Today, the country will know whether it has been successful in its second major deepwater bid round or if international companies are not prepared to place their investment dollars here.
This afternoon, at the last day of the T&T Energy Conference, the boxes will be opened and we will see whether the large international companies have shown interest in exploring in the deep water off T&T.
One does not know what to make of Prime Minister Dr Keith Rowley’s speech on Tuesday, when he chose to indicate the extent of the competition this country’s deepwater bid round faces.
He told the conference, “T&T is not singular in the matter, as several countries are actively promoting bid-rounds at this time, so we know that we are competing for exploration capital. Seven licensing rounds were closed by the first quarter 2022 and another eight licensing rounds, that are open, are expected to close by the end of 2022. Regionally, Suriname, Colombia and Brazil closed successful bid-rounds. Upcoming 2022 bid-rounds comprise Guyana’s deepwater blocks, Brazil sub-salt blocks and Ecuador oil blocks.”
The Prime Minister is right that there is serious competition for limited investment dollars and all of the areas that T&T is competing with are jurisdictions where the subsurface has had more success than we have recently had.
To be sure, the announcement yesterday by the Minister of Energy and Energy Industries, Stuart Young, that the BHP/Woodside’s discovery is now estimated at over six trillion cubic feet, would no doubt have factored into any interest oil and gas companies may have in the deepwater.
Most experts believe there are billion-barrel oil fields and more multi-trillion cubic feet fields in T&T’s deep water and while we have had some success, it is very conceivable that far larger discoveries can be made. The challenges T&T face are issues of competitiveness, sustainability and timing.
On the timing side, the world is moving firmly away from fossil fuels as pressure from society for renewables and green energy grows and the commitment from the world, as seen at COP 26, is to move away from oil and even to some extent, natural gas.
It means that the need for quick decision making is crucial. This country has, in the last seven years, showed that it suffers from analysis paralysis. The Government says the right things, perhaps are intellectually aware that quicker decision making is required, but nothing they have done shows an ability to execute.
I have on many occasions used this space to urge the late Franklin Khan to offer more deepwater blocks for bids but unfortunately, up until his death, he had not succeeded in bringing it forward.
The Government has now done so, in my view, four to five years late, and today, we will see whether the world has changed so much that the appetite for frontier drilling, with limited success, is so reduced that it does not lead to success, or if the companies are ready to bet on T&T. For the country’s sake, I hope it is the latter.
The second challenge of competitiveness is in many ways linked to the first and that of timely decision making.
It is hard work and requires a lot of thought and analysis to make changes to the fiscal terms for the energy sector. This has to be so because of the extent of reliance of the general economy on the energy sector and the potential impact of changes on government revenue and the welfare of the country. When we talk about the energy sector, we only talk about it in terms of tens of millions of US dollars, both significant revenue and the lifeline to the rest of the open economy, reliant on the sector for the foreign exchange it uses to import goods and services.
For years, the Government has been saying it plans to reform the fiscal regime to make the sector more competitive. The rhetoric continued at this year’s energy conference.
T&T and its Government must see the private sector as its partner and not its competitor. There are too many people in the administration who are of the view that the Government must be in control of the economy to the point where it is more important to exert control and influence, even if it means stagnating economic growth.
This notion that high taxation is the only way to get maximum benefit for the country is mind-boggling. Surely, a smaller piece of a larger pie is as impressive as squeezing the lifeblood out of a sector of the economy. It is no surprise that most of the country’s state enterprises are not net contributors to the economy, it is no surprise that the Government does not see anything wrong with monopolies and oligopolies as long as it is a state or state-aligned company.
We must embrace the concept of a free society, of a free open economy where the private sector takes the lead in economic development and the Government’s role is to regulate and facilitate.
Should the Government change its perspective then, it would see things like improving the ease of doing business and modernising customs and the port not as lofty goals but necessities. It is only then it will see the digitalisation of the country and in particular the public sector, as urgent in preparing the country for a life of independence from the clutches of the government and politicians as a way forward and an economic imperative.
Sustainability will only occur when, as a country, we take the steps to ensure that we have both an energy sector and an economy that operates on the real value for oil and gas—where the above the ground measures are such that they allow private capital to go to where a reasonable return can be made.
It won’t be long from now before we discover if we have succeeded in the first step or if we have to go back to the drawing board.