Tropical Storm Bret was not unanticipated, it did not strike unexpectedly like a thunderbolt out of the blue.
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Does MHTL matter?
There is not likely to be much argument with the proposition that the population of this country owes its standard of living to the wealth generated at Point Lisas and in Point Fortin.
The decision taken in the 1970’s to stop flaring natural gas and use the commodity as a feedstock for the development of the petrochemical industries at Point Lisas Industrial Estate contributes the tax revenue that has allowed governments since then to increase the country’s quality of life.
An even greater contribution to the population’s standard of living resulted from the decision in the 1990’s to liquefy some of the country’s natural gas and export it to other countries.
Those decisions are responsible for the fact that, until very recently, a large percentage of the cost of living for the majority of households in this country has been borne by the State from the taxes paid by the mostly foreign firms that operate at Point Lisas and Point Fortin.
To be clear, there is a direct relationship between the taxes paid by the companies operating on those industrial estates and the massive subsidies that the State has been able to afford to provide for the subsidisation of healthcare, education, housing, some jobs as well as land, sea and inter-island transportation and much else.
In very stark terms, were it not for the taxes generated by the companies operating on the Point Lisas and Point Fortin industrial estates, citizens of this country would have to dedicate more of their disposable income to paying for electricity and water, gasoline and educating their children through primary, secondary and tertiary education levels.
Were it not for the Point Lisas and Point Fortin taxes, the average man or woman would have to pay much more to access healthcare and the provision of free pharmaceuticals through the CDAP programme would soon become a memory from an easier and happier time.
Without those taxes, disposable incomes in T&T would plummet as more of the income of an average household would have to be spent on things that are now subsidised.
While the non-energy sector has been called upon to bear a much heavier burden of the payment of taxes in the last two budgets, there is little doubt that the non-energy taxes are related to the energy taxes. In other words, if energy taxes fall, non-energy taxes are likely to decline as well over time.
While there is a clear relationship between T&T’s standard of living and the wealth generated by the natural gas industries, it is much less clear how much taxes are generated by Point Lisas and by Atlantic LNG.
There is no line item in any Estimates of Revenue document outlining how much taxes are paid by the methanol (or the ammonia and LNG) companies operating in T&T.
No one—and I mean NO ONE—is in a position to say that the companies on the Point Lisas estate generated $7 billion in the 2016 fiscal year because T&T does not analyse its national accounts in a way that would facilitate that kind of information.
So, there is no accounting, on an annual basis, for the amount of taxes paid directly by the Point Lisas operators or by Atlantic LNG.
Is it not an unsatisfactory, if not acceptable, state of affairs that the two largest generators of taxes in this country remain a black hole?
To illustrate this point: In delivering the 2017 budget, Finance Minister Colm Imbert read out that he expected T&T’s total tax revenue during the current fiscal year to amount to $47.44 billion.
Of that amount, he estimated that, based on an oil price of between US$48 and US$50 a barrel and a natural gas of US$2.25 per mmbtu, T&T would generate $2.57 billion in “oil” taxes (presumably from oil AND gas) and $44.86 billion in “non-oil” taxes.
Of the $44.86 billion estimated to come from the non-oil sector, there is an assumption that a significant percentage of that would be derived from taxes on the sale of products from the Point Lisas companies such as methanol, ammonia, urea, melamine as well as from Phoenix Park Gas Processors—propane, butane and natural gasoline.
But there is no transparency in terms of how much revenue is generated by Point Lisas. None at all. Zilch. Zero.
Conclusion: It is very
It seems to me that the standard of living that an entire generation of people—and I am included in that cohort—have taken for granted is under threat from the structural changes that have taken place in the global energy industry.
The reference here is specifically to technological developments that have allowed the US to be transformed from a net importer of natural gas to a net exporter of the commodity, produced from shale.
That development has changed the market for natural gas and its derivatives forever (by which is meant for the next 20 years or so).
What that means is that T&T will very soon not have a price advantage in terms of natural gas available for sale. What this country has is companies that have built plants over the last 40 years that would be much more expensive to build in the US. That provides this country with a window during which the all-in cost of production of a tonne of methanol may continue to be less expensive here than in the US.
But that advantage disappears if the aggregator and distributor of natural gas to all of the companies on the Point Lisas estate, the National Gas Company (NGC), is unable to satisfy the contractual obligations of its client on the estate.
Which brings me to my final point: If T&T needs to find more natural gas to facilitate the continuation of Point Lisas and Point Fortin, then the companies that spend billions to find and bring the natural gas ashore are going to need to be more suitably incentivised for the cost and risks involved in finding more natural gas.
On the other hand, given the reality of shale gas in the US, the Point Lisas companies are not only going to want firmer guarantees about consistency of gas supply, they are probably also going to want more competitive gas prices to ensure that they stay here.
If the upstreamers want to be paid more and the downstreamers want to pay less, it seems obvious to me that the sacrifice is going to have to be made by the merchant in between the upstream and the downstream. That merchant, of course, is the NGC.
NGC has generated billions of dollars in revenue for T&T people. No time more so than between 2010 and 2015, when the previous administration called on NGC for larger and larger dividends every year...dividends that could have been reinvested in the company.
There is no doubt about NGC’s value. The question is: If the structure of the global natural gas industry has changed because of shale gas, can NGC remain the same.