Tahar­qa Obi­ka

I note the re­cent com­men­tary on T&T’s eco­nom­ic per­for­mance (in­clud­ing in the last Sun­day Busi­ness Guardian), which leans sig­nif­i­cant­ly on po­lit­i­cal rhetoric. This has re­sult­ed in a dim and one-sided view of the econ­o­my. There are es­tab­lished lo­cal econ­o­mists and by com­par­i­son, new re­cruits adding their voic­es to the ques­tion of the lega­cy of the past decade. Key as­pects of the analy­sis are coloured with what can be de­scribed as hy­per­bole. The ef­fect is that some of the eco­nom­ic com­men­ta­tors’ pre­scrip­tions lack ob­jec­tiv­i­ty in their analy­sis. This ar­ti­cle treats those po­si­tions that may be at vari­ance with the da­ta and ex­am­ines the facts that lay at the heart of our eco­nom­ic per­for­mance over the past decade.

En­er­gy Sec­tor

vs Non-En­er­gy Per­for­mance

The Trinidad and To­ba­go econ­o­my has the dual is­sues of en­er­gy man­age­ment along­side non-en­er­gy sec­tor growth lead­ing to di­ver­si­fi­ca­tion. Two decades ago when I was in­tro­duced to the study of en­er­gy eco­nom­ics at UWI, the chal­lenge of the econ­o­my then was T&T be­ing a ma­ture hy­dro­car­bon province. Ac­com­pa­ny­ing this was the lim­it­ed spe­cial­i­sa­tion of our non-en­er­gy ex­ports with­in the Cari­com re­gion.

My first job af­ter UWI at the Min­istry of Trade back in 2006 charged me with the re­spon­si­bil­i­ty of seek­ing out com­pa­nies in­ter­est­ed in ex­port­ing ex­tra-re­gion­al­ly. A decade ago, whilst work­ing at a lo­cal com­mer­cial bank, the fo­cus was equal­ly to pro­mote ex­port op­por­tu­ni­ties be­yond the re­gion. The dri­ve to­ward non-en­er­gy sec­tor trans­for­ma­tion is a peren­ni­al one. There is an Ewe proverb from To­go in West Africa that trans­lates to mean, re­al knowl­edge is gained through ex­pe­ri­ence. The past two decades spanned sev­er­al ad­min­is­tra­tions and our ex­pe­ri­ence across all teach­es us that the en­er­gy sec­tor re­quires a new di­rec­tion. It was al­so ev­i­dent that there is much to do to en­sure our man­u­fac­tur­ers and ser­vice sec­tor stake­hold­ers tar­get mar­kets be­yond Cari­com.

The prob­lems in the en­er­gy sec­tor have not been unique to one ad­min­is­tra­tion. The Re­view of the Econ­o­my of the Min­istry of Fi­nance in Ap­pen­dix 1 il­lus­trates that from 2010 to 2015 en­er­gy sec­tor GDP fell by 11.5 per cent in con­stant 2000 prices. En­er­gy in­dus­try GDP fell from $36.8 bil­lion to TT$32.6 bil­lion in that 2010-2015 pe­ri­od with de­clines across the main en­er­gy sub­sec­tors of ex­plo­ration and pro­duc­tion ($2.6 mil­lion), re­fin­ing ($1.65 mil­lion) and petro­chem­i­cals (10 per cent). The chal­lenge of nat­ur­al gas sup­ply has been a peren­ni­al one for the past two decades. As a re­sult, the ques­tion is what has been done that will suc­cess­ful­ly re­turn gas to our do­mes­tic plants and bal­ance rev­enues in the in­ter­ven­ing pe­ri­od.

Pol­i­cy mea­sures for the en­er­gy sec­tor

From this writer’s per­spec­tive, four pol­i­cy mea­sures are ap­par­ent in the Gov­ern­ment’s ap­proach to right­siz­ing the re­turns from the en­er­gy sec­tor:

1) There was a shift from con­cen­tra­tion on the east­ern seaboard of the US and the Hen­ry Hub. This re­sult­ed in the des­ti­na­tion of our LNG be­ing di­ver­si­fied to in­clude West­ern Eu­rope and the Far East with the Japan/Ko­rea mark­er fea­tur­ing high­er prices al­low­ing for bet­ter net-back prices for LNG.

2) Pri­ori­tis­ing spend­ing on nat­ur­al gas pro­cess­ing above the crude re­fin­ing sec­tor. The long arc of his­to­ry may look favourably on this strate­gic de­ci­sion which re­sult­ed in the re­struc­tur­ing of Petrotrin. The pos­i­tive re­turn from Her­itage Pe­tro­le­um is one ben­e­fit of this;

The for­mer ad­min­is­tra­tion’s Min­is­ter of En­er­gy Kevin Ram­nar­ine is on par­lia­men­tary record lament­ing the heavy loss­es in the re­fin­ing sec­tor. How­ev­er, the for­mer regime could not take what would have been a ju­di­cious step, the fact that it may not have been pop­u­lar in­flu­enced their de­ci­sion not to act de­ci­sive­ly on the re­fin­ery;

The re­mod­el­ling of a small open pe­tro­le­um econ­o­my shift­ing from crude oil to nat­ur­al gas would re­quire a Gov­ern­ment with the ca­pac­i­ty to take the tough de­ci­sions. The cur­rent ad­min­is­tra­tion made what was un­doubt­ed­ly a dif­fi­cult de­ci­sion with the Pointe-a-Pierre re­fin­ery. In ef­fect the gov­ern­ment chose pru­dence over pop­u­lar­i­ty, long-term ben­e­fits over short-term po­lit­i­cal gain. It is im­por­tant to note that in the re­gion, re­fin­ery clo­sure is not a strange oc­cur­rence, among the lat­est in­cludes clo­sures be­ing in Cu­ra­cao in 2018 and St Croix in 2021;

3) Find­ing new mar­kets for en­er­gy com­pa­nies head­quar­tered in T&T whether state or pri­vate-owned. The par­tic­i­pa­tion of the Na­tion­al Gas Com­pa­ny - via its sub­sidiaries - in the en­er­gy sec­tor in Africa is a tes­ta­ment to the fruits of this strat­e­gy. This is ev­i­denced by the Tech­ni­cal Ser­vices Agree­ment be­tween Phoenix Park Gas Proces­sors Ltd (PPG­PL) and The Gas Gath­er­ing Ltd (TG­GL) of Ghana. In 2022 TG­GL was award­ed a con­tract by the Ghana Na­tion­al Gas Com­pa­ny to con­struct Train 2 of that na­tion’s gas pro­cess­ing fa­cil­i­ty. Fur­ther­more, the gains made by pri­vate T&T head­quar­tered en­er­gy com­pa­nies in neigh­bour­ing Guyana is al­so a tes­ta­ment to a new mod­el for our par­tic­i­pa­tion in the glob­al en­er­gy busi­ness; and

4) the gov­ern­ment fo­cused on iden­ti­fy­ing new sources of gas. An ex­am­ple of this is

the de-uni­tis­ing the cross-bor­der field with Venezuela at Lo­ran-Man­a­tee. This was fol­lowed by Shell in Ju­ly of 2024 an­nounc­ing its fi­nal in­vest­ment de­ci­sion with pro­duc­tion to come on­line in 2027. In Ju­ly 2024, the Min­is­ter of En­er­gy al­so se­cured a li­cence from Venezuela for the cross-bor­der field Cocuina with at­ten­dant in­volve­ment by BP and NGC. We all ap­pre­ci­ate the sig­nif­i­cance of the two-year OFAC li­cence se­cured in May 2024 which runs un­til May 2026.

These strate­gic de­ci­sions by the Gov­ern­ment and the abil­i­ty to ex­e­cute have now put T&T in a favourable po­si­tion where we are im­mu­nised from the geopol­i­tics sur­round­ing cross-bor­der fields with Venezuela. Reach­ing first gas from this field in 2027 will pro­vide a much need­ed gas sup­ply re­prieve that is over two decades in the mak­ing. One pos­i­tive ex­ter­nal­i­ty of a re­turn of gas sup­ply would be the forex avail­abil­i­ty.

Recog­nis­ing rhetoric

The for­mer Min­is­ter of En­er­gy would have every­one be­lieve they have the panacea to cure the en­er­gy sec­tor yet their record speaks dif­fer­ent­ly. In De­cem­ber 2014, Kevin Ram­nar­ine is­sued an of­fi­cial state­ment on Petrotrin’s re­fin­ery fail­ures, cit­ing clo­sures of over 60 re­finer­ies world­wide in what was a lamen­ta­tion about the poor prospects of crude re­fin­ing.

Ac­cord­ing to the Cen­tral Bank da­ta cen­tre, crude oil pro­duc­tion stood at 2.6 mil­lion bar­rels per month as at De­cem­ber 2014 and de­clined to 2.3 mil­lion bar­rels per month when they demit­ted of­fice in Sep­tem­ber 2015. This meant that an in­creas­ing per­cent­age of the re­fin­ery through­put was ac­count­ed for by im­port­ed crude, which was a prob­lem on its own.

When the for­mer ad­min­is­tra­tion en­tered of­fice crude oil pro­duc­tion was hov­er­ing above 3 mil­lion bar­rels per month, ef­fec­tive­ly pro­duc­tion fell by rough­ly a quar­ter dur­ing their tenure. There­fore, the state­ment by the for­mer Min­is­ter of En­er­gy amount­ed to a mere pub­lic re­la­tions gim­mick as they failed spec­tac­u­lar­ly to re­vive crude pro­duc­tion. The de­ci­sion to bring the re­fin­ery back on­line will re­ly on in­ter­est from an ex­ter­nal part­ner as the trea­sury can­not take on the bur­den of such an en­deav­our at this time.

On the gas side, the for­mer ad­min­is­tra­tion’s record is no bet­ter. This begs the ques­tion; What track record are they re­ly­ing on to en­gen­der con­fi­dence that they can per­form any bet­ter if giv­en a sec­ond chance to gov­ern? On the ques­tion of find­ing oth­er in­ter­na­tion­al op­er­a­tions for NGC, such as in Ghana, the for­mer ad­min­is­tra­tion by a cock­tail of ab­sence of pro­to­col mixed with dis­re­gard for a Ghana­ian del­e­ga­tion ef­fec­tive­ly lost that sig­nif­i­cant deal. It took the cur­rent ad­min­is­tra­tion eight years to achieve the agree­ment with Ghana Gas.

T&T’s non-en­er­gy sec­tor is grow­ing

Trinidad and To­ba­go’s non-en­er­gy sec­tor has shown re­silient growth, re­sult­ing in an over­all growth of 6.5 per cent from 2015 to 2024. Since the pan­dem­ic in 2020, the non-en­er­gy sec­tor has al­so grown by $9.6 bil­lion. This achieve­ment is sig­nif­i­cant as it high­lights the re­silience and strength of our econ­o­my be­yond the en­er­gy in­dus­try. The fact that the econ­o­my has grown post-pan­dem­ic is due to the non-en­er­gy sec­tor.

Eco­nom­ic com­men­ta­tors in­stead of down­play­ing the sig­nif­i­cance of the man­u­fac­tur­ing sec­tor ought to send pos­i­tive sig­nals to en­cour­age in­vestors in that sec­tor by out­lin­ing which val­ue chains would ben­e­fit from in­ward in­vest­ment. Di­ver­si­fi­ca­tion is not akin to an on-and-off switch, but is rather a process that oc­curs over a gen­er­a­tion and re­quires all hands on deck.

Non-en­er­gy growth ex­plained

Avail­able da­ta for sub­sec­tors in the non-en­er­gy sec­tor are avail­able in the Re­view of the Econ­o­my up to 2022. Un­der this ad­min­is­tra­tion, since 2015, we have seen mea­sured growth in the non-en­er­gy man­u­fac­tur­ing sec­tor from $8.7 bil­lion in 2015 to $10.24 bil­lion by 2022 show­ing a ro­bust re­cov­ery from the pan­dem­ic.

Da­ta in 2024 on the food, bev­er­ages and to­bac­co prod­ucts seg­ment of the man­u­fac­tur­ing sec­tor demon­strates this growth as in 2024 it is es­ti­mat­ed to have grown by $2.7 bil­lion or 53 per cent. This is tremen­dous growth. The man­u­fac­tur­ing sec­tor via syn­er­gies with oth­er sec­tors such as agri­cul­ture and con­struc­tion cre­ates jobs and sup­ports as­so­ci­at­ed in­dus­tries such as en­ter­tain­ment and fi­nan­cial ser­vices. An­oth­er key sec­tor, agri­cul­ture ex­pand­ed by 25 per cent in 2022 when com­pared to 2015.

De­spite the glob­al chal­lenges, par­tic­u­lar­ly the COVID-19 pan­dem­ic in 2020, which caused a tem­po­rary yet sig­nif­i­cant dip in non-en­er­gy GDP, the econ­o­my re­bound­ed ro­bust­ly, un­der­scor­ing the gov­ern­ment’s strate­gic ap­proach.

For in­stance, 2019 saw over $3 bil­lion in non-en­er­gy sec­tor growth, even af­ter the clo­sure of the pe­tro­le­um re­fin­ery in 2018, prov­ing that the non-en­er­gy sec­tor is strong and grow­ing. The re­fin­ery clo­sure on­ly had a mar­gin­al im­pact on the over­all en­er­gy sec­tor GDP with an ex­pect­ed de­cline in 2018 in re­fin­ing. There­fore, the claim that the econ­o­my col­lapsed af­ter re­fin­ery clo­sure is ill-in­formed and may be noth­ing short of hy­per­bole.

Econ­o­my has two sides

Com­men­tary on the econ­o­my must be bal­anced to al­low per­sons to form an ob­jec­tive view. Just as we dis­ag­gre­gate the man­u­fac­tur­ing sec­tor be­tween non-en­er­gy ver­sus en­er­gy man­u­fac­tur­ing to iden­ti­fy the work of in­sti­tu­tions such as the T&T Man­u­fac­tur­ers As­so­ci­a­tion in ex­pand­ing out­put, it would be disin­gen­u­ous to state the econ­o­my is weak­er be­cause over­all GDP de­clined. This is be­cause we know that the non-en­er­gy side is re­silient and has ex­pand­ed over the past decade de­spite the chal­lenges of the pan­dem­ic. It is the en­er­gy sec­tor which re­quires fo­cus and most of the com­men­tary is ef­fec­tive­ly silent on the mea­sures tak­en to ad­dress the gas sup­ply and gas rev­enue mod­el.

In­vestor con­fi­dence and pre-pan­dem­ic per­for­mance lev­els

One UWI econ­o­mist claimed the econ­o­my was char­ac­terised by low in­vestor con­fi­dence and eco­nom­ic un­cer­tain­ty, cit­ing the de­cline in over­all GDP. How­ev­er, an econ­o­my where the non-en­er­gy sec­tor has grown since the pan­dem­ic to re­turn to pre-pan­dem­ic lev­els and ex­ceed those of 2015 can hard­ly be de­scribed as one with low in­vestor con­fi­dence.

The claim by the econ­o­mists at UWI that the econ­o­my has not re­turned to pre-pan­dem­ic lev­els means they are not will­ing to sep­a­rate the en­er­gy from the non-en­er­gy sec­tor in their analy­sis. To bor­row an ex­pres­sion from a friend in the le­gal pro­fes­sion, they are hid­ing be­hind the ‘fig leaf” of an ar­gu­ment in their crit­i­cism of the econ­o­my.

FDI flows and fis­cal man­age­ment

For­eign Di­rect In­vest­ment flows are usu­al­ly a fea­ture of the en­vi­ron­ment in the en­er­gy sec­tor, which is im­pact­ed by glob­al prices of which we are price tak­ers and the fact that we are a ma­ture hy­dro­car­bon province. It serves no pol­i­cy­mak­ers to take FDI flows as an in­di­ca­tor of the over­all econ­o­my when it large­ly tends to re­flect the for­tunes in the en­er­gy sec­tor. It is about time we dis­ag­gre­gate our FDI flows along the lines of en­er­gy FDI ver­sus non-en­er­gy FDI. This would be of greater sig­nif­i­cance to pol­i­cy­mak­ers and cur­rent and po­ten­tial in­vestors in the non-hy­dro­car­bon sec­tor.

On the ques­tion of fis­cal man­age­ment, one would strug­gle to find a Caribbean econ­o­mist who would ad­vo­cate against the ex­pan­sion­ary fis­cal pol­i­cy of the gov­ern­ment giv­en the need to spur eco­nom­ic growth. The spend­ing of the gov­ern­ment has fa­cil­i­tat­ed re­silience and growth in the non-en­er­gy sec­tor as ev­i­denced by the growth of 6.5 per cen since 2015. The ad­just­ments made in the en­er­gy sec­tor should reap re­wards in the next five-year plan­ning hori­zon and with that ris­ing tide the ex­pect­ed progress in the non-en­er­gy sec­tor should sup­port con­tin­ued growth. One pos­i­tive ex­ter­nal­i­ty of a re­turn of gas sup­ply would be the forex avail­abil­i­ty.

The fact that the econ­o­my has grown post-pan­dem­ic de­spite de­clines in the en­er­gy sec­tor is a tes­ta­ment to the work the gov­ern­ment has put in to sup­port eco­nom­ic progress. The growth of the non-en­er­gy sec­tor is ev­i­dence that the poli­cies of the gov­ern­ment are reap­ing re­wards. This demon­strates that the econ­o­my is in­deed re­spond­ing to the need to re­bal­ance. As­sess­ment through ob­jec­tive lens­es how­ev­er re­mains es­sen­tial. The so­lu­tion lies in build­ing the en­tre­pre­neur­ial spir­it among our cit­i­zen­ry to build brand and in­dus­try T&T.

Tahar­qa Obi­ka is a for­mer trade and in­vest­ment con­sul­tant with Min­istry of Trade and In­dus­try. He is a for­mer Sen­a­tor in the eleventh Par­lia­ment and for­mer tem­po­rary Sen­a­torin the twelfth Par­lia­ment.