Need to diversify economy
Thursday, August 2 2012
WHILE the marked increase in the production of liquefied natural gas (LNG) in the United States which, understandably triggered a decline in US LNG imports, has impacted on Repsol’s LNG sales, none theless recent reports indicating that Repsol was reviewing its LNG assets in Trinidad and Tobago (TT) , Canada and Peru have comeas a surprise.
Trinidad and Tobago, through TT based Atlantic LNG in which Repsol is the major shareholder, had for several years supplied the United States with more than 72 percent of its LNG imports. Within the past two years, however, the bulk of exports of TT produced LNG had been shifted to Latin America and today TT’s LNG exports to the US account for approximately 25 percent of that country’s LNG import market.
There has been stepped up LNG production in Latin America. This meant that any large direct sales of liquefied natural gas by Repsol would have been hit. In the meantime, there has been a contraction of demand for liquefied natural gas by many countries, worldwide, as a result of the ongoing international financial crisis which has seen, for example, several countries in Western Europe go into recession or near recession and faced with a troubling debt crisis.
Meanwhile, Energy Minister Kevin Ramnarine, looking beyond the financial crisis has stated that should Repsol indeed decide todispose of its interest in Atlantic LNG, the People’s Partnership Government might acquire the assets either through the State owned National Gas Company (NGC) or another entity. Given that the US continues to step up its production of liquefied natural gas through the exploitation of shale gas, and that several countries in West Africa and South America are among those seeking to develop significant production levels of LNG, both for internal use and export what would the short and medium term effects be both for Atlantic LNG and this country should Repsol withdraw?
A factor which can not be overlooked is that TT’’s natural gas reserves may very well run out in the second half of this century, this country’s share of the Loran and Manatee gas fields notwithstanding. The earning of revenue which would assist in paying for Repsol’s share of Atlantic LNG is crucial.
While the Petroleum Company of Trinidad and Tobago Limited (Petrotrin) is insisting that its domestic oil production has increased, nevertheless coming as it has virtually on the heels of “the Jubilee discovery” we would prefer to adopt a conservative approach, particularly as Government has not been able to provide an estimate of the revenue it believes the “Jubilee find” will bring.
In the meantime, there is an increasing need to put in place measuresto effect the clearly essential diversification of the TT economy.
While a major conference on diversification was held recently, we need to remind that an equally major seminar on”Building a Strategic Framework for Capital Markets Development in TT - The Way Forward” was held on December 15, 2000. Business Day asks the question: Are we really serious about diversifying the economy of TT. What has Government done and what is Government doing, realistically, to effect the achieving of diversification?
We wish to point out that we are not specifically targeting the People’s Partnership Administration for any failure to act on the diversifying of the TT economy. Indeed, all of the country’s governments to date must share in the blame for merely paying proverbial lip service to economic diversification. In addition, the timidity of the private sector has not helped nor has the the continued global economic downturn and the uncertainty about when it will end.
Government, however, should consider offering special tax incentives in a bid to encourage initiative, clearly necessary if diversification of the economy is to achieved. Perhaps the only occasion in the country’s history that the private sector appeared to seek to convince itself it was on the road to diversifying the economy was in the early 1950s, when import substitution was being promoted and, on reflection, that was unamusingly absurd.