the citizens of Point Fortin, let us say, with pride but yet with humility, we are going well, and may God bless our nation.”

(Continued next week)

 

 

 

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