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Balancing energy risks and rewards

Thursday, February 6, 2014

This week’s annual energy conference hosted by the Energy Chamber provided a forum for executives working in this country’s most important sector to meet and exchange ideas about how global changes will affect the way business is done here. One of the issues that got more traction this year than previously is the idea that there must be greater alignment between the allocation of risks and rewards along the local petrochemical value chain from the wellhead to the gas station.



The thinking behind this idea is that the enterprises that take the least risks should have the lowest reward, while those that take the greatest risks should be entitled to the largest rewards. While the idea of a risk/reward continuum has theoretical legitimacy, there is little doubt that it is being propagated by those who feel their companies are not being adequately compensated for the risks they are being asked to take by the Government.



The particular risks include the exploitation of the deep waters off Trinidad’s east and northeast coast, which has been described as the country’s new province and whose exploration and development the Government is anxious to start as a means of extending the life of the energy sector. The current contestation between risks and rewards has gained greater saliency as the Government is about to embark on negotiations to update the long-term supply contracts of bpTT and BG, two of the country’s largest producers of natural gas.