BPTT an­nounced on May 10 that the re­sults of its drilling pro­gramme have been dis­ap­point­ing. BPTT, T&T’s largest gas pro­duc­er and tax­pay­er, re­port­ed that the four wells drilled as part of its in­fill pro­gramme were “dry”. This de­vel­op­ment will have a sig­nif­i­cant neg­a­tive im­pact on fore­cast­ed pro­duc­tion par­tic­u­lar­ly in 2020 and 2021. There­fore, the gas sup­ply to Train 1 will be chal­lenged af­ter 2019.

To cush­ion the shock of this an­nounce­ment, BPTT said that on­ly Train 1 would be af­fect­ed and that the oth­er three trains would con­tin­ue as nor­mal. It al­so not­ed that de­spite the re­cent suc­cess­es in the Sa­van­nah, Macadamia and An­gelin fields these re­cent re­sults are a re­minder of the risk and un­cer­tain­ties in­her­ent in oil and gas ex­plo­ration.

To para­phrase Lloyd Best, when the en­er­gy sec­tor sneezes, the rest of the econ­o­my catch­es a cold. In­deed, every down­turn since in­de­pen­dence has been led by weak en­er­gy sec­tor per­for­mances. The cur­rent “turn­around” de­pends on the en­er­gy sec­tor, gas in par­tic­u­lar, as the T&T econ­o­my is a “gas” econ­o­my pro­duc­ing 11 times more gas than oil.

The en­er­gy sec­tor ac­counts for ap­prox­i­mate­ly 80 per cent of for­eign ex­change earn­ings, 40 per cent of GDP, and as much as 50 per cent of gov­ern­ment rev­enue dur­ing boom years. There­fore, any neg­a­tive de­vel­op­ment in the sec­tor has a sig­nif­i­cant im­pact on the per­for­mance of the econ­o­my and im­pacts the lives of every cit­i­zen.

The in­stalled plant ca­pac­i­ty in the LNG and the petro­chem­i­cal sec­tors re­quires ap­prox­i­mate­ly 4.1 bil­lion stan­dard cu­bic feet (scufs) a day to op­er­ate at full ca­pac­i­ty. Av­er­age dai­ly pro­duc­tion was 3.628 bil­lion scufs for 2018 and the pro­jec­tion was to in­crease av­er­age dai­ly pro­duc­tion to 3.9 bil­lion scufs ul­ti­mate­ly reach­ing four bil­lion plus scufs in 2020. In oth­er words, whilst pro­duc­tion has im­proved to ap­prox­i­mate­ly 89 per cent of ca­pac­i­ty, the sec­tors have not re­turned to full pro­duc­tion. BPTT cur­rent­ly ac­counts for 50 per cent of the gas pro­duced with 250-300 bil­lion scufs per day go­ing to Train 1.

From this per­spec­tive, BPTT is say­ing that it ex­pects gas out­put con­tract­ed to Train 1 to de­cline in 2020 af­fect­ing up to ten per cent of to­tal gas pro­duced. The de­cline is sig­nif­i­cant, so much so that “BP along with At­lantic and its share­hold­ers are work­ing through op­tions for the fu­ture of the train.” Train 1 is at the end of its life ex­pectan­cy and a ma­jor over­haul was planned for lat­er this year. If the 2019 de­vel­op­ment pro­gramme does not yield pos­i­tive re­sults, all op­tions will need to be con­sid­ered, in­clud­ing clo­sure of Train 1.

This is why many com­men­ta­tors ad­vised the need for a for­ward-look­ing ap­proach and ur­gent restora­tive ac­tion ear­ly in the life of this ad­min­is­tra­tion. Wait­ing for an im­prove­ment in mar­ket prices is a pas­sive strat­e­gy that de­pends on forces en­tire­ly out­side of the coun­try’s con­trol. It al­so why cau­tion was ad­vised in look­ing at a turn­ing point and call­ing it a turn­around in the haste to score po­lit­i­cal points pri­or to the 2020 elec­tion.

In­deed, the IMF gave the same ad­vice al­beit in more mut­ed, diplo­mat­ic lan­guage say­ing that “the out­look is sub­ject to risks tilt­ed to the down­side in the near term. Key risks in­clude low­er en­er­gy prices, de­lays in de­liv­er­ing en­er­gy-re­lat­ed projects on time, and fur­ther dis­rup­tions to out­put, pend­ing com­ple­tion of the oil and gas tax regime re­form”.

The an­nounce­ment by BPTT presents a trou­bling sce­nario point­ing to a weak­ened gas per­for­mance in the 2020-21 pe­ri­od. What hap­pens in 2022 and be­yond? And where are the fis­cal changes and reg­u­la­to­ry re­forms re­quired to move the coun­try for­ward? What is the ben­e­fit if, hav­ing achieved some weak growth in 2018, it slips right back in­to a down­turn in 2019? Rather than an im­prove­ment in the for­eign ex­change out­look more busi­ness­es are com­plain­ing of re­duced al­lo­ca­tions, for ex­am­ple.

The last five years have not been easy, nor will the next ten. Ma­jor strate­gic changes are re­quired, changes that this ad­min­is­tra­tion has not be­gun to con­tem­plate or to dis­cuss. The net ef­fect of Petrotrin’s clo­sure is neg­a­tive and will re­main that way for some time. Im­prov­ing what is left is a sev­en-ten turn­around year ex­er­cise if suc­cess­ful. Com­ing on the heels of the Petrotrin re­or­gan­i­sa­tion, the neg­a­tive im­pact of clos­ing Train 1 would be colos­sal.

T&T can­not bor­row or spend its way out of these dif­fi­cul­ties as gov­ern­ment ex­pen­di­ture does not cre­ate sus­tain­able jobs and loans have to be re­paid. In­deed, the re­verse is true: gov­ern­ment rev­enues and there­fore its ex­pen­di­tures de­pends on the growth and the ef­fi­cient per­for­mance of the econ­o­my. Venezuela is a prox­i­mate ex­am­ple of fail­ure in this re­gard. It re­quires de­lib­er­ate fis­cal mea­sures and an en­ter­pris­ing and in­dus­tri­ous pop­u­la­tion to achieve sus­tain­able growth. All en­er­gy sec­tor cor­po­ra­tions com­pete in a glob­al mar­ket and al­lo­cate and in­vest re­sources in ju­ris­dic­tions which will help them achieve the best re­turns. Lo­cal busi­ness­es are no dif­fer­ent.

The cur­rent busi­ness mod­els and the strate­gic out­look for the sec­tor re­quire im­me­di­ate ad­just­ment. Sign­ing an agree­ment with Chi­na to de­liv­er gas that NGC does not pro­duce is not “sen­si­ble”. Politi­cians are elect­ed to deal with the sub­stan­tive mat­ters as suc­cess is mea­sured in out­comes, not win­dow dress­ing. Lead­er­ship and man­age­ment are the suc­cess­ful hall­marks of any ad­min­is­tra­tion, the hall­marks by which this ad­min­is­tra­tion will be judged.