If Oil and Natural Gas runs out, does T&T have a Plan B?

[Flex]

T&T RUNNING OUT OF NATURAL GAS.
By Curtis Williams (Guardian).

T&T is running out of natural gas and its shortage is pointing to a bigger problem. At the same time, the downstream sector is facing real challenges from Shale gas in the United States, with companies already preparing to move some of their operations there.

Those were some of the arguments used by Proman Holdings, through its consortium Consolidated Energy Ltd (CEL), in seeking to have the Court of Arbitration rule that it should pay less that US $900 million for Clico’s 56.53 per cent of Methanol Holdings Company Ltd.

In submissions which have never before been made public, since the proceedings were held in secrecy, and which the Sunday Guardian has copies of, it was revealed that the natural gas shortages, which have cost the country hundreds of millions of dollars, may have also hurt the Government’s valuation of MHTL.

CEL told the court that T&T’s gas shortages were likely to continue for years and it had already cost the company significant revenue while hurting the sales of the National Gas Company.

In a scathing review of the country’s natural gas challenges and allegations that the NGC has consistently underestimated the problem, CEL argued that both the Clico directors on the MHTL and the NGC made incorrect assumptions of gas supply issues. Proman representative on the MHTL board Joseph Cassidy told the Court of Arbitration, “Past and present experience shows that management, like the NGC, has underestimated the probable impact of curtailments in 2014 and beyond.

Yet Clico has claimed that management’s assumptions concerning curtailments are too liberal. In particular, Clico-appointed directors, including Mr (Rampersad) Motilal, have continuously questioned management’s curtailment allowances of five per cent from 2016 to 2018 and five per cent thereafter.”

Cassidy pointed to last September as an example of the strain that gas shortages had put on MHTL, saying that while the NGC had estimated curtailments of 12 per cent under the DCQ (Daily Contract Quantity) levels for September 2013, the average curtailment rate was actually 25.96 per cent and on September 3, a 34 per cent curtailment rate made it impossible to maintain concurrent operations of all five methanol plants, so it was necessary to take plants offline.

He said, “As a result, management decided to perform maintenance work on M2, followed by M5000. Curtailments have also impeded management’s ability to improve and achieve greater reliability in the melamine operations. Also, to appreciate the significance of current conditions, one must understand that prior to 2011, MHTL operated at name plate levels—the maximum quantities it could obtain, not DCQ levels. MHTL essentially took as much gas as it needed.”

Cassidy added, “Just by limiting MHTL to DCQ levels, MHTL’s production is significantly lower regardless of gas curtailments. The gas curtailments, which result in MHTL receiving even less than DCQ levels, just make the situation that much worse. And as I have repeatedly stated to the board, this would not be an issue today if the NGC had contracted for sufficient gas, but it will continue to be the case until they do so.”

The Court of Arbitration heard despite the NGC’s previous assurances that curtailments would not be an issue going into 2014, the gas supply in early January was five to ten per cent below DCQ levels, and the NGC issued a force majeure notice on January 5, 2014.

Cassidy said, “The average supply reduction in January was even greater—8.7 per cent below DCQ levels. Yet, based on a presentation, the NGC gave to the Point Lisas Energy Association (“PLEA”) in December 2013, management assumed that supply rates in 2014 would average just two per cent below DCQ levels.”

Clico's argument

Clico tried to counter this argument and sent in an expert witness in the former director of Resource Management at the Ministry of Energy Helena Innis King. She argued that there was no issue of T&T running out of gas nor a structural problem, but rather it was due to significant maintenance work that was being done by the country’s two largest gas producers, bpTT and BG.

Innis King opined, “There are no grounds for concern that the gas is running out.” Innis King’s suggestion that it was due to maintenance issues is in keeping with what Energy Minister Kevin Ramnarine consistently told the country prior to 2014, but which bpTT itself is now denying is the root cause of the problem.

The company argued that the 2008 global economic crisis, unfavourable fiscal environment and the expectation by the National Gas Company and the National Energy Company that an oversupply of gas was likely due to the cancellation of downstream projects created uncertainty which invariably affected investment decisions.

BPTT said its heightened maintenance activity that took place following the Macondo disaster was necessary to ensure continued safe and reliable operations and while it did contributed to the current gas curtailments, it is not the primary factor. The issue of gas shortages at Point Lisas has also set off a firestorm with Ramnarine accusing the Point Lisas Energy Association of politicising the issue. Cassidy also told the International Court of Arbitration that last year alone, MHTL lost 410,000 metric tonnes of production.

“These are not only metric tonnes MHTL cannot sell, but also about US $70 million worth of gas it does not pay to the NGC. Thus, everyone in the value chain suffers as a result.” He also said MHTL was not as profitable as is suspected because of the escalation agreement with the NGC where the higher the methanol price, the higher the price of gas the NGC sells to MHTL.

Cassidy showed that in 2005 to 2008 methanol prices were projected by MHTL’s management to average US $186, which was consistent with recent history. But the average actual price for that period turned out to be US $383 per tonne. “The difference between projected and actual profits after tax for these periods is explained by (1) the structure of the gas contracts and (2) the economic downturn. For the period of 2004 to 2008, forecast profits were US $171 million while actual profits were US$208 million—a difference of only 22 per cent, despite a 106 per cent increase in prices. This is due to the structure of MHTL’s gas contracts with the NGC.” Cassidy said.

Cassidy acknowledged that the present low gas prices in the US was likely to increase, but he said it would do so minimally and would continue to be a threat to T&T downstream sector.

Innis King rubbished that argument saying, “Notwithstanding developments in Shale gas in the US, Trinidad’s gas industry has a strong future: given the difficulties of developing Shale gas resources, the US Shale gas industry is unlikely to have a real competitive advantage over Trinidad, whose gas reserves are, by contrast, far easier to develop.”

CEL has been the minority shareholder in MHTL and the German group has been Clico’s partner including marketing and selling its methanol since its inception. The NGC gave to the Point Lisas Energy Association (“PLEA”) in December 2013, management assumed that supply rates in 2014 would average just two per cent below DCQ levels.”

Clico's argument

Clico tried to counter this argument and sent in an expert witness in the former director of Resource Management at the Ministry of Energy Helena Innis King. She argued that there was no issue of T&T running out of gas nor a structural problem, but rather it was due to significant maintenance work that was being done by the country’s two largest gas producers, bpTT and BG.

Innis King opined, “There are no grounds for concern that the gas is running out.” Innis King’s suggestion that it was due to maintenance issues is in keeping with what Energy Minister Kevin Ramnarine consistently told the country prior to 2014, but which bpTT itself is now denying is the root cause of the problem.

The company argued that the 2008 global economic crisis, unfavourable fiscal environment and the expectation by the National Gas Company and the National Energy Company that an oversupply of gas was likely due to the cancellation of downstream projects created uncertainty which invariably affected investment decisions.

BPTT said its heightened maintenance activity that took place following the Macondo disaster was necessary to ensure continued safe and reliable operations and while it did contributed to the current gas curtailments, it is not the primary factor. The issue of gas shortages at Point Lisas has also set off a firestorm with Ramnarine accusing the Point Lisas Energy Association of politicising the issue.

Cassidy also told the International Court of Arbitration that last year alone, MHTL lost 410,000 metric tonnes of production. “These are not only metric tonnes MHTL cannot sell, but also about US $70 million worth of gas it does not pay to the NGC. Thus, everyone in the value chain suffers as a result.”

He also said MHTL was not as profitable as is suspected because of the escalation agreement with the NGC where the higher the methanol price, the higher the price of gas the NGC sells to MHTL. Cassidy showed that in 2005 to 2008 methanol prices were projected by MHTL’s management to average US $186, which was consistent with recent history. But the average actual price for that period turned out to be US $383 per tone.
“
The difference between projected and actual profits after tax for these periods is explained by (1) the structure of the gas contracts and (2) the economic downturn. For the period of 2004 to 2008, forecast profits were US $171 million while actual profits were US$208 million—a difference of only 22 per cent, despite a 106 per cent increase in prices. This is due to the structure of MHTL’s gas contracts with the NGC.” Cassidy said.

Cassidy acknowledged that the present low gas prices in the US was likely to increase, but he said it would do so minimally and would continue to be a threat to T&T downstream sector.

Innis King rubbished that argument saying, “Notwithstanding developments in Shale gas in the US, Trinidad’s gas industry has a strong future: given the difficulties of developing Shale gas resources, the US Shale gas industry is unlikely to have a real competitive advantage over Trinidad, whose gas reserves are, by contrast, far easier to develop.”

CEL has been the minority shareholder in MHTL and the German group has been Clico’s partner including marketing and selling its methanol since its inception.

Energy Minister: Reserve hike coming

Energy Minister Kevin Ramnarine yesterday said he could not comment on what Proman or their legal representatives have said at the arbitration hearing. In an e-mail exchange with the Sunday Guardian, Ramnarine said the valuation of any asset is based on a range of assumptions of probabilistic variables.

“On the issue of curtailments, this matter has been well ventilated in the public domain. I have spoken on it several times, and I will do so again. The facts are that firstly there was a period of underinvestment by major upstream companies in the period 2008 to 2010 that has led us to where we are today,” Ramnarine said.

He cited the Central Bank study for that period to support his claim. “It is also reflected in public statements by major multi-national companies and is the principal reason that we have experienced the disruptions in supply,” he said. Ramnarine also said that there was a period of “major asset maintenance conducted by BP and BG that has caused disruptions in supply.”

“This is a consequence of companies placing a higher emphasis on safety in a post Macondo world,” he said. Ramnarine said in response to those consequences, the Government has re-engineered the fiscal regime which managed upstream objectives. “This has resulted in record levels of investment in the period 2011 to 2014. As I have indicated previously, the projected investments by energy companies, based on their submissions to the MEEA, is expected to be US$3bn per year over the next three years.”

He said added to that, the recent approval by BP of the Juniper project and the approval by BG of the Starfish development in 2012 (due to be online in November 2014) are “positive signs that the country’s two major natural gas suppliers are responding to improve natural gas supply.” “Consequently, we expect to see improvements in reserves and output in the near to medium term.

Ramnarine said in the last three years the Ministry of Energy has co-ordinated the supply-demand balance to mitigate the impact of curtailments on Point Lisas and Atlantic.  “In this effort we have worked and will continue to work with all stakeholders,” he said.

[lefty]

nope!!!!!!

[mukumsplau]

no plan B from what i see..not seeing where the money spinner will come from...cant stop the drilling though

option can very well be working out something with venezuela for the production and processing of their nat gas reserves seeing that they dont have the infrastructure (physical, commercial) to do so...

[Socapro]

We used to have one under the previous government but Kamla and her Cabal knows best.

[lefty]

We used to have one under the previous government but Kamla and her Cabal knows best.

I am no PP but this is dead wrong, Manning's plan called for monetizing the remaining gas resources through down stream energy and raw material production investments, most of which have fallen through due to the smelter and OPV fiascoes, investor confidence and such......but to say that there was a concrete plan for life after gas would be stretching the truth

[Socapro]

We used to have one under the previous government but Kamla and her Cabal knows best.

I am no PP but this is dead wrong, Manning's plan called for monetizing the remaining gas resources through down stream energy and raw material production investments, most of which have fallen through due to the smelter and OPV fiascoes, investor confidence and such......but to say that there was a concrete plan for life after gas would be stretching the truth

I appreciate your view.
Btw have you read this document?: https://sta.uwi.edu/conferences/10/cote/documents/day1/bforum/Kelvin%20Sergeant%20-%20COTE%202010.pdf

[lefty]

I appreciate your view.
Btw have you read this document?: https://sta.uwi.edu/conferences/10/cote/documents/day1/bforum/Kelvin%20Sergeant%20-%20COTE%202010.pdf

those are bullet points.....we are speaking of a complete policy document on the way forward, projection for growth and sustainability, contingencies in the case of possible failure.......in other words what posted there is summary when what is needed is policy based on said points, there wasn't much ah dat on manning tenure either.....difference they had an idea of direction they wanted to go, but d map was incomplete at best........but I suppose an incomplete map is better than no map

[Socapro]

I appreciate your view.
Btw have you read this document?: https://sta.uwi.edu/conferences/10/cote/documents/day1/bforum/Kelvin%20Sergeant%20-%20COTE%202010.pdf

those are bullet points.....we are speaking of a complete policy document on the way forward, projection for growth and sustainability, contingencies in the case of possible failure.......in other words what posted there is summary when what is needed is policy based on said points, there wasn't much ah dat on manning tenure either.....difference they had an idea of direction they wanted to go, but d map was incomplete at best........but I suppose an incomplete map is better than no map

There is a comprehensive document produced by the PNM some of which I've read but unfortunately the link to it is now broken: http://www.caribbeanelections.com/eDocs/manifestos/tt/PNM_manifesto_%202010.pdf

[zuluwarrior]

I think one of PNM plans was the smelter that this government along with Wayne did not want ,only to realize now how useful it would have work for us .

[Flex]

Petrotrin boss fears $ crisis, fuel shortage.
By Yvonne Baboolal (Guardian).

Some $.5 billion in crude oil and the survival of T&T’s economy are behind Petrotrin’s determination to berth a tanker coming from Ebola-stricken west Africa, even though it is now in a standoff with employees who are refusing to do it.

Petrotrin president Khalid Hassanali confirmed the situation yesterday, telling the T&T Guardian: “I know there are some people, including Petrotrin employees, who are refusing to work. “But we will have to find a way to berth the vessel. If it doesn’t berth, the refinery will have to shut down.  “Petrotrin depends on imported crude oil to operate. If Petrotrin doesn’t operate there will be no fuel for the country.”

Petrotrin workers have refused to berth the tanker, Overseas Yellowstone, which arrived at Pointe-a-Pierre last Friday with $.5 billion worth of crude oil from Gabon, west Africa. Gabon is not on the list of countries whose citizens have been banned from entering T&T but it borders Guinea, Cameroon and Congo. Health Minister Dr Fuad Khan announced last week that anyone coming from Sierra Leone, Guinea, the Democratic Republic of the Congo, Liberia and Nigeria would be denied entry to the country.

The highly contagious Ebola virus continues its spread in west Africa and the rising death toll is now over 4,500. Cases have also been reported in the US and Spain. Hassanali said yesterday that the Health Ministry gave a certificate of clearance to Overseas Yellowstone last Friday but workers were still refusing to berth it.

Workers have to go out in tug boats and pull the vessel into the Pointe-a-Pierre port. He said the tanker took the crude oil cargo ten miles off the coast of Gabon and the crew members did not go onshore. Further, Hassanali noted, the crew had been aboard the vessel for 62 days. The Ebola virus has a 21-day incubation period.

Contacted yesterday, Khan confirmed that medical personnel from his ministry had gone aboard the Yellowstone and cleared it of Ebola last week. “It’s Ebola free,” Khan told the T&T Guardian yesterday. “The vessel was also given a clean bill of health based on its history, where it came from. “It came from west Africa but never reached shore.

Its crew members are people from different parts of the world,” he noted. Khan said Petrotrin workers were refusing to go on board the ship to offload it but they have no reason to act in that manner. “The ministry and its doctors take their jobs seriously. If they are using Ebola for their union problems, it’s the country that will suffer,” he said.

Crew already taken off ship

The presence of the tanker has also thrown workers at the Point Lisas Industrial Estate into a state of panic.  A source claimed after the Health Ministry cleared the tanker last Friday, six crew members were taken off and transported to Piarco Airport. “We don’t know if these crew members were changing shift, or what,” the source said.

The source claimed that after Petrotrin workers refused to berth the vessel, Petrotrin got Point Lisas tug boat workers to bring six crew members ashore. “The Government is banning people coming from West Africa into the island on airlines but they are being allowed to come in at the sea ports,” the source added. A Plipdeco official yesterday denied the tanker was berthed at this port, saying the vessel is out at sea on its way to Pointe-a-Pierre and Point Lisas does not service oil tankers.

Another United Kingdom-registered cargo vessel, Ocean Discovery, was initially prevented last week from docking at the Chaguaramas port. The vessel stopped at two ports in Africa before arriving in Trinidad but after Health Ministry officials checked the crew they were allowed to dock.

Roget: No protocol in Place

Oilfields Workers’ Trade Union (OWTU) president general Ancel Roget said yesterday Petrotrin workers were within their rights under the Occupational Safety and Health Act to refuse to berth the Overseas Yellowstone, since the company had no health protocol in place to protect the workers and the country from Ebola. “Petrotrin has not secured this port where a lot of international ships berth. Also, we don’t know which personnel crew members had contact with along their journey. Petrotrin is putting workers and the country at risk,” he said.

Roget also confirmed that crew members from Overseas Yellowstone were taken off the ship and expressed concern about that. “We don’t know who these people are and where they were taken,” he said. He added that the union got information that Petrotrin was trying to get Plipdeco workers to berth and offload the tanker. He said the union did not trust Petrotrin and was calling on the Health Ministry to intervene in the matter. “We want a committee set up to develop protocols to protect workers,” Roger said.

Also contacted on the matter yesterday, National Security Minister Gary Griffith told the T&T Guardian to pass on all Ebola reports to a recently set up committee being overseen by the National Operations Centre. Griffith said every five minutes someone called him to report some Ebola threat. “Someone even called to report something about a pair of sneakers coming from west Africa.”

President Anthony Carmona has signed an official order declaring the Ebola virus a dangerous threat to public health. The order gives state officials the authority to take required action to stem the disease.

About the Ship: Overseas Yellowstone, registered in the Marshall Islands in the northern Pacific, stopped at several ports on the way to its Pointe-a-Pierre destination, the last being Cartagena, Colombia. An online site showed the tanker anchored yesterday in the Gulf of Paria in T&T and gave its destination as Pointe-a-Pierre

[fishs]

 Set of lazy ignorant workers.

 

[Flex]

Oil outlook uncertain for T&T
By Natalie Briggs (Guardian).

Experts advise wait and see, watch gov’t spending

Oil has become the world’s routine. It is there, running in the background of everything and, like an app or a piece of equipment, nobody notices when everything is right, but the results are potentially catastrophic when things go wrong. Last week, the Organisation of Petroleum Exporting Countries (OPEC) made a significant departure from the routine, announcing that it would maintain oil production at 30 million barrels, a move ostensibly against US shale oil producers.

The high level of production has created an oversupply, depressing prices. As of writing this, the price of oil was US$57.81 a barrel (West Texas Intermediate) down from US$115 in June.

Financial services company, Morgan Stanley has predicted that the price could go as low as $43 and OPEC member, Kuwait has said that prices are likely to stay low for the next six to seven months.

In this clash of titans, OPEC lead member, Saudi Arabia, realising the threat posed by the US shale oil producers is, apparently, trying to force them out of production, and in some cases may succeed as several fracking companies are in debt and will not be able to survive sustained low price.

Shale oil costs more per barrel to extract from the ground, while Saudi Arabia can still extract oil for comparatively less and make an albeit smaller profit on lower oil prices.

Consumers in countries that are oil importers have been benefitting from lower gasoline prices, but Saudi Arabia's OPEC partners Iran, Nigeria and Venezuela, may all run into serious trouble over the coming months as oil prices are lower than what they need to balance their budgets.

Like the proverbial cockroach in fowl business, T&T as a small exporter, has found itself in the middle of a situation not of its making and outside of its control.

On November 28, Finance Minister, Larry Howai stood before the Lower House presenting three scenarios open to T&T as a price taker. All of them involve adjustments to earnings and the deficit. Howai said:

“...the reduction in total revenue will be $1,879 million on an annualised basis. This will be offset by savings on the fuel subsidy of $507 million. The overall fiscal deficit will increase by $1,372 million or 0.7 per cent of GDP.”

The finance minister also said that government was continuing to monitor the situation and that adjustments may mean that each ministry may have to cut $45 million from their expenses.

He also recognised that there was “no room for complacency” as the ministry continues “to monitor what is happening in the global environment and to refine our remedial fiscal measures to ensure that the country can respond appropriately to changes in the market for oil and gas”.

Responses to the minister's assessment of the situation have ranged from “waffling” (Terrence Deyalsingh to reporters after the minister's presentation) to charges that he is deliberately trying to mislead the public into a false sense of security.

The editorial of the Sunday Guardian of November 30 upbraided Howai for only outlining what was the mid-range scenario and not worst case scenario for a protracted price war between OPEC and the US, namely, “a sustained period of further price collapses to US$45 a barrel and the natural gas netback to US$1.75 a unit.”

An informal poll on the streets of Port of Spain, shows that many people are aware of the situation with oil prices, even if they are not clear on the circumstances surrounding the impact of a decline on the country’s revenue. Most of them are also cognizant that it affects them, even if they are not sure how it will, particularly if there is a further decline in the oil price over a prolonged period.

Time a factor

Economist, Dr. Ronald Ramkissoon said even with the fall in government revenues, time was still a major factor in determining what the potential fallout could be for the public.

“It is important to distinguish between a short-term fall in the price of oil and let's say a long-term or a sustained change. If the fall in the price of oil is for a month, two months or less, as you would imagine, that is less of an issue, compared to if there is a sustained decline for six months, 12 months.”

If the decline in oil prices is for the medium to long term, Ramkissoon said he sees the resulting reduction in government spending, which he said made up between 30 to 35 per cent of GDP, having several spin-off effects.

“If government then spends less on goods and services and employment or wage increases for example, then there is less flow of income and business, to those who depend on the government for business. If government is buying less construction materials, then the private sector may have to consider reducing the number of its employees.”

He also foresaw problems with foreign exchange as he said lower energy prices would mean less revenues coming from energy sector companies, who make the largest contributions of foreign exchange to the country.

“If the inflow of foreign exchange slows and the demand remains strong at the existing exchange rate or price, then you either have to allow your reserves to be depleted or you are going to have to adjust the price of foreign exchange.”

Ramkissoon emphasised that both scenarios were dependent on how long oil prices remained depressed. He also said that there were steps government could take, including borrowing to sustain spending to prevent a slowdown in the economy, draw down on foreign reserves, as well as allowing an exchange depreciation in the foreign exchange market to curb demand for US currency.

“We are not there yet.” cautioned Dr. Ramkissoon.

Economist and UWI lecturer, Dr. Roger Hosein said he also did not expect much to change within the short term.

“The decline in oil prices would not lead to dramatic changes as it is an election year and the government would strive to preserve the transfers and subsidy spending which is one of the main conduits through which the economic rents are passed onto to the man in the street.”

In this election atmosphere, Hosein said, that items like GATE and CDAP would be left untouched, the fuel subsidy marginally affected and current unemployment rates maintained by “fiscal expenses”.

Hosein said the real challenge with low oil Oil outlook uncertain for T&T

Experts advise wait and see, watch gov’t spending oil stabilises at US$75 and that anyone assuming government after the 2015 elections would have to seriously commit to “downsizing the size of the state” in the economy. The UWI lecturer again made a call for diversification of the economy as this was the only way to protect the “man in the street” from the “ vagaries of the petroleum market”.

Watch government borrowing

Acknowledging that the man in the street could face among other things, a cutback in his ability to spend, save and invest, that businesses could see reductions in production, eventually leading to job losses and that the foreign exchange situation could worsen if oil prices remain low, economist and Opposition senator, Dr. Lester Henry characterised all of these as pointing to a further deterioration of T&T's investment climate.

“People would become less optimistic about future prospects. The investment climate hasn't been good anyway.”

He was more concerned though, that the government would borrow, a solution outlined earlier by Dr. Ramkissoon, to finance the additional deficit created by falling oil prices, even though the finance minister has said that this would not be done (Trinidad Express November 29).

In Henry's view the government would not have a choice, since it had no buffers in terms of savings, after four years of running budget deficits. He said that all that remained were the country's foreign reserves. Henry said the public should be worried about the potential cost that could be passed on to the country from this borrowing.

“What we need to do is to pose the question to the finance minister and ask him: What is the quantum of borrowing that has been taking place. Because they can borrow very quietly without the public knowing and it shows up six months later. We need to get some kind of transparency to the extent of government borrowing during this period in the run up to an election.”

He contrasted this with the previous administration's position of being able to draw down on deposits at the Central Bank.

“If you go back to 2002 to 2007, there was surplus of revenue that had been accumulated at the Central Bank, so when the crisis hit in 2009, it mainly affected us in 2009, the then government drew down on those balances at the Central Bank, to help cover the shortfall in revenue. I don't think any such thing exists right now.”

Bad news for energy investors

Brent Salvary of KSBM Asset Management Ltd said: “Equity investors in the US energy sector have felt the pain with the exchange traded fund, (ETF), XLE, that tracks publicly traded companies in the Energy Select Sector Index, down 12.5 per cent for the year thus far and down 24 per cent from its June 23rd peak.

While recognising that Trinidad and Tobago's situation was not as bad as Venezuela which he said is now “facing mounting pressures mounting pressure to maintain spending on subsidised programmes that are more populist in nature than they are economically viable...The savings aspect of our economy as transfers to the Heritage and Stabilization Fund would most likely be the same as last year: zero. On the flip side investments in exploration by the major oil and gas companies may be put on hold or considerably scaled back.

“We have seen companies like Conoco reducing their capital spend by 20 per cent worldwide while Schlumberger is reducing its global workforce as it takes a related US$200 million charge due to the dramatic fall in oil prices. This would have a similar effect on both oil producers and service companies in the energy sector and we can look forward to lower investments in the local economy at least for the short-term.”

This echoes warnings to energy sector stakeholders during an Energy Chamber discussion on the implications of falling oil prices last Tuesday. In a Guardian report on the meeting, Roger Packer of Tucker Energy Services told those in attendence to learn from the mistakes of history as all indicators pointed to T&T heading for a “serious economic downturn”.

But at this point, all views remain speculative. At this point, no one can tell how low prices will descend, what steps the government will take and how these will eventually end up affecting the stakeholders, including John Public.

Ultimately, it is time that will tell how these low oil prices will affect T&T. And, it is only through time that the commentators for this article will be proven right, or wrong.

[Flex]

PM on falling oil prices: Govt may have to revise budget, withdraw from HSF
Reshma Ragoonath (Guardian)

Prime Minister Kamla Persad-Bissessar says if oil prices continue to slide on the global market the Government may have to revise, for a second time, the national budget. And if the situation does not improve soon, withdrawals from the national Heritage Stabilization Fund (HSF) might be necessary, she added.

Yesterday, the price for Crude WTI (West Texas Intermediate), on which the budget is pegged, fell bellow US$60, according to Bloomberg.com. At present, crude oil is selling at US$57.81, down from a high of US$100 earlier this year. Persad-Bissessar, speaking with reporters at her annual toy distribution drive at the Ato Boldon Stadium, Couva, said Finance Minister Larry Howai sent out circulars last week to ministries ordering all non-essential services be cut.

However, she said, essential services like health and the social services programmes would not be cut since those would be required to support the most vulnerable. Persad-Bissessar said the trimming of excess in ministries would take place in the coming weeks and into the new year. The Prime Minister hastened to add, “Should the oil prices continue to fall it will be required to have a further look at the budgeted figures and do some revisions as may be necessary.”

She assured that the HSF, which was set-up for “rainy days,” would be available to the Government if needed. “The fund is configured [to be triggered] should the oil prices fall below a certain amount. Minister Howai has told me that there is no (need) to trigger off withdrawals from the HSF,” she said.

Persad-Bissessar assured that the fund was “a padding and a support, budgetary support, fiscal support.” The HSF currently stands at US$5,563.3 million.

She said there was no need to cut her annual Christmas toy drive since those functions were not paid for by the Government, but through donations. “So these will continue, all the toy drives will continue,” she said. At the toy drive, which was attended by thousands of eager children from central Trinidad, Persad-Bissessar got a special surprise when 13-year-old heart surgery patient Anuradha Balgobin presented her with a thank-you letter.

The form two student at Sarawati Girls Hindu College hugged the Prime Minister and thanked her for the Life Fund that enabled her to have life-saving open heart surgery this year. “I feel very happy. I knew she would help me. I came to give her a letter. I came this specially to give her the letter to thank her for the Life Fund and getting me the surgery,” the little girl from Mc Bean, Couva said.

Balgobin’s sister Shweta said she brought her sister because it was important for her to say thank you. She said her family would never have been able to raise the US$.5 million needed for the surgery. Persad-Bissessar said she was touched by the girl’s gesture and promised that the Children’s Life Fund would not be cut.

[Bourbon]

For the past previous 3 or 4 budgets.....we running at a deficit of BILLIONS.
The HSF is 5.5 billion USD....so lets say 30 billion.

That is currently half of this year's budget.

Does this allay any of your fears?

[Sando prince]

‘8 energy firms lost $10b in last 4 years’

http://www.trinidadexpress.com/news/8-energy-firms-lost-10b-in-last-4-years-285731461.html

By By Asha Javeed

From 2010 to 2014, eight energy companies based in the Point Lisas Industrial Estate suffered combined losses of US$1,639,694,699.20 (or roughly TT$10 billion) because of irregular natural gas supply.

In turn, the National Gas Company (NGC) lost US$653.3 million (about $4.1 billion) in revenues, the Government lost US$217.4 million (about TT$1.3 billion) in corporation tax and US$1.4 million (TT$8.82 million) for the Green Fund.

On August 25, the Point Lisas Energy Association (PLEA) of CEOs which comprises Ian Welch, managing director of PCS Nitrogen and chairman of PLEA, Jerome Dookie— the chief executive of Caribbean Nitrogen Company, Dennis Patrick—the chief executive of Methanol Holdings Ltd, Roberto Mantellini- president of Point Lisas Nitrogen Ltd, Robert Bellisle- managing director and chief executive of Arcelor Mittal Point Lisas Ltd, Charles Percy-the chief executive and managing director of Methanex Trinidad Ltd, Jay Henderson— managing director of Nu-Iron Trinidad and Tobago and Richard de La Bastide— president of Yara Ltd, penned a three-page letter about the gas supply curtailments to Energy Minister Kevin Ramnarine.

The chief executives said despite their plea in 2011 that the matter be addressed, they were “severely affected by frequent curtailment in the supply of natural gas to our various plants”.

PLEA noted that they had tried to collaborate with other stakeholders in an effort to come up with solutions to the problem.

“PLEA even facilitated and paid for consultants to work with the Group you agreed to form to look at the shortfall issue. Sadly, to date, little progress has been made. Indeed, despite these efforts, and notwithstanding numerous assurances to the contrary, the gas curtailments continue unabated and have been worse than forecast and appear to have no end in sight.

“As a result of this situation, our respective companies, and by extension, the Government and the people of Trinidad and Tobago, continue to lose significant revenue daily,” the letter stated.

“This does not include the other indirect losses and expenses such as the damage caused to our equipment by constantly having to cycle the plants to respond to broad fluctuations in supply, and the impact that this has had on the equipment’s ability to continue to produce safely at design capacity. Nor does it capture the full trickle-down effect on and the opportunity cost to the nation. Additional indirect effects include the increased risk of accidents and environmental mishaps and the development of a reputation as an unreliable supplier of petrochemical products.

“Honourable Minister, the image that is being painted of Trinidad and Tobago is a place where the gas is either running out or the supply has been overcommitted. The longer this image is allowed to persist, the less attractive the country will be as a venue for foreign direct investment. Numerous investors have passed up the opportunity of investing in Trinidad and chosen to invest in other countries where the supply of gas is more readily available and consistent. We fear that unless the situation is soon brought under control and the confidence in the availability of gas to be supplied to our plants is restored, we may soon witness the permanent closure and migration of plants from Trinidad and the collapse of the Point Lisas model,” the letter observed.

They said the situation required “immediate and definitive handling” and called for critical measures, which they identified as:

1. Concrete action items within a timeline to restore a reliable, stable contract gas supply to PLEA in the shortest time

2. Appropriate planning and communication of items in 1 above

3. Short, medium and long-term outlook of gas supply so the proper planning can be affected. (It is understood that this can only be made possible with accurate forecasts of well-depletion rates superimposed by new production capacity)

4. An understanding of the new gas-consuming projects that have been announced and progressing. What is the plan for the supply of gas to these projects given that the gas shortages being experienced by existing consumers have not been addressed?

5. Reinstate the Reserve Gas/Gas Behind-Pipe to mitigate unplanned upstream outages that will significantly reduce curtailments in Point Lisas.”

PLEA said while they appreciated Ramnarine’s efforts, “given the severity of the problem and the very dire consequences with which we-and the country as a whole-are faced, we consider it our duty to escalate the matter and strongly recommend that immediate action be taken to reverse this worsening and prolonged situation”.

“Please be assured of the ongoing cooperation of our companies towards sustainable solutions and improvement in the economy of Trinidad and Tobago,” the letter ended with the signatures of all eight chief executives.

That letter had followed a letter penned by PLEA on October 3, 2011 which had also called on Ramnarine to address the gas situation because of mounting losses by the plants.

That letter observed: “In implementing these curtailments, the NGC also continues to claim the protection of force majeure clauses in our contracts. There is dissimilarity between the contracts in this regard. While the clauses provide the NGC with a shield in genuine cases of events beyond its control (subject to the limitations set out in the contracts), the expectations are that the NGC must take every reasonable step to limit the force majeure event and its consequences. Furthermore, contractually, the NGC is obligated to meet with us to discuss the consequences of the force majeure event, and the intended remedial actions to be implemented. This simply has not occurred. Indeed, the NGC routinely gets notification of shut-downs from its suppliers, and then passes these over to us forcing us to reduce production rates.”

PLEA had made some recommendations then to Ramnarine. They were:

1. Gas users contracting directly with gas producers- If as gas users, we are, as a matter of policy, free to contract directly with producers, the local gas supply market will become a more transparent and competitive one which will be conducive to the settlement of more attractive terms and, address all the issues of supply that impact or have the potential to impact our productivity.

2. Re-ordering of priority for gas supply— the current status of gas supply priority, gives the LNG producers the highest priority of supply after electricity generation in instances of gas curtailment. We believe that it is time to re-order the gas supply priority so that except for electricity generation, all gas users share curtailments pro rata. In current markets, not only are we losing out but government revenue suffer as well, when it should be benefitting from high commodity prices.

3. Provision of a buffer gas supply- the NGC’s gas suppliers have the available capacity and infrastructure to provide the NGC with an adequate quantity of stand-by or buffer gas which can be used in circumstances where the regular supply is curtailed for unforeseen disruptions. This would of course necessitate a negotiation of terms between the NGC and its able suppliers.

4. Trading among gas users- Given the volatility of the petrochemical markets in which we operate, we propose, in the instances of gas supply restrictions, that we be allowed to enter into commercial arrangements among ourselves, which would allow us the flexibility to determine the rate at which we should each operate, while at the same time complying with the NGC’s request to reduce overall production rates. This would ensure that if market conditions are good for one of us, then the opportunity arises for negotiation, which would allow a user to benefit as much as possible in the prevailing market.

5. Re-pressing of old Petrotrin wells- As a means of providing additional gas storage, we suggest that the old Petrotrin wells can be reconditioned and re-pressured to be used for underground storage which we can tap into as needed.

6. More equitable sharing of the burden. Given the premier position enjoyed by the NGC in our gas sector, we believe it is important for us to have a more equitable sharing of the burden, as well as the benefit. Specifically, in each of our gas contracts, we agree to a take or pay clause. We believe that consideration must be given to the development of a deliver or pay formula whereby if the NGC fails to deliver to its customers, it will accept a reasonable portion of the financial fall-out. This type of policy will create an incentive- based culture, which promotes efficiency and accountability from which our country will ultimately benefit.

Contacted yesterday to comment on the letter, Ramnarine maintained the stance he’d taken in an interview with the Sunday Express two weeks ago, that the problem won’t be set right until 2017.

“There is a gap between what could be supplied and what is the total demand. And that gap is probably five to ten per cent,” he had said.

“I am going to be honest with you, that situation will not go away for the next two and a half years. Where we will get relief is in the year 2017 when the Juniper (a bpTT gas field) comes on.”

Last week BG’s Starfish field came into production.

“That’s good news. It helps. It’s a bit late. It had a slippage in schedule because of rough seas but it is going to come on in stages. They will bring in the first well next week, by January they will bring in the second well and by March they will bring on the third well. It will add 220 million standard cubic feet of gas (mmcf/d). That is not going to alleviate the problem, it’s going to help but it won’t make it go away. We are in this supply-demand situation for the next two and a half years,” he had said.

[asylumseeker]

Just realized the price at the pump reflects a decrease ...

[Bourbon]

Just realized the price at the pump reflects a decrease ...

Umm....in T&T?

[Flex]

Don’t panic
By Clint Chan Tack
December 31 2014

PRIME Minister Kamla Persad-Bissessar yesterday declared nothing will distract her from ensuring that the country is protected against the dangers of falling global oil prices.

Persad-Bissessar urged citizens “don’t panic” adding she will address the nation on the state of the economy and how Government will deal with falling oil prices next Thursday. She made this declaration at the final post-Cabinet news conference for 2014 at the San Fernando Teaching Hospital, Chancery Lane, San Fernando.

Persad-Bissessar also announced the House of Representatives will sit 24 hours later to debate the Finance Bill. When the House completes its debate on that legislation, Persad-Bissessar said she will hold consultations with stakeholders on the state of economy and the way forward.

Persad-Bissessar, who left immediately after making her statement and took no questions from reporters at the briefing, declared in her speech, “I remain doubly focused on the task at hand. Attempts to distract my attention and energies from my responsibility to lead and manage the affairs of this nation will not deter me from my goal of a prosperous and secure nation.”

Reiterating that she remains concerned about falling oil prices as the new year looms, the Prime Minister said, “I will speak to the nation on the state of the economy on January 8, 2015. I will address the issue of falling oil and gas prices and their implications for Trinidad and Tobago and outline the way forward in the year ahead.”

She then announced that on January 9, “the Finance Bill will be debated in the House of Representatives.” Persad-Bissessar explained this bill will “give life and traction” to the measures announced in the $68 billion 2014/2015 Budget which Finance Minister Larry Howai presented in the House in September.

The Prime Minister said she looked forward “with keen interest in the ideas and suggestions which the stakeholders and citizens will share as we deepen our partnership in the interest of a prosperous and secure” country. “In the mean time, feel secure in the fact that your Government is monitoring the situation on a daily basis and working with you in mind every single day,” she said.

Reiterating there will be “no cut to affect the vulnerable and the underprivileged as well as health sector reform and crime fighting” and job creation remains high on Government’s agenda, Persad-Bissessar said in 1995 she was part of the United National Congress (UNC) administration under then Prime Minister Basdeo Panday which had to manage the country’s affairs against a background of low oil prices.

“I am therefore not daunted by the current situation but instead feel very confident of our ability to mitigate the impacts of lower energy prices whilst preserving jobs and promoting economic growth,” she said.

While telling reporters her Christmas season was “enriched by the thousands of happy faces of children” who interacted with her during her toy distribution drive, Persad-Bissessar did not speak about the controversial billboards bearing her face, that were erected during the season.

“Those happy faces gave me inspiration and the strength to continue to do the best that I can for our country and our people and to work harder with the next generation in mind,” she said.

With general elections due next year, Persad-Bissessar said as she reaches the end of her first term as Prime Minister, the country “is in a better place than when I inherited the responsibility for its administration.”

Reiterating that the People’s Partnership (PP) coalition has been “the most scrutinised administration” in the country’s political history, Persad-Bissessar boasted, “We enjoy today political stability, economic growth, financial stability, lower levels of poverty, and increased financial support for pensioners and the vulnerable in our society.”

She said under the PP, 75 labour agreements were settled; the subsidy on gas prices has been maintained; social welfare benefits have increased; universal childhood education has been advanced and the public can look forward to improvements in health care with the opening of the Children’s Hospital in Preysal by mid-2015.

“All of this has been achieved without any new taxes (personal and corporate) in the last five years,” Persad-Bissessar boasted.

[Agent Jack Bauer]

Land of d limbo right.........start stretching dem backs out

[lefty]

anybody followin d propag.... ah mean address to d nation going on now

[Flex]

Kamla slashes budget: continues expenditure in social programmes
By Ria Taitt Political Editor

PM HOLDS BACK

A $7.4 billion shortfall is what Prime Minister Kamla Persad-Bissessar last night identified as a result of falling oil prices.

The PM reaffirmed that the support grants, senior citizens’ pension, new minimum wage and baby grants will be untouched. But she provided no precise cost-cutting details or any sacrifices that the population might be called upon to make.

What the Prime Minister did announce was the Government’s 2015 budget would now be pegged on a revised oil price of US$45 a barrel, a 44 per cent reduction from the original benchmark of US$80 a barrel.

The gas price on which the budget is premised was also revised, from US$2.75 per mmbtu to $2.25 per mmbtu, she stated. This points to a major realignment in Government revenue and therefore adjustments in spending.

However, delivering her address to the nation on the economic situation, in light of the new budgetary and fiscal situation, Persad-Bissessar identified savings in Government expenditure from one source—$1.4 billion from a lower fuel subsidy outlay.

“What (areas) are we adjusting? In moving forward there’ll be areas where we must moderate or redirect our spending in order to manage the present situation, always making sure that we keep people and country first—Reviews of our PSIP and current expenditure are ongoing, with the aim of identifying savings of approximately $4.5 billion,” the Prime Minister stated.

“Amongst the areas identified for redirectional spending and indeed in helping us to make up the shortfall of the $7.5 billion...these are the areas that we would consider—infrastructural projects for which funding has not yet been confirmed; lower expenditure on non-critical goods and services; and cuts in allocation in selective ministries by about 15 per cent.

“Any additional shortfall will be met from revenues generated as a result of our continued public offering programme,” she added, referring to the IPO to be held for the public sale of shares in Phoenix Park, Gas.

“This would be the first-ever listing of an energy stock on the local stock market, thereby giving the citizens a direct stake in our very important energy sector.”

The Prime Minister said the international credit rating agencies, Standard and Poors and Moody, have all projected that oil will rebound to between US$62.7 and US$70 a barrel in the near to medium term.

However, she said, Government decided to use the “more conservative assumptions” (of US$45 a barrel) for oil and gas.

“What this means is that the shortfall we may experience in Trinidad and Tobago would be in the region of TT$7.4 billion,” she said.

The price of oil has moved from a high of US$107 per barrel in June 2014 to US$48.65 at the close of business yesterday, representing a 55 per cent decline, Persad-Bissessar pointed out.

But in noting that the country had to adjust its spending, she committed her Government to continue expenditure on “the things that matter most to you (the population)”.

Persad-Bissessar singled out the energy corridor—San Fernando to Mayaro highway, describing it as a “key investment”.

She also cited her Government’s committment to the “provision of protection to the vulnerable and disadvantaged; to ensuring the pace of business activity continues; to preserving jobs and personal incomes; to intensifying its efforts in making our nation safer; to maintaining successful investments in education; to making improvements in the quality of health care so urgently required; and to keeping our committment to critical infrastructure projects, including schools, hospitals and the housing programme”.

The Prime Minister gave the assurance that her Government will navigate safety through these turbulent times.

She trumpeted the achievements of her Government, stating that the economic fundamentals were stronger today than ever and that her Government’s economic policies had halted the decline that it inherited.

Persad-Bissessar recalled that when she was a member of the government in the 1990s the oil price fell to as low as US$9 a barrel, yet the economy was kept strong and investor confidence high and stability was maintained.

“I make this reference to reinforce the reference that Trinidad and Tobago has been here before and was able to overcome the challenges faced. The population can feel confident that once again the nation is fortunate to have a Government in place that has demonstrated responsible fiscal policies, that has balanced investment in social programmes and people-centred development whilst simultaneously turning the fragile economy we inherited in 2010 into the stable and strong one that it is today,” she said.

“The same prudence with which we managed the economy since 2010, to bring us to a position of resilence and stability, will be used in shifting our priorities and maintaining stability,” the Prime Minister stated.

“History will record this period as one of our finest when we stood strong, made the right choices, exercised the right amount of restraint, held the right course and indeed saw the right results,” Persad-Bissessar said.

The address was made live from the Diplomatic Centre, St Ann’s.

Before delivering it, the Prime Minister met with senior executives of the energy companies in the state sector and the Ministry of Energy and held another meeting of a sub-committee of the Cabinet.

[lefty]

she said a whole lot of nothing for people dat actually know anyting 'bout economics

[Sando prince]

Economist: Prime Minister failed to level with public

http://www.trinidadexpress.com/news/Economist-PM-failed-to-level-with-public-287998731.html

By Kim Boodram

ECONOMIST Gregory McGuire said last night it was his belief Prime Minister Kamla Persad-Bissessar failed to level with the public in her address to the nation on falling energy prices and its possible impact on Trinidad and Tobago’s heavily energy-dependent economy.

McGuire said his initial reaction to Persad-Bissessar’s address was there had been an overarching lack of detail, a bid to make the population more comfortable in a time of crisis and an opportunity to deliver a “platform statement”.

“I don’t think the Government has a handle yet on the extent of the crisis. I don’t think the Prime Minister has levelled with the public,” McGuire said.

He said he was yet to study Persad-Bissessar’s address, but his first impression was the PM failed to provide much-needed detail that would truly convince the population of this country’s ability to navigate on a lessened income.

“We still don’t know where the cuts will come from,” McGuire said when contacted last night, minutes after the conclusion of Persad-Bissessar’s live speech to the nation.

“Really, we are left, at the end of the day, still not clear about what the Government is going to do.

“She also seized the opportunity to make what I think was a platform statement.”

McGuire said Persad-Bissessar should have gone into detail when she announced Government’s plan to place Phoenix Park Gas on the public market and should have projected the expected revenue and when it could be expected.

“I think that the Prime Minister’s statement really lacked detail,” he said.

He also noted a lack of mention of the current price being paid by citizens who use premium gas at the pumps and said given prices at this time, customers were now paying a tax of over a dollar per litre.

“The price is way above what it really ought to be, given what the price of oil is now,” McGuire said.

Persad-Bissessar should also clarify which and how many State projects yet to receive funding were mentioned in the September deli­very of the 2014-2015 budget, given her remark funding for those projects would be deferred.

Persad-Bissessar also mentioned in her address last night her Government had turned around the economy it inherited in 2010 when the People’s Partnership swept the polls.

McGuire said the fact remained the economy had shown nominal growth in one year and has, for the rest of the time, survived but not expanded and remained “highly vulnerable”.

Boasting should come when an economy has seen growth upwards of three per cent, he said.

He said while Persad-Bis­sessar spoke a lot about diversification, the numbers she provided said little.

“What are the sectors your are talking about that you have actually led and created diversification?” he queried of the PM’s statements.

On Government’s announcement on Tuesday that money may have to be borrowed for the completion of its San Fernando to Point Fortin highway megaproject, McGuire said the “mistakes” associated with that project took place before an econo­mic crisis had developed.

He said a project of that magnitude should not have been carried out out-of-pocket but would typically have taken place on borrowed funds.

[grimm01]

she said a whole lot of nothing for people dat actually know anyting 'bout economics

This is an understatement because even the most uneducated people understand that if their salary get cut in half and their bills and spending stay the same, they going to be in plenty trouble.

Kamla stalling because elections coming up and if she have to cut any freebies, people going to be upset. So her calculation right now is how long can she delay a decision before the election, because yuh never know, oil prices might rebound. She better off passing a hat round the table at the next cabinet meeting and asking her colleagues to donate back some of what they thief from the Treasury.

[lefty]

she said a whole lot of nothing for people dat actually know anyting 'bout economics

This is an understatement because even the most uneducated people understand that if their salary get cut in half and their bills and spending stay the same, they going to be in plenty trouble.

Kamla stalling because elections coming up and if she have to cut any freebies, people going to be upset. So her calculation right now is how long can she delay a decision before the election, because yuh never know, oil prices might rebound. She better off passing a hat round the table at the next cabinet meeting and asking her colleagues to donate back some of what they thief from the Treasury.

lol so true on all counts

[Flex]

Rowley knocks PM’s poor economy plan
Richard Lord (Guardian).

Opposition Leader Dr Keith Rowley yesterday joined in with people from various sectors of society in ridiculing Prime Minister Kamla Persad-Bissessar’s economic plan in light of the continuing falling oil prices, saying Government had not taken the critical decisions to deal with the worrying global issue.

Rowley made the comment in the House of Representatives during debate on a Government motion to adopt the First Report of the Standing Finance Committee on proposals for the Supplementation and Variation of Appropriation for fiscal 2014.

Six business organisations—the TT Manufacturers’ Association (TTMA), American Chamber of Commerce (Amcham), San Fernando Business Association, T&T Chamber of Industry and Commerce, Penal/Debe Chamber and the Chaguanas Chamber—also expressed concerns about the lack of details by Persad-Bissessar about solid measures to deal with the falling oil prices during her address to the nation on Thursday night.

Yesterday was the first sitting of the House following the Christmas break. The motion was presented by Finance and the Economy Minister Larry Howai. Rowley began his response by saying the country was “smouldering while Government praises itself. There is smoke and there could be fire behind.”

He said the Government had failed to take the appropriate action to deal with the reduced oil price, adding Persad-Bissessar had not even admitted that the price of the commodity had collapsed during her address. Oil again traded at under US$50 yesterday. The priced dropped from over US$100 last year. The 2015 budget was based on an oil price of US$80, but the PM revised that price to US$45 in her address.

But Rowley insisted yesterday that Persad-Bissessar should have done more. He said the Government should roll back operations. The increased expenditure announced by Howai in the budget presentation last September, he added, should have been cut back as the required revenue was not there to support it. Rowley said subsidies should also be cut and warned that if the Government were to maintain its position the country may have to go to the International Monetary Fund (IMF).

“If this Government continues pussyfooting and pretending that we are the only oil and gas economy which has no problem with a collapse of the oil price, then we are going to end up before the IMF,” he said, adding Persad-Bissessar “did not address any of the fundamentals.” While the price of oil at which the budget was based had been reduced, Rowley said Government was maintaining the budgeted $250,000 for printing publicity and promotions.

He said Persad-Bissessar, in her address, which he labelled a campaign speech, also “did not say a word to deal with waste and corruption, which are its hallmarks in office.”

More Info

Leader of Government Business, Housing Minister Dr Roodal Moonilal, defended the Prime Minister during his contribution to the debate yesterday. He said Persad-Bissessar gave an assessment of the existing economic conditions in the country and “came flat out and said we are revising our budget assumptions.”

Moonilal said the Government will look to reduce the cost of goods and services by 15 per cent, try to clear $4.5 billion on infrastructure projects where financing was not confirmed as yet and seek to save on subsidy by $1.4 billion. “The Prime Minister was very clear on those issues,” he said. Moonilal said the economic fundamentals for this country have never been stronger. The problem was one of cash flow and the country was treating with it he said.

3 contracts in one day

As an example of the wastage, Rowley said the National Gas Company was now engaged in the repair of minor recreation grounds. He said he had documents to show that three contracts were received in one day by a company called Phoenix Project Management and Designs Ltd, which was formed in 2011. He said those recreation grounds were located in Cumuto, Gasparillo and Ste Madeleine were awarded for $3.5 million, $5.5 million and about $9 million, respectively.

The company’s address, Rowley said, was changed from Brechin Castle to Chaguanas and one month later there was another change of address. “They believe that they are hiding from the population what is going on with the raiding of monies out of NGC to these individuals,” he said. Rowley claimed the directors of that company were employees of SIS Ltd. “That is how the monies are being shoveled out of the state enterprises,” he said.

In response to Persad-Bissessar’s statement, Rowley said if an attempt was made to sell Phoenix Park Gas Processors, its value would have to be reduced because of the current outlook in the energy sector. He said the Government was effectively talking about a potential fire sale of state assets to acquire money to maintain the status quo.

[Socapro]

she said a whole lot of nothing for people dat actually know anyting 'bout economics

[Flex]

Khalid orders Petrotrin cutbacks and says: We can manage for short time.
By Kevon Felmine (Guardian).

Petrotrin president Khalid Hassanali is forecasting a dim 2015, saying the state-owned oil company could lose 40-50 per cent in revenue due to the continuing sip in global oil and gas prices.

As such, he says the company has readjusted its budget and will also have to slash drilling and development programmes. The revised budget will take into consideration its revenue forecast over a five-year period, he said.

Hassanali made the comment following the opening of a workshop on incident command systems at Petrotrin’s staff club at Pointe-a-Pierre. He said the company suffered a loss last year and expected to do the same again this year.

“As you know, we are in a down cycle and in these down cycles we still have to prepare for when prices will ‘re rise.’

“We are experiencing about a 40 to 50 per cent loss in gross revenue but, like I said, we manage our cash flows very carefully in these times,” he said.

Hassanali’s statement comes mere days after Prime Minister Kamla Persad-Bissessar announced that Government would peg its national budget figure on US$45 a barrel for oil and $2.25 for gas, as well as various cutbacks in Government spending, due to the falling global prices.

Yesterday, Hassanali said Petrotrin would use the down cycle not only to optimise and restructure the company but also be prepared for when the prices began to rise.

Hassanali said the company would reduce spending on its drilling and developmental programmes as many of its aged assets needed to be replaced. The focus too, he said, would be on cash management rather than accounting profits.

He added: “We will continue to cut, maybe to a reduced extent, our drilling programmes, our developmental programmes, because we have an asset that has to be replaced.

“We have just come out of acquisition of seismic at the marine acreages in Trinmar. We have certain responsibilities there and we also have already started development drilling in terms of our land seismic so there is a lot of potential.”

Although the oil price ended yesterday at US$46.30 a barrel with gas at $2.81 per trump, Hassanali said that would be sufficient to withstand the current crisis, although he said that would only be for a short time.

He said there were several initiatives with the Ministry of Energy and Energy Affairs to manage cost carefully.

“If you think of that in terms of our lifting cost, in other words, the money that is required to take a barrel of oil out of the ground, we can manage at the current pricing scenario. We can manage on a cash basis, not forever, but we can manage for a period of time.”

Financial hole

Last month, Energy Minister Kevin Ramnarine announced in the Senate that Petrotrin had suffered a loss of $346 million in fiscal 2014 and had a total debt of $14.38 billion.

He made the comment as he appealed to Petrotrin workers not to carry through on a proposed strike action over the company’s claim that it could not increase salaries.

“This is not a time for acrimony at Petrotrin. This is not a time to break down Petrotrin but to build up Petrotrin,” he said.

Ramnarine said the company’s poor financial performance was partly due to losses by the refining arm of the company.

The way forward for the company was to increase its crude oil and gas production through its own efforts as well as from ventures, such as its lease operatorship, farmout, incremental production service contract (IPSC) and joint venture programmes.

He said improved production was expected from the Trinmar operations in the Jubilee field and the ongoing South West Soldado project.

Contacted yesterday, Petrotrin’s communications department said at the end of 2013-2014 fiscal period, the company revenue was TT$29.285 billion and there was a loss of $347 million. The main contributor to the loss was a low refinery margin.

[Socapro]

Rowley: Govt needs to prepare for worst-case scenario
By Sue-Ann Wayow sue-ann.wayow@trinidadexpress.com
Story Created: Jan 15, 2015 at 8:42 PM ECT (T&T Express)

OPPOSITION LEADER Dr Keith Rowley says he expects more information from the Government concerning the falling oil and gas prices, and it needs to prepare for “a worst-case scenario”.

Rowley reminded the public that on three occasions in 2009, former prime minister Patrick Manning revised the nation’s budget because of a decrease in government’s revenue.

Rowley was speaking to reporters on Tuesday during the launch of the People’s National Movement’s (PNM) election campaign in Mayaro.

Referring to Prime Minister Kamla Persad-Bissessar’s address to the nation on the state of the economy last week Thursday, Rowley said,“What happened last Thursday was the first response. What is clear from the Government is that the Government is hoping that this is a very temporary occurrence and it will turn around soon. If that happens we will all be very happy, but if it does not happen, we have to prepare for a worst-case scenario.

“The causative factors of this collapse are factors which indicate that the price could go a bit lower for a fair period of time. So we have to be prepared for that and this is where the Government is failing us,” he added.

“The Government has to show honest leadership and provide the country with proper guidance in the situation. Playing politics because of an election is a dangerous game because time is being lost, opportunities are being wasted and it will become more difficult if the Government continues on its spendthrift pattern. Oil revenues will collapse,” said Rowley.

Last week, just after Persad-Bissessar’s announcement of a decrease in State expenditure in an attempt to deal with the drop in oil and gas prices, Rowley said the Prime Minister “failed massively” in her response to the growing turbulence in the global energy sector and instead delivered a campaign speech.

[Flex]

TT will buffer oil price fall
T&T Newsday

ENERGY Minister Kevin Ramnarine says the country will be able to buffer the fall in global oil prices and the outlook from local energy companies is positive.

He was speaking with Sunday Newsday yesterday after the Petroleum Dealers’ Co-operative Society Limited symposium entitled “The Retail Petroleum Industry in Trinidad and Tobago: Forging Ahead” held yesterday at Hyatt Regency, Port-of-Spain.

He noted the falling oil prices is a situation they monitor on a daily basis.

“As the Prime Minister said so eloquently in her speech (on the state of the economy) there is no need to panic. Of course there is need for concern and there is a need for adjustment and we are concerned and we are adjusting,” he said.

He continued’: “But the country has sufficient fiscal space in which we can buffer the impact of falling oil prices.”

He explained the foreign exchange reserves are US $11 billion to US$12 billion and the Heritage and Stabilisation Fund is over US$5 billion. He also said all the oil companies have indicated that there would be no cuts in jobs and he personally has not received any report thus far.

“And based on the feedback I have gotten from them and the feedback Newsday has gotten from them (in a recent article) thus far the companies have not indicated that they will cut any jobs,” he said.

He noted it is a situation that evolves daily but for now “they have indicated that all is well” and have also indicated that they will continue their capital investment programmes for this year plans which would have been made a year or two years ago.

“So the sector continues to be strong and we continue to monitor the situation on a daily basis,” he said.

He noted that they saw “some slight improvement in oil prices last Friday with Brent crude per barrel going back up to US$50 and we continue to monitor the situation over time”.

He reported that for the first quarter of fiscal 2015, October to December 2014, they have realised gas prices slightly above the budgeted price however they do not expect that trend to hold.

“Gas prices follow oil prices globally so we expect gas prices will come down which is why we have adjusted the budget to (US) $2.25 (per mmbtu gas price) instead of the $2.75 which was the September budget price,” he explained.

“So I mean we are planning for it,” he said.

He also responded to Opposition Senator and economist Dr Lester Henry’s contribution in Parliament last week in which Henry said this country was headed for a “perfect storm” of lower oil prices and lower gas prices and revenue as well as lower production levels.

Ramnarine responded: “I listened to what he said. And I don’t know what he was talking about. He normally is very confusing to listen to. I don’t know what he was referring to.”

He continued, “Oil prices are falling - the whole world knows that. Gas prices are falling too - the whole world knows that.”