Opening Remarks – Trinidad & Tobago Energy Conference 2019
Mr. Eugene Tiah, Chairman of the Energy Chamber of Trinidad and Tobago
It gives me great pleasure to welcome you to the Trinidad & Tobago Energy Conference 2019. I would like to say a special welcome to all our international visitors and also to those of you who are attending the conference for the first time.
All sectors of the global economy are being transformed by rapid developments in artificial intelligence, robotics, advanced data analytics and other advances in technology. The energy sector is no exception, and we have therefore taken as our theme for the 2019 edition of this long-running conference “technology: transforming the industry”. Over the next two days we will have a packed conference agenda exploring this topic, as well as providing an overview of the energy sector in Trinidad & Tobago and the wider region.
The past few years have been challenging for the oil and gas industry globally, and specifically in Trinidad & Tobago. While 2018 saw better average oil prices than 2017, significant declines at the end of the year and into early 2019 have shaken confidence in a longer-term improvement in prices. In response to weaker prices and projections of long-term downward pressure on oil prices, due in part to increasingly competitive renewable energy sources, oil and gas companies have continued their relentless drive for efficiency and competitive pricing from service companies and contractors.
This in turn has meant that service companies and contractors, who make up the majority of the Energy Chamber’s membership, have had to make serious and fundamental adjustments to the way in which they do business, just to be able to survive. The adoption of new technology has an important role to play in making this transition.
We need to have the right regulatory and policy environment to help our local service industry navigate these tricky waters. Serious reforms to the industrial relations environment and the education system are crucial if we are to successfully make this transition. The right local content policies can also assist the local service industry and ensure that we are able to retain more value in-country, at the same time as attracting direct foreign investment into the economy. Again, the right policies around education, capacity building and skills development will be crucial. The local service industry will also need the support of the financial services sector to make the necessary investments, and fostering those linkages is an important activity for the Energy Chamber.
In addition to the global factors impacting the industry, there have been specific issues facing the industry in Trinidad & Tobago. The hard choice to close the loss-making state-owned oil refinery was clearly the major decision in the Trinidad & Tobago energy sector in 2018. Many members of the Energy Chamber have traditionally done a significant volume of business with the refinery; for those members, the refinery accounted for on average twenty-five percent of their sales. Adjusting to this new reality has involved our members making some serious choices about how they have to run their businesses.
While the future of the refinery remains uncertain, I am sure that everybody hopes that we will find a suitable private-sector entity willing to take on the challenge, as has already happened with the gas to liquids plant.
What is of undoubted importance to Trinidad & Tobago is making a success of the new upstream focused Heritage Petroleum. Technology is going to have a very important role to play in profitably unlocking the significant oil reserves that still exist in Trinidad & Tobago, but without the right institutional structures and policy environment it is going to be difficult to attract the necessary private capital that will be crucial to the success of Heritage and the oil sector more widely. One of the key inhibiting factors is the current structure of supplemental petroleum taxation, which severely inhibits competitiveness of the Trinidad oil sector. The Energy Chamber once again renews its public plea that the Government seriously addresses this issue.
The other major issue that has specifically impacted on the local energy sector has been the continued shortfalls in gas production, which has had serious implications for the petrochemical sector and LNG exports. The good news here is that we have seen continued significant investment in the upstream gas sector and continued improvements in gas supply, with further increases projected over the next few years. Negotiations between BP and Shell, the major upstream suppliers to the Atlantic LNG facility, have been reported to have progressed well, allowing new investment decisions to be taken. We have also seen contracts being successfully renegotiated with NGC for domestic supply and in late 2018, first gas from a new T&T focused gas producer, De Novo.
Despite the new investments taking place, shortfalls in supply have continued to seriously affect the local petrochemical sector, which has had to also contend with higher gas pricing and increased competition in its key export market of the USA. The continued survival of the flagship Trinidad petrochemical sector, of which we are also so rightly proud, will rely upon a relentless focus on efficiency and competitiveness and we have to be extremely careful of any measures that will increase costs in this sector.
One of the areas that the Energy Chamber has done a lot of work in within the past year is the area of energy efficiency. This is an area in which there are significant benefits that can be created for the local economy, and there are some low hanging fruit that we can easily pick, to make more gas available to Point Lisas. Renewable energy also has an important role to play in reducing the demand for gas for electricity generation and investments in both efficiency and renewables can have a tremendous positive impact on our economy and the availability of foreign exchange.
It is also important for us to be involved in renewables and efficiency so that we can begin to understand the technologies involved, and build capacity and knowledge in these key areas for future growth within the overall energy sector. We know that technology around electric engines and autonomous vehicles is going to have a huge impact on the energy sector and we need to be involved in those technologies today.
While we focus on those new opportunities in renewables and efficiency, it is also important that we do not lose sight of the opportunities on our doorstep with new hydrocarbon developments. We are seeing a very encouraging deepwater exploration campaign underway in Trinidad, led by BHP, but nothing quite matching the enormous success of Exxon in neighbouring Guyana. Trinidad has the potential to develop a much more robust energy services sector, including developing deepwater expertise, by playing the role as a hub for the regional energy services industry, providing expertise and capacity to French Guiana, Suriname, Guyana, Barbados, Grenada and potentially offshore Venezuela. This should be a focus of national development and an important element in an overall export diversification thrust.
We have an interesting workshop on Wednesday afternoon looking at the development of a regional deepwater-focused services sector and the technology that drives that sub-sector.
In conclusion, these are interesting and challenging times for the energy sector. Technology is rapidly changing how we all work and creating both interesting opportunities and serious threats to our companies and the wider economy. We in the Energy Chamber hope that the deliberations over the next three days will help you chart a successful course.