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About Energy Chamber of Trinidad & Tobago
Local content: Let’s consult before implementing
One of the long-standing and key strategic objectives of the Energy Chamber has been to maximise local content in the Trinidad and Tobago energy sector. We believe that the maximisation of local content is a crucial aspect of sustainability and we have placed a particular emphasis on building the capacity and capability of local energy service companies to ensure that they are globally competitive. For more than a decade, we have actively worked with the government to promote the energy services sector. We played an important role in the development of local content policy and more recently scored a major success in at last getting the energy services sector officially recognised as one of the key sectors for economic diversification. This decision has, for the first time, opened up the possibility of direct government support to the sector through agencies such as ExporTT.
Through programmes such as Safe to Work, our competency development initiative and our project to strengthen corporate governance in our member companies, we have sought to directly help local service companies meet the highest international standards. We have managed to secure significant grant funds from both the Inter-American Development Bank and the European Union to support these initiatives. We have also assisted many of our service companies to access export markets in order to grow their businesses: over the past eight years, we have taken a total of 80 companies to 12 countries on 15 separate trade missions.
For the past three years, we have organised well-attended annual symposiums on local content, which have brought together local energy service companies with key supply chain professionals to discuss challenges to increasing local content and practical steps that can be taken to overcome them. The third instalment of the Local Content Symposium is set for the 18th November 2015.
Given this track record, the Energy Chamber welcomes the new focus that has been placed on local content by the Honourable Nicole Olivierre, the recently appointed Minister of Energy and Energy Industries. It is positive that local content is now firmly back on the policy agenda. However, we do also urge caution so that, in the excitement to pursue local content, we do not take some steps that we may later regret.
Both the local and global energy sectors have changed dramatically since the introduction of the Local Content and Participation Policy and formation of the Permanent Local Content Committee in 2004. At that time, the Trinidad and Tobago energy sector was in the midst of a period of rapid expansion. In 2003, the energy sub-committee of the Vision 2020 planning process predicted that our gas production in 2015 would be between a low of 5.0 billion cubic feet (bcf ) per day and a high of 10 bcf per day, with oil production predicted to be between 250,000 barrels per day (bpd) and 600,000 bpd. A decade on and the reality looks very different. We are struggling to maintain gas production at 3.8 bcf per day, well below the installed capacity of the existing downstream plants and Atlantic. Oil production has slid to 80,000 bpd with little signs of a sustained increase on the horizon.
A decade ago investors were lining up to build LNG import terminals all along the US coastline to create secure future markets for our major export. Today, investors are lining up to build LNG export facilities which will compete directly with Atlantic, with the first US exports just about the enter the market. The chances of significant downstream petrochemical investment in Trinidad and Tobago look remote and the struggle now is about maintaining what we have, rather than any expansion.
Globally, the oil and gas industry has entered into a new low price environment, with cost cutting, layoffs and reduced capital investment budgets at the forefront of industry minds. Competition for capital has intensified and major oil and gas companies are busy cancelling projects that do not meet the strictest investment criteria.
Since 2004, the global energy industry has had another decade of experience with local content policies and local content legislation, with varying degrees of success. In Trinidad and Tobago, respected international consultants Poten and Partners recently conducted a review of local content policy as part of the gas master planning process, though their findings have not yet been shared with the industry.
The Energy Chamber therefore urges the Minister to first engage with the energy industry and review the 2004 Local Content Policy before rushing forward towards legislation based on the old policy, as dialogue and consultation will inevitably lead to better policy.