Thursday 6th March, 2008

 

Issue of energy security

 
 
 
 
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The South Trinidad Chamber of Industry and Commerce (STCIC) hosted the annual T&T Petroleum Conference 2008 on Monday and Tuesday last week at the Hilton Trinidad and Conference Centre, St Ann’s.

The Business Guardian last week published the first half of the opening address delivered by STCIC president Dr Rampersad Motilal. This week the conclusion of Mootilal’s address.

The discussions on the reserves to production (R/P) ratio have highlighted the need for this nation to also consider other paths towards sustainable development which may not be directly linked to our hydrocarbon reserves.

The chamber strongly believes that the continued development of our energy services sector will provide one such avenue.

We can also develop a sustainable energy industry by exporting our energy services to the rest of the world. Here, within the Caribbean region, there are potential future hydrocarbon reserves that can be developed and T&T service companies are well placed to take advantage of these opportunities.

Late last year we took an extremely successful energy service trade mission to Guyana and Suriname and a number of our members are developing significant business interests in both countries.

Barbados has an upcoming bid-round. Production is increasing in Cuba. Slightly further afield, Brazil has huge potential.

For some time now, attention has been focused on how we can develop a long-term sustainable petrochemical industry even beyond our oil and gas. There are a number of countries in the world which have little or no hydrocarbon resources but have very successful petrochemical sectors. We hope to explore this issue further in this conference.

Local content

Building a successful export strategy relies upon a strong industry at home and, in this context, let me say a few words about local content.

The chamber has advocated a number of activities that need to be implemented in order to support local content in the operations of the country’s energy industries.

These include:

1. The integration of local content regulations with both existing and new production sharing contracts (PSCs) as well as those operating under production and export licenses such that there are defined standards which must be met.

2. Communication and dissemination of the Local Content Policy which should be championed, funded and implemented by the Ministry of Energy and the policy should be given prominence on all communications between the Government and existing and new companies entering T&T’s energy sector.

3. There must be independent monitoring and auditing of local content targets and achievements by companies.

Energy security

In order to meet its development goals T&T needs to consider the whole question of long-term energy security. The chamber has been advocating for sometime now the need for the country to set aside a tranche of gas for electricity generation for at least the next 50 years. We also need to more aggressively pursue the use of alternative energy sources to complement our energy portfolio.

Stock market/

divestment of assets

There is a noticeable absence of energy companies on the local stock exchange. We wish to encourage the Government to establish the appropriate framework.

Some portion of the assets of local energy industries should be divested and placed on the local stock exchange so that citizens can participate directly in sharing the risk and the rewards of the energy sector. This can also be a useful mechanism for the divesting of mature assets which may no longer meet the returns criteria of larger players but could still be profitable to a smaller, publicly-traded company.

Some adjustments may be necessary to the present rules and regulations governing the local stock exchange to encourage greater participation by the energy sector. In this regard, we note the scarcity of participation by local private companies in the upstream, mid-stream or downstream sub-sectors.

Refinery

There have been a number of statements recently concerning the construction of a new refinery at a cost of some US$3 to $4 billion at the Petrotrin refinery complex site in Pointe-a-Pierre. While investments in the local energy sector are always welcome, this will represent the largest single capital investment in any local petrochemical complex. We expect to hear more from the Government on the benefits of this investment and its plans to achieve competitiveness and how this project fits into the overall development plan for the sector.

On this issue, we wish to note that the presence of a well-managed, competitive, refinery— which is not necessarily reliant either on locally produced or imported crude—can provide important feedstock for the continued development of the petrochemical sector.

The basis of Singapore’s petrochemical sector, mentioned previously, is the presence of a diversified crude oil refining capacity.

It is easy to be sceptical about our chances of developing a sustainable energy industry long into the future. But in this 100th year of commercial oil production it is perhaps also important for us to take stock of where we have come from.

If you talk to many of the original thinkers and proponents of the Point Lisas Industrial Estate —including many of my predecessors as president of this chamber—they will tell you that their concept for a world-class heavy industrial estate was met with scepticism bordering on derision by many people in the country.

Yet, look where we are today! We therefore feel that there is sufficient basis for continued optimism about this sector.

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