PNM’s energy policy out of gas

Dasheen bush. Ochro. Pumpkin. Coconut milk. And Magi Flavour D’Pot, if you please. These are all essential ingredients to a good Sunday Callaloo. But if it wasn’t for the blue flame raving beneath granny’s charred coal pot, these flavours would not create this Creole masterpiece. So too with Trinidad’s economy where oil and natural gas are its currency.  Guest blogger Devendra Rajcoomar analyses the energy policies of the two main political parties in a two-part entry. Rajcoomar is a Trini-to-d- bone Consultant Fluid Drilling Engineer for the international firm Mi Swaco.

Revenue from oil and natural gas account for over 50% of Trinidad and Tobago's GDP

The PNM’s 2010 election manifesto points out the importance of energy to the Trinidad and Tobago’s economy, with it accounting for 50% of our  GDP, and the need to sustainably manage this resource.

They also outlined 4 main areas that they would place their energy focus:

  • Fiscal terms/contracts
  • Prioritizing the use of gas
  • Petrotrin improving oil production
  • Renewable energy
    1. Fiscal terms or Production Sharing Contracts will essentially give tax breaks to companies who decide to revitalize old oil fields so they can have money to explore and drill. Good idea. However, this particular policy seemingly targets companies who are producing oil and not gas. But over 10 years now there has been a need to review the gas taxation policy as this is our country’s bread winner now. NOT OIL
    2. Prioritising of Gas, basically they are only saying how they intend to divide the gas being produced in Trinidad between the existing petrochemical industries and future ones; including the aluminum smelters. There was no insight on how they intend to increase sales of  gas on the international market. Especially considering how our major market, the Eastern US seaboard, does not get 75% of its gas import from Trinidad anymore. Basically we need to establish new international markets for our gas. This is our mainstay at the moment. NOT OIL. Trinidadians need to realise that although the price oil is so high, the actual oil Trinidad produces doesn’t sell for the odd US$60 a barrel market value. It sells for almost half that.

      Aerian view of Atlantic LNG courtesy
    3. Petrotrin, they are asking the state owned oil company to utilise the 3D survey data they have deployed to discover new oil potential which in return should result in increased oil production. However, all the pundits, even company Ryder Scott who compiled an independent energy report a few years ago, have all suggested that worldwide oil production is on the decline if it hasn’t already. This is true globally and more so in Trinidad. In his book Peak Oil Paradigm Shift, Bilaal Abdullah, argues that the world’s oil production has plateaued, and it will never reach production levels that it has in the in the past. And so it’s misleading to expect Petrotrin to single handedly boost its oil production significantly through new discoveries. Again, OIL IS OUT, and GAS IS IN. And foreign oil companies will not consider any new ideas into new oil in Trinidad either, at least not on the scale the PNM is asking.
    4. Renewable Energy, probably the biggest concern globally, has been spoken of last. And other than a few promises of developing policies and partnerships with the US, they have not clearly stated what they intend to do. Why aren’t we envisioning windmills and solar panels? Basically, I believe they have only inserted this item in here to calm the environmentalist. I for one do not expect any serious drive to a solution for this anytime soon. Pursuing a renewable energy policy doesn’t mean we abandon oil and gas production.  These green energy sources go hand in hand with oil and gas discovery. Even Barack Obama has said the US will accelerate its oil and gas discoveries and alongside its renewable energy breakthroughs. Soon they might be drilling off  the entire US Eastern Seaboard. I might be flying to NY, getting into a chopper and going to the rig. Why then should we expect anything different from Trinidad? And if the PNM pursued both policies, I could also be flying  from Movie Towne past a windmill farm Down De Islands to an offshore rig in the Gulf of Paria.

    Read Devendra’s views on the  energy manifesto of the coalition of  the People’s Partnership here.


    2 thoughts on “PNM’s energy policy out of gas

    1. Well constructed analysis, good to hear the views from a man in the coveralls (and safety glasses)! My review of the PNM’s proposed energy strategy brings questions from a petro-economic viewpoint, begging further transparency of current and expected risks and rewards based on projected volumes, economic sustainability, and not forgetting the all important social and environmental impacts of exploration and production of our Oil and GAS reserves.…for the near future and BEYOND 2020!

      We can argue fiscal probity of any government in power, but at this stage of the game, the public should be bombarding these leaders for in depth details and facts for making the most of our existing energy reserves and plans for sustainable economic growth using alternative resources (including our vast human resource and knowledge pool!).

      My 2 cents for one of the 4 main areas outlined are as follows (mind you, with the current rate of inflation this 2c will cost you at least a blues!):

      Fiscal Terms – PSCs are intended to balance the risks and rewards among parties involved. The balance of power depends on the bargaining strengths of the country, for Trinidad this is directly related to the inherent risks of investing in a country with shrinking oil but relatively new found gas reserves. Foreign Oil Companies (FOC) however, are comforted by attractive incentives including relaxed tax and royalty regimes. I applaud the PNM’s recognition that this is the way forward for our Oil PSCs in order to encourage investment.
      However, and MORE IMPORTANTLY, this is a valuable learning point for us, as past blunders of laissez-faire PSC terms and tax laws should not be repeated when developing/updating our Gas PSCs and tax and royalty regulations. This introduces the point of varying tax schemes for the government to consider, including payments based on the FOCs share of profit petroleum or otherwise, which poses issues relating to the strength of local monitoring and control mechanisms of FOCs. Following on from Eastern European countries like Azerbaijan, there is considerable wealth to be gained from royalties, have we considered the impact of fixed and sliding scale??
      Using the UK North Sea licences as a case in point, initial PSCs were used to lure investors, but these companies had to accept harsher terms in the second wave of PSCs as they were now realising the future potential of such an investment! We should make a strategic stand for long term benefits!
      Additionally, other countries use PSCs for substantially benefit the local social and environmental needs. For instance, PSCs should include defined rates of local employment at suitable positions..after all, some of the senior staff involved in drilling the famed HPHT Ibis Deep well were suitably qualified locals! Investment in improving local skill set e.g. via UTT may be another method of developing our human resource pool via PSCs.
      With the impact (financial, social and environmental) of the recent US offshore oil spill, and the heart stopping proximity of the sinking platform off Venezuela, have we scrutinised our local HSE regulations and revised our PSCs to this effect?

      In depth cost benefit analysis for opportunity costs must be examined before further consideration is made for future on land oil recovery! Mudman can you shed some light on stats behind these undertakings?

      I am a curious one, as this list is by no means exhaustive! It is imperative that our country’s leaders get this right NOW, a broader perspective of T&T’s finances, sustainable development and growth are imperative for future generations’ well being!


      1. D khan you raised some very important points on an issue that Trinidadians don’t know much about. The price and terms of our nation’s oil and gas contracts need to be better scrutinized and negotiated in a competitive way. The public also needs to be educated so that we could understand these contracts. I’m going to ask mudman to weigh as well, as he’s the expert. Mudman what you say?


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