The Min­istry of En­er­gy launched its on-shore bid round on May 16. Last year, deep wa­ter blocks were al­so of­fered and re­cent­ly the Min­istry laud­ed rig ac­tiv­i­ty in the sec­tor–all of this in the back­drop of re­duc­ing oil pro­duc­tion and the fail­ure to sup­ply down-stream­ers' nat­ur­al gas de­mand over the last 2 to 3 years–an im­pli­ca­tion that the de­mand is at the lim­it of sup­ply. What we hope for are new finds of oil and or gas.

How could an abun­dance of nat­ur­al re­sources not sig­nif­i­cant­ly add to a na­tion's pro­duc­tiv­i­ty and wealth–all we have is US$4.5 bil­lion in the HSF af­ter ex­ploit­ing en­er­gy for 100 years, and low on-shore pro­duc­tiv­i­ty! The Dutch dis­ease, es­pe­cial­ly in de­vel­op­ing coun­tries with nat­ur­al re­source bo­nan­zas, tends to re­duce rather than en­hance liv­ing stan­dards. The dis­ease nor­mal­ly in­creas­es the val­ue of the lo­cal cur­ren­cy ex­change rate and so makes the oth­er ex­port prod­ucts of the coun­try pro­gres­sive­ly un­com­pet­i­tive.

In T&T, with a man­aged float, the im­pact is a re­flec­tion of the high­er wages and salaries in the en­er­gy sec­tor on­to the on-shore econ­o­my, re­duc­ing the pro­duc­tiv­i­ty of this labour.The on-shore ex­port sec­tor earns of the or­der of 10 per cent of our for­eign earn­ings and its re­gion­al com­pet­i­tive­ness is sup­port­ed by gen­er­al sub­si­dies in en­er­gy sup­plies.

Nor­way es­tab­lished a large sov­er­eign wealth fund from the pe­tro­le­um rev­enues to in­su­late its econ­o­my from en­er­gy earn­ings. In­stead, T&T, with its pro-cycli­cal spend­ing of such earn­ings–a lev­el now main­tained by this gov­ern­ment via fis­cal debts–saves part of the ex­tra rev­enue it did not pre­dict from the ac­tiv­i­ty of the en­er­gy sec­tor.

This dis­ease en­cour­ages the gov­ern­ment to ex­tend many ameni­ties, sub­si­dies and trans­fers to the pop­u­la­tion, dam­ag­ing the work eth­ic (URP, Cepep), and en­cour­ag­ing em­i­gra­tion from the re­gion.An im­me­di­ate con­cern is the re­duc­tion in our oil pro­duc­tion–from 225,000bbls/dy to some 80,000 now, and the nat­ur­al gas re­serves, which at the present rate of us­age could last some 12 years.

Our ma­jor hope for in­crease in these re­serves/pro­duc­tion lies in the cur­rent deep sea ex­plo­ration–risky and ex­pen­sive, so re­duc­ing the re­turns to us as a com­mer­cial re­place­ment unit of oil or nat­ur­al gas.We were at one time the ma­jor ex­porter of LNG to the US. With the new tech­nol­o­gy of shale gas ex­trac­tion the US could be­come an ex­porter of cheap nat­ur­al gas.

Be­cause of the stran­gle hold Rus­sia has on gas sup­ply to Eu­rope, prices there are some US$14/mmB­tu com­pared with US$4/mmB­tu in the US.In the short term we can redi­rect our LNG ship­ments to Eu­rope/Asia and con­tin­ue to sell our more ex­pen­sive gas.Eco­nom­ic de­vel­op­ment de­pends on the avail­abil­i­ty of a rel­a­tive­ly cheap source of en­er­gy. If clean gas is so much cheap­er in the US than in Eu­rope/Asia then the lat­ter can­not com­pete in gen­er­al glob­al trade with the US.

Eu­ro­pean gas prices have to go down, es­pe­cial­ly since shale gas ex­ists in Eu­rope and even Chi­na, not to men­tion that re­gion's large gas ex­port ca­pac­i­ty in Qatar and Aus­tralia.If our gas can­not com­pete glob­al­ly with US$4 gas then the sur­vival of our nat­ur­al gas in­dus­try, in­clud­ing the down­stream proces­sors, is un­cer­tain.

We have to do what we can in the en­er­gy sec­tor but we have to hedge our risks–add oth­er strings to our eco­nom­ic bow, di­ver­si­fy the econ­o­my if we are not to al­so run the risk of be­com­ing a pe­tro­le­um has-been; a mod­ern day East­er Is­land.

MARY KING

maryk­ing@tstt.net.tt