Norman Christie, BPTT President
All protocols having been observed, ladies and gentlemen I wish you a pleasant good morning.
It is a pleasure to once again join you at the opening of the Trinidad and Tobago Energy Conference. BPTT has supported this conference since inception and has seen it grow to be the signature industry gathering on the Trinidad and Tobago calendar of events. When the theme of Powering Development and Ensuring Stability was decided on, commodity prices were much higher than they are today but thetheme remains extremely relevant.
At last year’s conference, there was a lot of positive sentiment with new production sharing contractsbeing signed and active exploration starting up in the deep water. There was much excitement about the future of the energy sector and plans reflected the level of excitement. However, to quote the former heavyweight champion Mike Tyson, everyone has a good plan until they get punched.
While optimism and opportunity legitimatelycontinues in the T&T energy sector, the rapiddecrease in energy prices over the past few months has dealt a hard blow to the global energy marketsand T&T is not immune. But as any good strategist will tell you, what you do after you get hit matters. Prices are down, but our sector can be resilient if westay focused on the long-term while dealing with short-term challenges. Across the globe, oil and gascompanies are revisiting their plans and making tough decisions to ensure long term viability.
So what should we do to Power Development and Ensure Stability in spite of and in response to thedownturn? Well, I believe it would be terrible to let a serious downturn go to waste. Now is the time topreserve what is good and put into action many things that we have talked about for too long. Hard times have a way of sharpening focus and spurring action. I hope that is the case for us
To be abundantly clear, this is not a time for panic, this is a time to prudently improve our competitive standing.
The need for Prudence
Now, I know that there are varying views as to how long prices will remain low, or how low they will go. I am not going to engage in any predictions this morning but I do believe that it would be wise for us to contemplate lower prices sticking around for a while. So, what are some of the prudent actions that we should take in response? In the time allotted I can’t present an exhaustive list but I will quicklymake a few suggestions. I believe there are four activities that we must not slow down and three activities that we need to get into more intense action on.
The activities that we must not slow down are ones that it might be easy to roll back but to do so would be shortsighted:
- First and foremost are activities that have improved safety. Whether we are talking about benefits from the Energy Chamber’s Safe to Work (STOW) initiatives or the process safety improvement projects that many of us areengaged in, safety related activities must be preserved and built on. Now is not the time to be distracted from safety as a top priority.
- Second, we must continue investments toimprove the integrity of aging infrastructure.
- Third, we must continue to support philanthropic efforts in service of the most vulnerable in our society.
- And fourth, we must preserve clear gains thathave been made in fiscal policy. The country has benefitted from increased investments as aconsequence of recent changes to energy relatedfiscal policies. We have to be sure not to roll back those gains because that would be a sure recipe for loss of competitiveness.
The three activities that we need to get into more intense action on are items we have talked about for many years now. I’ll quickly mention two areas and then spend a bit more time on the third.
Number 1 is to increase the level of cooperation across the industry in order to grow revenue andreduce costs. With the leadership of the Ministry of Energy, we have increased cooperation across the gas value chain to mitigate the impact of disruptions to supply. However, in many otherareas including logistics, there is too much duplication, and clear opportunities exist toreduce costs. When I say cooperation here, I am using a very, broad net – upstream, midstream, downstream, the service sector, government, opposition, unions and more. Where the upstream is concerned, I believe it is time for an Upstream Association and I commit to doing my part to get one started.
Number 2 is to reduce bureaucracy. Whether it is permits or other forms of approvals let’s use this downturn to become much more efficient. I therefore welcome a recent announcement by the government to set up a committee to address this issue.
Gas Master Plan
Globally, we are seeing what happens when the investment climate is not suitable to attract scarce capital. Even before the recent changes in energy prices there were lessons to be learned from countries like India. In the plenary session later today there will be a segment on gas dynamics in India so I won’t go into lengthy details but I know thatdepressed domestic gas prices in India have created a disincentive for upstream investment. Lack of investments in the upstream then led to declines in India’s indigenous gas production, which thenincreased the need for the importation of LNG to meet the country’s energy needs. This is just one example of the impact of policy on the development of natural gas resources.
The Gas Master Plan itself is of course not a panacea. However, it is an important precursor to policies that will surely impact future investment decisions. As an example, BP will be renegotiating major NGC andLNG contracts before 2018. Before concluding these negotiations both gas suppliers and gas consumers need to understand government’s broad energy policy on key matters such as gas pricing, gas allocation, and any intentions for further downstream diversification. The national gas master plan must address these key issues. For investment decisions to be made, investors need some sort of certainty on the future plans for the gas based industries on the island.
Further, when that policy direction is laid out, we must follow through on it. A well written plan that is not put into action is not in the interest of the country. I am advocating that this gas master plan is too important to succumb to the vagaries ofbureaucracy, inertia or politics
We should make good use of this downturn and ensure that we act with urgency to deliver the Gas Master Plan and resultant policies. Remember, investments go where they feel welcome.
Let me turn my attention briefly to BPTT’s actions in the current environment. Like all of you, we arecarefully reviewing our plans. We are making hard decisions but these decisions are being madeconsistent with our Values such as Safety and Respect and with an eye towards a long term future in Trinidad & Tobago. For example, we recently announced that we are offering a Voluntary Separation Program (or VSEP) to some of our employees. Of course, only a few employees will likely express an interest, and we won’t accept any applications that could jeopardize safety or our performance. However, through simplification and efficiency efforts, along with reduced activity we will be able to accept some applications. We will do this in a way that recognizes our employees as our most important resource. At the same time that we are offering a VSEP program though, we are progressing major investments such as the Juniper project.
We are also working hard to mitigate the currentnatural gas supply demand imbalance. I have used the word mitigate intentionally because I do not believe we will materially address this issue until major projects such as Juniper come on stream late 2017. In the spirit of being prudent and avoiding panic, I think it is important for me to remind you that despite the current supply demand imbalance,we remain confident in the subsurface. The good news is that there is no shortage of prospective acreage and there is still a lot of opportunity and resources that lie below the ground. Early results of the Ocean Bottom Cable seismic survey recently completed by BPTT have given us confidence that there are a lot more resources to go after in T&T.
At BPTT, we are in action, and we won’t let the downturn in commodity prices go to waste.
As I conclude, I return to the theme of the conference, Powering Development and EnsuringStability. You will have determined from my speech that I believe that we have an excellent opportunityto use this downturn as added leverage to secure thefuture. We must not panic, we must be prudent, and we must act with urgency. And, if prices do rebound in the near future, it still would have been wise to do the things I have advocated. Let us work together to continue to make this industry the envy of many. Let us turn the spears outwards and not inwards. Let us serve the citizens of Trinidad and Tobago with distinction. Let us respond to the current challengesand not waste this downturn!
I thank you for your kind attention and hope your time at the conference will continue to be productive.