By Raffique Shah
November 30, 2014
In the current oil prices turmoil that has sparked much speculation, rumours of doom and gloom, and seeming indifference on the part of Government, the few in the country who know and understand what’s happening at the global level owe it to the nation to let their voices be heard.
We cannot believe the politicians. Over the past few months, as the price of West Texas Intermediate (WTI) crude slipped from US$105 a barrel in June to below US$70 a barrel last week, Finance Minister Larry Howai and Energy Minister Kevin Ramnarine were singing, “Don’t worry, be happy!”
Meanwhile, as she doled out hefty incentives of $50,000 a person to members of the country’s women’s football team, the latest recipients of State largesse from our bottomless pit of gas dollars, the Prime Minister remained stupendously silent on the most alarming economic development to have struck her Government during its tenure.
In the absence of informed discussion on the issue, the political blogs and social media networks went wild with portents of doom and gloom: now we ask-mih-no-questions dark if not dead, the natives screamed.
In the face of this state of national confusion, I plead with our knowledgeable analysts—Gregory McGuire, Terrence Farrell, Roger Hosein and a handful more—to intervene, to inject some sanity in the situation, to shine some light in an area of darkness that should never be, since oil and gas are the oxygen of our economy.
If we settle for guidance from Howai and Ramnarine, there is no problem with tumbling oil prices because it is gas that sustains the economy, providing 90 per cent of revenue from the energy sector. Howai told Parliament last Friday that as long as gas prices remain above US$2.75 per mmBtu (1,000 cubic feet), even if oil drops to US$65 a barrel, revenue loss will be a mere TT$1.3 billion, or 2.1 per cent of Government’s projection.
What neither minister told the population is that ever since this country shifted its gas sales from the depressed US market three years ago, and focussed instead on South America (Brazil, Argentina, Chile), Europe (UK, Spain) and Asia (Korea, Japan, China), LNG has been sold at more than US$10 per mmBtu, at times as high as $16.
In other words, by pegging budgeted gas price at the Henry Hub benchmark of $2.75 per mmBtu, Minister Howai engaged in sleight-of-hand economics (and arithmetic), knowing well that actual revenue would be four times more, certainly for LNG exports, which is approximately 50 per cent of all gas produced and sold.
What neither he nor Ramnarine said, too, is that the remainder of the gas, which is sold to and utilised by downstream energy plants (methanol, ammonia, urea), iron and steel manufacturers and power generators, is sold at Henry Hub prices or less. In fact, T&TEC’s general manager Kelvin Ramsook let the cat out of the bag when he said last week that they are buying gas at US$1.18.
So, yes, the country is making good money from at least half of the four billion cubic feet of gas produced and utilised daily, meaning LNG exports. But this is not a new development. It happened when oil sold at an average of US$90 a barrel, which was for the duration of this administration’s incumbency.
A sudden drop in prices must have deleterious effects on projected revenues. The ministers are being disingenuous by suggesting otherwise, especially as the industry is scrambling to maintain production levels above 80,000 barrels per day (bpd). In December 2008, when production stood at over 100,000 bpd, oil prices plunged from $133 (June) to $40! By January 2009 it had climbed back to $69, but the impact on revenue was startling.
In fiscal 2007/2008, out of total revenues of TT$56.8 billion, $30 billion came from the petroleum sector. By 2008/2009, when oil plunged (but recovered fairly quickly), petroleum sector revenue also plunged by almost 50 per cent, to $15.7 billion. In the ensuing years it crept back up, but lower production meant less revenue: $17.8 billion, $20 billion, $18 billion.
Oil shocks are nothing new. As one of the oldest oil producing and exporting countries in the world, we have been through the boom-bust cycle repeatedly. In 1970, oil fetched US$1.80 a barrel. When the 1973 Arab-Israeli war triggered the first oil boom, prices climbed to the then astronomical $11.58 (1974), $36.83 (1980) and stayed there until 1986 when it plunged to $14.43.
We all know what happened politically that year. It rebounded to average $20 through the 1990s, falling only once (1998) to a low $12.72. Between 1986 and 2002 ($30), the country experienced five changes of government, almost all of them coinciding with declining oil prices.
The incumbent Partnership Government enjoyed buoyant prices throughout its tenure. Now, on the eve of elections, there is a slide with little hope of recovery before June 2015, when OPEC next meets.
Oil and politics are deadly cocktail, a bitter potion for politicians. Maybe that is why ministers are in denial over the looming prospect of significantly lower revenues, which could mean fewer dollars to throw at voters. And that is where this Government performs best.
On Friday, in a statement to Parliament, Howai said about $1.3 billion would be cut from the budget expenditure with an average cut of $45 million per ministry.
Your article is totally accurate and your information has been admitted by the finance minister and the energy minister, probably after your article was written.
Do those governmental admissions make this article irrelevant?
The implications of this scenario could be very serious for T&T
http://www.vancouversun.com/Canadian+Natural+Resources+chairman+sees+touching+barrel/10423950/story.html
http://www.vox.com/2014/11/28/7302827/oil-prices-opec
The war between OPEC and the U.S. will see oil prices going down further. The U.S. has increased production and is finding ways to get more oil. Obama has opened up more lands for drilling and encouraged increase in local production. A glut in the market is inevitable because OPEC will not reduce production. More the merrier. Better for consumer.
Agreed Mamoo,
but this will not last forever. The Saudis are trying to squeeze foreign countries like the US that produce oil,…to the ground. This has a trickle effect and can later trigger another recession globally…but we will have to wait and see.
Meanwhile, the U.S. does not care because they are busy fracking with large complanies like Texas’ Eagle Ford shale, Permian Basin and North Dakota’s Bakken shale (projected to pump 150 to 900 million barrels in the next 3 years), and consumers are happy at the pump. I won’t discuss the hundreds of oil spills in ND, and I am scared to think about the spills in Trinidad that go unreported.
I don’t think it will be all gloom and doom for Trinidad but there is cause for concern with this PP and the PM winning an election. Trinidad still has the largest ammonia (11 plants)and methanol (7 plants) in the western hemisphere…so revenue is expected…
This PM must not neglect businesses and voters. Most voters in Trinidad have never seen the inside of an oil factory even though they are surrounded by oil wells. Voters want to see tangible changes and this PM needs to up the ante and deliver something the voters support.
She really needs to work on winning voters and it is not necessarily throwing a few dollars their way (that should have occurred after the floods),she needs to focus on infrastructure in the rural areas where the majority of her voters reside, reassuring them that she is delivering what she promised when her party won.
On a side note, Trinidad has about 30 billion dollars tucked away in the Sovereign Wealth fund…so its not that bad…
‘She really needs to work on winning voters and it is not necessarily ……bla bla bla.’
Sistaz I.
Ha ha ha , and dat was a good one folks! This gal is obviously, still auditioning for an elusive PP job, and so is loosing credibility daily, with each utterance,that it ain’t even funny anymore.
So make up your mind Indrani/Indera- Gandhi. Does your PM need to win voters, who emanated from outside her camp, that 4 years ago , help her achieve her power grab, under the skillful guidance Jack FIFA Warner, or should she instead, only focus on reassuring those from the ‘tribal front ,’ who would support her irregardless of whether she neglect them or not?
Somewhere out there, in Debe, or maybe it’s Point Fortin, la la land, phony environmental activist, Dr Kabalsing, is writing his final will, and testament, as he and his 23 supporters, recognize, death is eminent, since your Siparia Queen Kamla, is about to throw dem under de bus.
This type of adolescent analysis, is beyond hilarious, mi Chica, and if I was your Professor, correcting your college paper, you ain’t getting more than a D- for this paltry effort.
‘You allze,’ need to get it in dem thick skulls of yours Indrani / Indera , that Afro dominant PNM ,won 97 out of 100 elections , since independence, because of savvy Indian voters support, and likewise, your ULF/UNC/ turned PP, only won under de Faddah of your Nation ,Baz, aka de National Divider in Chief,and finally Kamla,because progressive Afro Trinis, held their noses, and voted for them.
It ain’t no different in your adopted Yankee land -America, my naive amiga. No Democrats, sat in the White House, without Republican voters support, and vice versa.
In the case of America , the division is ideological, but as for T&T?
You got it. Simply Tribal, since there are no major differences, between these two major, competing, grassroots , political parties here.Por ejemplo:- Both exploit, and neglect their poor. Both are controlled by self serving , non visionary corrupt elites.
Both would ensure that our underachieving T&T, avoid taking a more desirable part, of sustainable development, and what a sick tragedy, hmmmm?
Both , once in office,seems powerless, in curbing the influence of their greedy, country leeching, business benefactors.
Both would not hesitate, to give away our precious , fast depleting , natural resources, to the highest foreign bidder, only to obtain trinkets in return.
Just keeping it real folks, with no holds barred views , as opposed to sappy diatribes ,all too common. .. well… , you get de idea.
I luv dis land, Y tu?
Long live de Republic of T&T!
I am going to state some personal views here…
I really hope young people read more about the “real” history of T&T and the political rise of the PNM party and how for the past 30years they have usurped almost every natural resource for their own personal gain. Now the country is facing some mild economic hardships and the PMN is quick to point to the PP.
I won’t go into the details of the 50’s and early 60’s and will limit discussion on political figures like Williams, Butler, Capildeo and the role McMillian played in negotiating deals between the US and T&T and the US$30million that the US paid T&T (and the PNM controlled) for having a military presence….I wonder where all that money…went back in the day when there was no transparency with the PNM??
In the 1961 election in T&T, the East Indian community were treated pretty nasty by the PNM..they made sure that strategic electoral boundaries were drawn in their favor and and that their party had a presence in every part of Trinidad…it was no surprise when Williams gave all his PNM cronies large raises in those days before an election…he wanted to secure the PNM position to infinity…
That’s why in the 1961 elections, many DLP meetings were quashed by the PNM bullies…throwing stones at meetings, calling over 3,000 police to break up meetings, and physically preventing Indians from unifying their parties. You see folks, the PNM profited big time (financially) by preventing the Indians from Uniting…more deals and contracts for the PNM folks…and the mentality of the PNM was…”keep the Indians as Laborers”
Back in those days, the PNM dreamed of a true capitalist society with a large uneducated Indian work force. They truly embraced foreign investors and now…today, Trinidad,one of the largest exporter of LNG is still struggling with completing many upgrades to its own oil machinery.
For the past 30 years the PNM did not spend money on common sense beneficial infrastructure like upkeep and repairs of roads, bridges, building and expanding sewer systems, re-routing water ways, designing dams to prevent flooding, and investing in education and better health care for everyone. They were too busy building up their bank accounts, travelling the world and dining with dignitaries…A bunch of self serving clowns. I won’t get into the fig tree and plantain trees…”daylight come and me wanna go home…” Right Mr. PNM man…just tally me labor..
So instead of looking to the future, the PNM, green-lighted legislation and financial project that swelled their party’s pockets.
Perhaps we should get some statistics from Ramesh Chaitoo regarding Trinidad’s LNG and Petrotrin’s future outlook…
If investors are investing in T&T (like the Chinese in Summer Soca LNG), we need to ensure that such investments are to Trinidad’s benefit and the money is used appropriately…for investment purposes…
30 years of PNM is like a lifetime of PMS…
We need to look at the big picture when this topic of oil and its revenues come back to the table for discussion. Oil development brings serious global warming issues. Trinidad is also sitting on a quake prone line. In this respect we are playing a very dangerous game as we are heating up the ocean and seas close to us and obviously we are interfering with the underground as we move further and further underground for more oil or gas finds. And of course the seismic techniques we are using and the oil cleaning chemicals we are using are not in keeping with producing a safe and healthy climate for all our citizens. Instead we are destroying both our abilities to find fish and grow our own food and our water sources are becoming more and more contaminated and compromised as well. We already know about our beach and land losses over the years. Atlantic LNG have extremely inefficient gas turbines that are gas fueled and vents tremendous amounts every hour of un-burnt gas (dont forget Hurricanes like Katrina and Sandy and the damage they did to the USA alone – they grew from just north of Trinidad – I keep saying you pay for your misdeeds – USA would not allow these turbines designed this way to operate in the USA … we were always dispensable to them). As I said before our NGC system is filled with poor design and our old oil industry is technically very inefficient and run by morons, let alone by very corrupt individuals both as workers and managers. We are a bomb waiting to explode. We need to take charge of what we have and put responsible and qualified locals in charge. As someone said this government saw the highest oil prices and not a cent savings we saw. They are making deals everyday that they are ill equipped to make. The knowledge of the Energy Minister is questionable. There are no systems in place to measure the poisonous effluents of all our industry. Our Storage tanks of oil, ammonia, methanol etc. are aging and poorly kept. At Fedchem they expanded production in their three plants by a margin of over 30% with no percentage increase to their storage capacity. These ammonia tanks are over 30 years ( in some cases over 60 years old). Can California and Couva residents escape an ammonia cloud given the wind speeds and rupture to their tanks. Many will die. Our industry in Point Lisas was built too close to homes unlike anywhere else in the world and there are no checks and balances on how they are run by this Energy Minister. You will recall these plants are managed by business persons with practically no engineering know how … like Duprey and others like him. Cheap gas and cheap labour brought these opportunist aboard. Is it we rather see oil in our back yard as opposed to being able to …growing our own food. Do you know how healthy your WASA water really is? Plants in Trinidad dump their waste the cheapest way, in the sea or they bury it and it no doubt contaminates the water system. Does not government cares about who get cancer, respiratory attacks, etc.
Is your UNC government checking the flood damage costs to all citizens due mainly to global warming? Is your police force entering industrial plants to assess damaged workers in those plants when they happen. I have witnessed turbine/ compressor systems blown apart from poor management decisions that are only concerned with keeping plants online. And many worker injuries occur but most are more afraid to lose their job so everything is hushed up. In my personal experience doctors are quick to stick you with pain killing needles to mask your injuries. I remember an ammonia loading arm that was destroyed because of ill design that killed someone and the investigation was very poor completed with no actions taken. I have seen boiler systems and heating elements blown with damaged workers not properly compensated. In nearby plants I know of deaths that were never properly investigated by the state. Do you know how the mandatory NIS works for injuries – The company has a one liner to sign. You, the injured, need to assess your own injuries internal or otherwise on their NIS forms – they have the most outdated system that exists today. You are pressured to prove that your own injuries occurred on the job. In most cases I am told the company does not pay one red cent because of the many holes in this system. It is the insurance coverage that handles the costs and I do not have to tell you how insurance companies operate in T&T do I? NIS is no different to the other insurance companies in T&T. You know they pump endless money elsewhere to rally their cause. However the real losers are us, the citizens.
Mr. Jerry, if you witnessed all these ailments in the oil industry..what actions did you take to prevent it, were you in a low level position or in a managerial post…just curious.Perhaps in those days oil workers did not have a voice. This is why there needs be a task force or some oversight committee in all industries..those voices are still somewhat silent, but more people are speaking up and they are being heard..
Seems as though I cannot get in with Firefox..just checking with Internet Explorer
Good point Mr. Hussain. The problem with the oil and gas industries and companies like Atlantic and the others are common. They do not immediately report accidents relating to human injury and oil spills. There is a silent policy where injuries and oil spills are not reported at a local level. Usually the owners and higher ups are told about the extent of damages and it is usually their decision to release information, and most of the time it is unreported especially in countries that are dependent on foreign investors. Accidents are reported only when it is very noticeable.
The above is common practice in the U.S. and many of these companies have no care in the world about permanent damage to the environment. Fracking in the U.S. have destroyed thousands of acres of viable farmland and ruined many farmers. If this is going on in the U.S. who knows what is taking place in the refineries in Trinidad.
Trinidad geographic location makes it the perfect place for natural resources… for wildlife and plants. We need to preserve those. I also agree that with old equipment pumping oil, the risk of spills are inevitable.
Hopefully the global warming summit in Lima will be successful and an agreement will be signed…meanwhile China and the U.S. will just keep polluting and puffing on..
Mr. Hussain, your point is well taken. I did something about Yara years ago..
This is no transparency in the Oil and Gas business. When it comes to natural resources…the fangs come out from wealthy investors. Trinidad is really a servile follower of the US. This needs to stop and Trinidad needs to focus “on Trinidad.” We used to have the best beaches, the best weather, the best wildlife and the best people.” Well that was a long time ago…now we have polluted beaches, oil spillage that have killed off many marine life, and people who live in two worlds…rich and poor.
I am really trying to support the PM and I applaud her meeting with MPs and speaking bluntly about their lax attitude to the public..but that is not enough.
The wealth distribution in Trinidad is a sad story, the unemployment of unskilled workers is climbing, and the education outlook in technology is grim. Trinidad should have the best agri. scientists in the world, the best marine wildlife experts in the world, and the best tourism in the world…where are we heading???
We need new ideas, smart people, and folks that are not afraid to speak for fear of retaliation by the community or their jobs…
….can someone chime in here??
Oil revenue goes mainly to foreign concerns with one percentage point going to politically attached locals both business well connected to government and the cabal led government. Amoco made over $600 Billion USD from operations in Trinidad alone back in the 70s. On the other hand our people faced removal of the once healthy middle class who are now very poor now and faced losses from flood damages throughout the years and this situation continues on and on. No adequate compensation comes from governments who continue to steal from the public purse. We also never shared in the oil and gas wealth over the years and still today do not share in any oil and gas wealth but instead from all the oil and as speculatively earned wealth from oil and gas yearly faces inflated prices in food, housing, utilities etc. Our unions are run by very inefficient and poorly schooled union leaders of which some have in the past jumped into political selfish ventures. Of course the workers are always used as pawns and lose out as deals are made behind closed doors. The G8s or G20s fete off the third world and when these economies do not produce to prop their economies they are vexed when groups e.g. ISIS or ISIL become threats to them. Who are the real evil doers?
Agreed and point well taken.
http://www.newsday.co.tt/businessday/0,203818.html
With elections in de air, everyone want’s to know what’s the score, and so yours truly -‘unlike most oh dem phony experts,or typical , paid, (non credible) cyber yapping- party hacks’- will say it loud and clear, so that dem confused ,tribal competitors ,can understand.
During the run up to the next election , come 2015, there are two things, this Kamla led, UNC dominant- PP,power Mongrels ,ain’t touching, with a 10 ft pole-as we like to say on de streets.
The first is our precious Carnival, because of some Ebola concerns, and the 2nd is removing subsidies on gas , even if oil fell to $10:00 per barrel, on the international market, or her ardent, trusted Spiritual Adviser Sat Maraj, gave her another of his numerous ,clearcut derivatives.
Ok, I take that back , for with respect to the first, she will perhaps halt de Carnival ,if half of her homebase Sipara , and we can throw in PP Capital -Chagurnas ,her Mentor Papa Baz – Couva , Tabaquite ,Barackpore, Penal, Cabal head honcho Goopiesing’s -Caroni , Erin, and Aranguez /El Secorro, gets wipe out, in an epidemic – since she would have recognized, that unfortunately- she would have to also scuttle plans ,for all Chutney Soca, as well-which will incur the wrath of the tribe.
The neo populist games, that these self serving ,political bozos , are prepared to play, so as to get, and or ,hold on to power, are simply amazing, ain’t it people?
So where you at , Dr Rowley,ummmm de PM in waiting, as far as putting your house in order?
Mi intiendo . It’s simply challenging, to put a coherent, counteracting plan in place , when you, and de Party have to deal with that perennial Everready Easter Bunny Patrick Manning .
The man simply has this stupid obsession ,with dying in office, like Pappa Deffy Eric, his idol, hummmm?
Well, don’t worry, for members of our co opted, historically comatose media,will quicker catch Her Madjesstrick Queen K, and Lavantille Ambassador ,Makandal Dagger, in a seedy POS hotel,smoking some high grade , Jamaican , or Columbia Ganja-in like manner to former Cabinet member ,Anil Roberts- than ever beholding a Patrick Manning, or worst yet, his drinking pal Basdeo Panday administration, ever again.
The carefree Trini citizens, as a collective, often times, don’t give a darm , if Good Friday falls on a Monday, but just ain’t foolish.
You can tell de, anti Tobago- UWI trained -Sando Geologist, is in deep trouble ,when life time Party hacks , such as Professor Emeritus Selwyn Ryan ,is jumping off his, and clueless Hazel ,political bandwagon, ummmmmm?
http://www.trinidadexpress.com/commentaries/MANNING-A-BURDEN-TO-BEAR-284986711.html
This Manning bloke ,is making , even the Zimbabwe diabolical, African ,tyrannical ,power hound , Robert Mugabe , look more like the revered ,Dalai Lama , with each passing day.
http://m.aljazeera.com/story/201412417332461120
Both of these nepotistic bastards, were involved in their nation’s politics for, what , over 3 decades , and yet, they are still grasping for power, like a 6 weeks old baby , trying to suck milk from the breast of his/her mama.
How pathetic indeed.
Stay vigilant people!