Wednesday, December 13, 2017

Gasping for gas


Multi-billionaire and philanthropist Warren Buffett says: “You only find out who is swimming naked when the tide goes out”. The tide of energy revenue has receded for Trinidad and Tobago, this time from structural changes in global energy, meaning the tide is not returning whilst our economy, exposed in its fragility, remains stranded on the beach.

And shrinking from the heat of reality, witnessed by the departure of ArcelorMittal and the coming closure of two methanol plants. We simply do not have enough gas to meet demand, the shortfall threatening to mothball the petrochemical sector at Point Lisas and the LNG industry at Point Fortin, our two main revenue earners, the country also needing gas for electricity to power the rest of the economy and society.

The shortage goes deep, “the falling of Mt Trinidad”, says Kjetl Solbraekke, consultant with Rystad Energy whose study shows whilst current installed demand for natural gas in this country is over 4 billion cubic feet per day (bcf/d), production dropped in 2016 to 3.3 bcf/d; and output from presently producing fields will decline by 14 per cent annually from 2016 to 2030. So even with three new projects coming on stream —Juniper, bpTT's offshore platform, Sercan, gas field in the North East involving bpTT and EOG Resources, and the Trinidad Onshore Compression project (TROC) to provide more gas to the four Atlantic LNG trains—production will be kept in the 3.3 bcf/d range. In other words, we will continue gasping for gas.

Rystad also warned we need investment in new gas projects immediately to avoid further decline after 2019 when production from Juniper will start decreasing. So, it is good news British Petroleum (BP) and the National Gas Company (NGC) are moving closer to a new gas sales agreement which could bring investments of US$5-$6 billion between 2017-2022 and pave the way for the Angelin project to start production in early 2019.

But does it solve our long-term problem? The Government acknowledges gas is becoming more difficult to discover and more expensive to develop, with up-streamers like BP, Shell and EOG asking a higher price for their gas and NGC, as aggregator/gatherer, having to most likely cut its margins to ensure survival of the economy. When you are gasping, you don't call the shots.

Instead, in desperation, you turn to the internationally discredited and absolutely corrupt Maduro administration in Venezuela, infamous for its expropriation habits, every day producing new tumult with each new episode as the dictator grabs for more and more power, recently wanting to emasculate the legislature, that country now facing the prospect of embargo or suspension from the Organisation of American States. Will we be able to preserve our dignity in such a hemispheric stand-off as we gasp for Venezuela's gas?

And what will happen to Point Lisas in the four years it would take for the materialisation of the dubious Dragon field idea, if it ever fructifies? Will we survive when a global energy revolution has pushed us to the periphery of investment flows? Rystad points to the decline in our gas development projects since 2005. But during the same period, as just one outcome of the energy revolution that has seen the tide recede on Trinidad and Tobago, the United States, with its humongous shale reserves of almost two hundred years, has attracted major investments in petrochemicals, emerging as both a premium exporter of ammonia, urea and methanol, and a major LNG source, shipping to the Middle East, India, Europe and throughout Latin America, with a terminal now in Jamaica to service the Caribbean.

But in this situation threatening the very viability of this country, as reserves decline and the government borrows to fund its budget, taking debt to alarming levels, this scandalously irresponsible administration has done nothing to gestate new foreign earnings, without which we have no future. And adding insult to injury, after one and a half years, the Economic Development Advisory Board, headed by Terrence Farrell, recently presented an utterly lame document, a “diversification roadmap” to some ministers. Unbelievable! After 18 entire months? And what does the document do? It identifies “seven industries to drive diversification”, almost the same ritualistically listed in almost every budget for the past ten years. Is this all they have done on the most important issue facing the country, after one year and a half? These people should be ashamed to appear in public. And this board reports directly to the prime minister! Where was Rowley whilst this slackness prevailed at the highest levels, right under his nose?

And it doesn't end there. Whether through error or by design the document does not include agriculture as an area for economic diversification! And no explanation, no apology. Is this sloppiness or insanity? And after 18 months, all we are given is intellectualisation and generalisation, telling us what we already know about the need for infrastructure, investment, research and marketing. But nothing concrete! Nothing specific! For heaven's sake, what are the plans, programmes, policies, incentives to get these sectors going! They say the next step is that ministries must now analyse the document! Well we know what will happen. Absolutely nothing, zero, zilch, nada!

Complacency is this country's cultural curse. We have never been profoundly challenged by anything. We have never had to create wealth, for example. Energy revenues simply flowed into the coffers. It is the reason we never diversified the economy. And it is the reason we don't recognise the urgency to act on the one path to save the society. Complacency has robbed us of the will and creativity we now need to save ourselves. The nation is today trapped by its very character.

As we gasp for gas, this country could die.