Too little, too late?
By Raffique Shah
March 23, 2018
It may well be a case of too little, too late. It might even be a classic case of trying to set right an historical economic wrong when the oil barrel is about to run dry. But for sure, Government's Rip Van Winkle's rude awakening to the reality that Trinidad and Tobago has for far too long been gang-raped by the large energy corporations, with the complicity of its mothers and stepmothers (successive governments and some of the elites), reduces informed patriots to a mixture of tears and guffaws.
I could hardly believe what I was watching and hearing—the front rank of the ruling People's National Movement in full attack mode, crying foul over the contractual tax arrangements between the Government(s) of T&T and the oil and gas majors, agreements that see the latter's contributions to the Treasury literally dry up at a time when no other commodities can fill the breach, leaving the country starved for foreign exchange and revenues in general.
In stupor, I literally peered into my television set, foolishly expecting to see and hear apparitions of realists and revolutionaries of yesteryear—George Weekes, Joe Young, Trevor Farrell, George Sammy, Lennox Pierre, Allan Alexander—speaking from behind the curtains, with Keith Rowley, Franklyn Khan, Colm Imbert and others miming from the front.
You see, the PNM, in previous incarnations, especially under the leadership of the venerable Dr Eric Williams, ridiculed those who cautioned government about the wiles of the global energy conglomerates and warned them against parting with the national patrimony for the proverbial song. In fact, when we (I was a "youth-man" among those giants) protested against the relative pittances firms such as BP (also in a previous incarnation), Shell, Texaco and Amoco were paying for our oil, and demanded they re-negotiate royalties and taxes upwards, the governments of the day pointedly ignored us.
So it was quite a shock to see the Rowley regime expose some of the injustices that linger to this day, and signal Government's intention to call on the exploiters of our hydrocarbon-resources to come better in these tough times, to not bite the hands that contribute to their super-profits. BP, for example, enjoyed a US $6.2 billion profit in 2017, up from $2.6 billion in 2016. Shell, which recently returned to T&T having acquired British Gas, posted a profit of US $16 billion, while the largest of them all, Exxon Mobil, which rules the new-oil roost in Guyana, declared $19.7 billion.
BP, operating locally as bpTT, is, or was, the second largest contributor to the national coffers after the National Gas Company. It also rescued the natural gas sector by starting production at the Juniper platform last July, and overall restoring daily production closer to the 4 billion cubic feet per day (bcd) required to meet the needs of the downstream petrochemical plants (ammonia, methanol and urea), power generation, and Atlantic LNG.
Several factors negatively impacted the slump in government revenues from the energy sector, which plummeted from TT $27 billion in 2014 to TT $9 billion in 2017. These included steep declines in production and prices of both oil and gas. Additionally, the conglomerates were allowed to write off their capital investments over a much shorter period (hence significantly reducing their tax liabilities), and engage in the lawful but disingenuous practice of "transfer pricing" in marketing their lion's share of LNG.
Indeed, while it is true that hindsight is 20-20 vision, one wonders whether getting into LNG at the turn of the Century was a prudent, not to add profitable, venture. It was one thing to boast of being a leader in the new wave of selling and transporting natural gas for which demand was growing almost exponentially. But with relatively small gas reserves (never more than 15 trillion cubic feet proved), and generous concessions made to Atlantic LNG shareholders (BP, BG, Repsol, with NGC having small stakes), one wonders why we proceeded with Trains 2, 3 and 4 without demanding a bigger share of the pie.
Atlantic LNG consumes more than 50 percent of our gas production (2 bcf/d), but the returns to NGC, hence government, are nowhere close to what we earn from the ammonia and methanol plants at Point Lisas, which utilise far less gas. True, the latter also enjoy generous gas prices which need to be revised upward (note the CNC-NGC imbroglio). But during the gas-shortage crisis, they suffered more than Atlantic LNG.
Readers should note, too, that the world's leading LNG exporters have infinitely bigger reserves than ours: Qatar (75 million tonnes per year—880 tcf reserves); Australia (45MMT/132 tcf); TT (12MMT/12 tcf).
So, yes, we need not merely to re-negotiate our share of the profits from our hydrocarbon resources, but we should re-prioritise usage, allocate gas based on returns to the country—and let the energy majors know that it cannot be exploitation as usual.
Sure they are in business to make and enjoy profits, super-profits, as I have noted above. But so are we. With a mere 700 million barrels of proved oil reserves remaining (Guyana, seven wells drilled, has 3.2 billion and counting!), and around 10 tcf gas, even with new finds, we have at best a few decades to make money off our hydrocarbons.
In many ways, Government may have moved too late to retrieve some lost dollars, and to restore some dignity to one of the oldest oil producers in the world. Realistically, we need both. They have my support in this pursuit.
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