Sponsor’s Remarks – Trinidad & Tobago Energy Conference 2017
It is my pleasure to once again be a part of this great Conference. BPTT has been a proud sponsor since inception, and I have had the privilege of actively participating for the last 6 years. Recently, one of my analysts asked me: “Since you have been delivering speeches at the conference have you seen any material improvements in the areas you have spoken about?” I told him, it was funny that he should ask because in preparation for this year’s speech I reviewed my prior speeches and concluded that there have actually been material improvements in many areas. I also confessed though, that there are a few critical problem areas that hang around like a stalker – they just never go away. So, this year as we discuss the topic of, “Building competitiveness in an evolving energy world” it is my hope that over the next year we will see positive momentum even in the persistent problem areas. If ever there was a year when it is worth solving our problems this is it, because 2017 is without a doubt a year of inflection.
Evolving Energy World
I would like to address the theme of the conference by suggesting three key choices we should make to build competitiveness. Before I present the choices, let me provide a summary of how our industry is evolving. The head of long term planning for BP, Dominic Emery, has identified six megatrends in the energy world that will no doubt have an impact on the future of our industry:
- The 1st is Energy Transitions. As the 21st century develops, natural gas is now growing faster than any other fossil fuel – and renewables faster still. Climate policy is now playing a much bigger role and we must transition to lower carbon sources of energy.
- The 2nd megatrend is Oil Supply. Over the past two decades, the energy world has moved from a situation of worry about peak oil supply where there would not be enough oil resources to meet global demand, to concerns about peak oil demand where demand plateaus and then gradually starts to decline.
- The 3rd megatrend is Natural Gas. The amount of natural gas traded across borders is increasing dramatically as liquefied natural gas (LNG) is poised to surpass pipeline imports as the dominant form of traded gas in the next 20 years.
- The 4th megatrend is Renewables. Wind and solar power have been growing faster than fossil fuels, albeit from a low base. Manufacturing costs have come down about 80% in solar and about 50% in wind, making them more competitive with fossil fuels.
- The 5th megatrend is Electrification and Transportation. The transport sector is set to change significantly, with electric and driverless vehicles. Of particular interest is the combination of vehicle electrification with new methods of mobility, car-pooling and ride-sharing.
- The 6th megatrend is Demand. The demographics of emerging economies and the demands of millennials are likely to change consumption. Strong economic growth will come from non-OECD countries. Millennials are changing their consumption patterns and these patterns will be enabled more digitally than in the past, and in ways that we have not even thought of yet.
Later this morning, Bernard Looney, the CEO of BP’s Upstream segment will share more about our evolving industry.
Choices to Build Competitiveness
In light of this evolving energy world, I would suggest three key choices to build competitiveness:
- Vision over division;
- Courage over complacency; and
- People over power.
Vision over Division
January 16th was Dr. Martin Luther King Day and as is customary during that celebration, the power of his vision was on display in the many replays of the “I have a dream” speech. To win in our evolving industry, focusing on a powerful vision is extremely important. This is not leadership mumbo jumbo. To quote a Biblical phrase, “where there is no vision the people perish.” The power of a clear vision certainly applies to the energy industry in Trinidad & Tobago. We have a vision of a country that continues to punch way above its size through the drive, intellect, and innovation of its people. A country that reaps maximum benefits for all its citizens from the large quantities of hydrocarbon resources below the surface and competent human resources above the surface. A country that gains competitive advantage from its significant infrastructure, installed at bottom-of-cycle costs. And finally, a country that builds a bridge to a diversified economy that includes the material export of talents and services honed in the energy industry. That vision stands in contrast to one of our persistent problems, division. I need not elaborate on the many stories of division between labour and industry, multinationals and locals, etc. The intense focus on division is like a grey cloud blocking the sun. On the other hand, a resolute focus on a vision improves our chance of winning even in a fast evolving industry.
We must focus on a vision and not on division.
Courage over Complacency
Winning in the evolving energy world will require courage. The Honorable Prime Minister, Dr. Keith Rowley has on multiple occasions raised the need for tough decisions. His statements certainly apply to the energy industry. Trying to preserve status quo in this environment is not a winning approach. Instead, tough decisions have to be made to improve productivity, eliminate waste and improve commercial arrangements. Further, there has never been a better time to make these decisions because as I have said on multiple occasions, we should not let a downturn go to waste. It took courage for example, to remove some fuel subsidies. It will take courage to address a catalogue of other pressing problems. One sure enemy of courage is complacency. Complacency creates an environment of inaction, sometimes because people don’t want to be blamed for a wrong move. Complacency sometimes results from false hope. For example, I recently heard some misplaced optimism when a commentator said that the industry is back on track because oil prices have experienced a 70 percent increase from their lows in 2015 and 2016. He clearly forgot that oil prices are still less than half of what they were just over two years ago. We can’t keep or revert to old habits and inefficient ways of working because we think price will bail us out. In this evolving energy world we have to act as if prices will be low for a very long time, because they very well could be.
We must choose courage over complacency.
People over Power
Evolving energy trends have caused significant dislocations globally. Loss of revenue, loss of jobs, currency devaluations and in some countries political instability, are just a few effects. Closer to home, Trinidad & Tobago has experienced an approximately 70 percent reduction in government revenue from energy and significant job losses. While the government here has been very clear about its desire to put all citizens of Trinidad & Tobago first, all of the other segments of society will need to do the same. We know that in times of significant dislocation the vulnerable can suffer disproportionately. This doesn’t have to be the choice for Trinidad & Tobago. Instead we can put all citizens of Trinidad & Tobago first. To be clear, I am not talking about political power. I am talking about us. We, as corporate Trinidad and Tobago, must be part of the solution. I derive confidence from the fact that I know the sterling character of the leaders I work with in this industry and their desire to put people first.
We must all consistently choose people over power.
The bpTT Story
To recap, my suggestion is that we choose Vision over Division, Courage over Complacency and People over Power. You may ask, is this all theory? I believe not. Over the past few years, BP has been making these choices. Our Group CEO, Bob Dudley, was one of the first leaders to predict lower for longer oil prices. Have we been perfect in responding? No, but we have done many things well and we are already seeing the results of the choices we made.
In bpTT, we have stayed true to our Vision – a vision of excellence in performance, mutual benefits to country and company and delivering benefits to all the citizens of Trinidad & Tobago. So, for example, we have preserved our Social Responsibility programs throughout the down-cycle while finding ways for more efficient execution.
We have made painful decisions including a 15 percent reduction in our overall headcount and a 50 percent reduction in our expatriate workforce. And, our courageous decisions have not only been about reducing and stopping, they have also been about continuing. For example, despite the economic downturn we spent over US$3 billion in capital expenditures in 2015 and 2016 combined. Further, we will spend another US$1.3 billion in 2017 if the environment remains conducive to investments. The US$2 billion Juniper project which will deliver first gas in the third quarter of this year demonstrates our commitment to investing through cycles.
We are also being courageous in pausing unsanctioned investments while we await policy and commercial clarity. Angelin is one such project that we will sanction once there is clarity on policy and commercial matters such as price. Time is of the essence though, because the country needs this gas in early 2019. The good news is that we are now in active negotiations with the government and NGC to agree the terms necessary for sanction of Angelin. And, the government is treating this with urgency.
We are also taking a courageous stand to raise the bar on collaboration. Collaboration has been one of the consistent themes in my past conference speeches, so I am pleased to be able to share this year that we are making progress on this. We worked with the industry to sanction the Trinidad Onshore Compression Project, we worked with EOG to sanction the Sercan II project, and we have worked with upstream operators to form the Trinidad & Tobago Upstream Group, which will be the subject of a panel discussion later today.
We work extremely hard to put people first. Safety has remained our number one priority and Respect is one of our Values. There is no quantum of hydrocarbon or money worth more than our workers. We have also maintained our commitment to the people of Trinidad & Tobago. Even as we continue to work through negotiations, we continue to invest for the future. An excellent example is our ongoing state-of-the-art seismic acquisition and processing program. Based on the success of this program we are now drilling exploration wells. As we speak, the Savannah exploration well is being drilled in the Columbus Basin, and with our partner BHP we are exploring in deep-water blocks. Later this year we will spud a second exploration well called Macadamia in the Columbus Basin. If our exploration efforts are successful it will guarantee benefits to Trinidad and Tobago for decades to come and provide a necessary bridge to diversification.
So, ladies and gentlemen, the task of building competitiveness in an evolving energy world in my view requires vision, courage and a continued focus on people. These choices are especially important in this year of inflection. Having reviewed my prior speeches, I know that last year I said that while the going will be tough for the energy sector and Trinidad & Tobago, in the end we will be OK. A lot has transpired since, but I still hold the same view. However, I recognize that there is considerable worry for many. So, I would remind us all of the popular saying: “The darkest hour is just before the dawn.”
I wish you a productive conference. Thank you!