June 6th 2020: Former Energy Minister Kevin Ramnarine expects energy companies operating in T&T to report historic levels of losses for 2020 and 2021 but sees the situation normalising in 2023.
Ramnarine, now an Energy Consultant, was the feature speaker last Thursday (June 4th) at a weekly Corporate Governance Zoom seminar hosted by the Caribbean Corporate Governance Institute (CCGI) addressing governance challenges in the energy sector. The audience included leaders in the banking, energy, manufacturing and services sectors.
Noting that the International Monetary Fund has forecast negative growth of 4.5% for T&T in 2020, Ramnarine said: “That seems conservative.” He also sees 2021 being the same as or worse than 2020 as local energy companies carry forward losses as deferred tax assets. This will have consequences for tax revenue in 2021. He also added that “Government may not collect any Supplemental Petroleum Tax from March 2020 into 2021” as oil prices should generally remain under US$50 per barrel and Supplemental Petroleum Tax is only payable if prices are above US$50 per barrel.
In addition, with T&T’s methanol and ammonia plants now among the highest cost producers in the world, they were among the first to shut down and, as prices go back up, they will be the last to start back, Ramnarine predicted. He also noted that the cost to produce a tonne of methanol in Trinidad and Tobago was around US$175 per tonne which made most methanol production at Point Lisas uneconomic in the current price environment. He added that currently 35 per cent of the plants at Point Lisas were either closed or idled.
He identified the challenges that government will have to eventually confront as including the future role of the National Gas Company, whose customers are disappearing one by one; the fiscal regime for exploration and production operators; and addressing the relationship between the NGC, T&TEC and TGU.
Speaking just one day prior to World Environment Day, Ramnarine cautioned that one critical issue the country must address at some point was energy efficiency and energy conservation. He noted that 15% of residences in T&T accounted for the majority of residential demand for electricity.
Despite the gloomy outlook he sees in the short to medium term, Ramnarine said: “I am an eternal optimist when it comes to Trinidad and Tobago.” We will survive this, he said. We’ve done it before in the 1980s after which we went on to 15 consecutive years of economic growth from 1993 to 2008, he noted.
Ramnarine sees enormous opportunities for Trinidad and Tobago in Suriname and Guyana, which do not have a deep water harbours and are in the early stages of developing their Deepwater hydrocarbon sectors. “Our greatest asset is the Gulf of Paria..., which is like a lake in the middle of the Atlantic Ocean,” he said. Adding that another significant asset was the ISCOTT dock which is underutilized, Ramnarine said maritime services could become a big job creator and revenue generator for the country but the strategic vision and planning were lacking.
The theme of Thursday’s Zoom seminar was: “Managing in the Perfect Storm - Governance Challenges in the Energy Sector.” Ramnarine said that to improve governance on State Boards, how those Boards were appointed and constituted had to change. He suggested that the Statoil (now Equinor) and Saudi Aramco models could be looked at in this regard. These allowed for the appointment of directors from various interest groups and for the appointment of foreign directors.
CCGI has been hosting weekly online seminars and discussions since the start of stay at home restrictions in March. Topics have ranged from “Governance Response to Covid-19,” “Embracing Digital While Mitigating the Risks,” “Partnering with Labour: Engaging Your Teams in the Battle Against the Pandemic,” and “Dealing with Difficult Boards.”
Non-profit organisations will be particularly interested in this week’s session, which will be held on Friday (June 12th). The topic is: “Avoid Non Compliance! Fulfil Legal Obligations Created by the Non Profit Organisations Act.” According to CCGI CEO Kamla Rampersad De Silva, the new Act was passed in June 2019, and requires new filing obligations which come into effect at the end of this month. For more information visit the CCGI’s website at: www.caribbeangovernance.org.
Please contact Kamla Rampersad de Silva, CEO-CCGI