The world has been forced to make a choice between life and livelihoods.
Faced with the pandemic caused by the novel coronavirus that has resukted in tens of thousands of deaths globally, governments all over the world, including T&T, have created great economic hardships on their people as they try to flatten the curve and therefore limit the spread of COVID-19; in the process saving lives.
It is a reality that there can be no livelihood without life and the actions by governments, including the Rowley administration are understandable and, in some ways, laudable.
For economies like T&T, the challenge of the COVID-19 threatens to hurt much more and continues for longer because of the impact it is having on global energy prices. Faced with an already over-supply situation and the geo-politics of the Saudis, it is likely to keep oil and gas prices low into the medium term, if not the longer horizon.
In some ways COVID-19 has given us an opportunity to see the benefit of some of the government’s actions pre COVID-19 and also its shortcomings.
For sure Petrotrin—as it was then constituted—with a lifting cost of US$35 a barrel and poor margins on its refining would have gone bankrupt under these conditions or, at best, forced the government to guarantee even more debt on behalf of the company.
That the Rowley administration had the political will to close down the company and continue only as an exploration and production entity gives it a chance to survive. I suspect that post COVID-19 crude prices are likely to increase to the US$40/$45 a barrel as demand improves and allows in the short-term shale producers to survive. But not enough for energy dependent economies like T&T.
I also think the proxy war cannot be sustained by the Saudis and Russia and good sense must prevail which could see prices back to US $55/$65 a barrel by 2022/23 as demand also catches up with supply.
The crisis has allowed the country to see a Prime Minister who appears more invigorated and in charge of things and shows that the government finally is beginning to understand that if it works with the private sector, rather than their previous position that they are in power and they set the policy, that there may be benefits for the country.
I am pleased that the government listened, to a large measure, what the private sector had to say in terms of its selection of those essential businesses that should remain open, which gives the country the best chance of keeping some aspects of the economy going while at the same time protecting the public interest.
The private sector has shown the administration how much it is prepared to work in the nation’s interest and the financial institutions have enjoined the battle to keep people and companies afloat with significant assistance in both reducing interest rates and loan deferrals.
The one thing we do not want to see is a marked increase in non-performing loans.
It is the private sector who will have to lead the economy into a more sustainable and resilient path and the government must see that it has a crucial role to facilitate this growth and not compete with it.
The government must lead the sector, not by trying to crowd it out, but by making it easier to do legitimate business . Government must ensure the regulatory framework is inviting to investment but at the same time protects consumers and the public interest.
The government must work with the private sector to ensure that we have an exchange rate that is sustainable, competitive and is a true reflection of the value of the TT dollar against other major currencies.
The COVID-19 crisis has shown us that if forced to act, or forced to collaborate, the Government can do it and I hope that the lethargy of the past four and a half years does not return post COVID-19.
One of the challenges that we will have to fix post COVID-19 is the energy sector. The sector has served us well and sustained the country’s economy for decades.
Fixing the challenges of the sector is not in anyway a suggestion that the urgent diversification needed, cannot be achieved and ought not to be a major focus of government. But there is still life in the energy sector and T&T needs to make the best above the ground decisions so that it is sustainable and resilient.
The government has to find a solution to the ongoing natural gas challenges facing the country. It is true there are some projects like those Shell recently announced that will increase gas production. But it is not a short term solution and will take another three years.
With that in mind the downstream sector which has been suffering from natural gas curtailment for almost a decade and now higher gas prices in T&T cannot continue to operate in the present circumstances.
At the end of the day those petrochemical companies have to compete with similar operations in the United States that are enjoying cheap shale gas .
Is there then a possibility of T&T benefiting from low shale prices and should we see low shale prices in the US as the death of T&T’s petrochemical sector or an opportunity?
Jamaica has for some time become an importer of natural gas for its power generation and alumina industries. Is it possible to land natural gas here at a price lower than the close to US$4 that the NGC is demanding per mmbtu for its gas?
It other words, can we as a country meet the 500 million standard cubic feet of natural gas shortfall by allowing the private sector to import the gas and use it in their plants, lowing their per unit cost, ensuring they have all the gas to compete and at a price that is lower than what they can get from our local producers?
Perhaps it will also allow Atlantic LNG to get all the gas it needs and even open the door to further expansion downstream or the return of some plants that may be mothballed.
The time has come for the country to seriously study and consider if there is a possibility of using the low prices for natural gas in the US as an opportunity to strengthen our local petrochemical sector.
The numbers will have to be run and it cannot be a situation where the NGC sees it as an opportunity to charge such a large toll for use of its pipeline that the price becomes unworkable.
I also do not think the NGC should be the one importing the gas because that will return us to the same position we are in with a lack or transparency, with a company that enjoys a monopoly position and competes with its own customers.
COVID-19 has already taught us a lot of lessons, let’s hope one thing we learn is the need for the private sector to truly be the engine of economic growth.