Prime ministers speech

18
Prime Minister address to theGeological Society held at the Trinidad Hilton Hotel on November 14, 1992 at the Annual Dinner/Dance & Awards Ceremony,

In my profession as Well as in the oil industry which means so much to Trinidad and Tobago, Clear thinking is a prerequisite. Clear thinking has led to a point of view here that this country depends too much on oil and gas and petroleum. And that we ought to seek to diversify the economy away from oil and gas, to ensure that the non-oil sector plays a more significant role in the economic and social life of Trinidad and Tobago.
And while Mr. Chairman that is the consummation to be wished, no country like Trinidad and Tobago could ever behave as though it were a crime to be seized of resources of oil and gas. Those are the resources that we have and it is on the basis of those resources in the first instance that we have to strive to bring about the standard of living to which the society aspires.
Not too long age, while we spent our period in the political wilderness, clear thinking. Mr. Chairman, members of the Geological Society, brought is to the point where we were able to examine some of the major constraints to the proper conduct of petroleum affairs in Trinidad and Tobago.
I want to put it to you that the need for expeditious decision making on the one hand, and the need to ensure that while we seek to diversify into the non-oil sector we do not interpret that to minimize the contribution that oil and gas can make to the economy of Trinidad and Tobago. We came to the conclusion that new arrangements would have to be necessary to ensure that we maximize the returns from a most important natural resource.
The Government today, therefore, is organized in a manner that seeks to do just that. In terms of institutional arrangements, there is a very important sub-committee of the cabinet - it is a Standing Committee on petroleum, comprised as it is of six Ministers of Government and a number of leading personalities in the energy sector, getting together as a committee, acting as we do as a Clearing House for major policy decisions in the energy sector.
Another aspect to that, is the recognition that, if oil and gas plays such an important role in the economic life of the country, then we ought to deal with it in a manner that recognizes that, and above all, we should seek to avoid any situation which suggests that the energy policy of the country would be the subject of any major adjustments, as Governments in the country change.
And so, as we seek to expedite the decision making process, we also seek to de-politicize energy policy in a way that protects citizens, so that even with the coming of different political pastors, we at least have some agreement on the general direction in which our petroleum should go.
We are committed to a process of consultation with the opposition in the energy sector, hoping, Ladies and Gentlemen, that by this mechanism, we can reach a broad consensus on the energy policy and that the country is not asked to pay any price as a consequence of shifting political fortunes. As the energy sub-committee arrangement goes in place, I am pleased to report that it has had the desired effect of expediting the decision-making process in oil.
Quite recently new arrangements have been entered into in respect to the South East Coast Consortium. Those arrangements involve a company called ENRON. And I think that it is a credit to the new arrangements that from start to finish the entire process of farming out that license took a period of three months.
That is important, ladies and Gentlemen, because, as I said earlier, clear thinking brought us to the conclusion that we needed to be able to move much more rapidly than we have moved in the past in taking decisions that relate to the energy sector. In the same way, by this mechanism, we committed ourselves quite early to two significant mergers in the energy sector.
One is the assimilation of the National Energy Corporation by the National Gas Company, and the second, and I use words slightly differently in this case, is the merger, not the assimilation of one by the next, but the merger of the two major companies, Trintoc and Trintopec. It is important that one points out that it is a merger and a new company is to be formed, so that we will understand that a consequence of that will be equity in the process of allocation of responsibilities which necessarily must be a consequence of bringing any two companies together. We have made errors in the past in that kind of arrangement. We recognize it and we are seeking to avoid a repetition of those errors at this time.
The merger arrangements are well on track, and in fact, the new Board of Directors of the new company will be named very shortly. The Board of Directors has already been identified and in the interest of a smooth transition, the Boards of both Trintoc and Trintopec will be changed. Changed in such a way to ensure that one Board runs both Trintoc and Trintopec and the new company. The Cabinet will consider the matter on Thursday coming and we will be in a position to announce very shortly the new Board of Directors of the new company, and incidentally, the new name of the company which too has already been decided upon.
More and more as we look at what is emerging here in Trinidad and Tobago we are comming to the conclusion, not only that we have more gas resources than oil, and therefore there needs to be a major shift in the energy balance of the country from oil to gas; but also we are realizing that we are in possession of gas resources far in excess of the resources that we initially anticipated that we have, and certainly far in excess of the 14 or 17 trillion feet of proven and discounted possible and probable reserves. That realization has brought about at least one major shift in the thinking of the Government.
I was one of those who was by no means subscribing to the view that file SECC (South East Coast Consortium) formed a major part of the energy future of the country. That used to be a point of view that I held sometime ago, and then we modified that, taking into account what we knew at the time, reserving as I thought it would have been necessary, east coast gas production liquids coming from that for domestic conversion, leaving north coast gas production, which is more expensive, for export if necessary. Today, the position of the Government is that we are committed to liquefied Natural Gas. We are committed to it with no restriction being placed on the source or sources from which that gas has come.

This week, the Minister of Energy is going to leave Trinidad and Tobago. He goes to the United Kingdom, together with representives of the Natural Gas Company, with that particular message, specifically to British Gas, the other Company that was involved in the discussions to provide the next tranche of gas supplies for domestic industry. The message being that we are committed to an LPG project and that we see British Gas and the development of the Dolphin Field as an integral part of such a project, seeking, as we will be, to bring such a project on stream within a period of about five years.
Many people, express gloom and doom about the industry here. I have never been one of those persons. I remind you, that somewhere around 1982 or it might have been 1983, in a different capacity, I had expressed the point of view that, on a statistical basis, we are due to find a large oil field in Trinidad and Tobago and my view was that the oil field was to be found deep and on land. What I did not say at the time, Ladies and Gentlemen, is that statistical oil brings statistical money. We can't spend that.
Today we have the Southern basin Consortium, and recently we were discussing the new fiscal arrangements in oil, the tax arrangements which everybody in this country knows is a necessary prerequisite to the stimulation of activity, job creation and of course, the possibility of discovering whatever reserves we have. It was very interesting that, at that time, the oil companies involved in interpreting the seismic work that has been done, considered it well, we may have some structures that could be of interest, we are not sure and so on, and therefore had to take, or we were expected to take, a conservative view of the possibility of discovery and production in setting up the tax regime. The minute the law was passed in Parliament, we got a different point of view - well, things are looking a little better than we first thought.
Whatever it is, Ladies and Gentlemen, it is the source of tremendous optimism at the level of the Government. Drilling is expected to take place next year. There are a number of major structures in the Southern Basin that have to be tested and we will see in due course, whether the prediction of the 80's was right or whether, Ladies and Gentlemen, prophets of gloom and doom will prevail on this occasion. I myself believe that there is every reason to be optimistic in respect of the Southern Basin Consortium, and indeed there is also reason for optimism as a deep well is drilled in the Samaan field.
And that is important in the context of the difficulties that the country faces, particularly, high debt service. Six hundred million dollars this year, US, six hundred million dollars next year, or just under that in the following year and then it goes down somewhat. We have gone through the first year, we have just been able to conclude arrangements to float a one hundred million US loan on the Eurobond market. Part of the financial arrangements into which Government is entering to, above other things, satisfy our debt liability.
But then we have a particularly difficult two years ahead of us, as indeed 1992 has been a particularly difficult year. Two in ore years of great difficulty, as a result of die need to service a very high debt, but if we are able to do it, as we believe we are, we confidently expect we will be able to, we believe that brighter days will be ahead of us.
One of the ways in which we feel we can service that debt is by entering into a policy of divestment in the energy sector. We have no choice, Ladies and Gentlemen, even if we wish to go a different route, and I tell you we don't. Even if we wished to go a different route, the need to service debt dictates that some of the savings of the country, saved as they have been by investments in enterprises that we anticipated would have been profitable in due course, must now be converted into cash to deal with debt service.
The whole divestment policy inside and outside of the energy sector, it has already started, and there is no need to go into it. But the Bank, and I think it is First Boston in respect of Fertrin and Urea, has had some encouraging news to bring to the Government of Trinidad and Tobago, in terms of bids that they have received when they were associated with die signing of the Eurobond loan just a day or two ago.
But we divest also, Ladies and Gentlemen, for other reasons. In 1963, while I was still a student at Presentation College, the best school of all, the greatest (see how many people agree with me), one of the executives of Shell Trinidad Limited at die time, came to give a lecture to die school and raised this question incidentally, '63 was just alter OPEC had been formed and you know the thinking that was taking place around the world at that time - should a small developing country divert scarce financial resources to expensive and risky oil exploration ventures, rather than channel those resources into programmes that could impact directly on die social services in the country and on die quality of life of its citizens? That was the question. Those were die years of nationalism, and of course, everybody interpreted that to mean well, yes, if it is that the OPEC countries can do it, why can't we? and there was a rush of investments around the world in the oil industry, and particularly so after the oil proce shock of 1973 and the second one of 1979-1980.
Today 1992, so many years later, in Trinidad and Tobago we are able to answer that question with greater clarity. I draw your attention simply to the financial position of Trintoc and the financial position of Trintopec and to let you know that the two joint venture arrangements in which both these companies have entered, it is the State Oil companies that have constituted a break or disincentive, as it were, to the exploration effort because of the shortage of finds.
That is the reality of that situation, and the answer to the question that was asked as far back as 1963, as far as I am concerned, and as far as the Government of Trinidad and Tobago is concerned is - No, small developing countries are better off spending money on operations that are not as risky as oil exploration, and that thinking is also central to the divestment policy on which the Government of Trinidad and Tobago is today embarked.
Divestment policy has different angles to it in respect of the refining sector. You have a straight situation where we have met a refinery which is to be upgraded to about 165,000 barrels a day capacity, in circumstances where domestic oil production can only guarantee just under half of that. How are we to satisfy the rest of the diet of that refinery, recognising that you need a full throughput capacity to ensure viability? How are we to do it? Could we survive purely on the basis of making purchases on the spot market or does it give the country a greater measure of security if we were to enter into arrangements with a joint venture partner who is able to bring something into the arrangement? Bring the 80,000 barrels a day or so crude together with some kind of secure market to guarantee that the expenditure of US$260 million that is being made in the first instance, because further upgrading is required after that, so that the expenditure should not have been wasted and that there can be a return on the investment over a period of time?
That is the Pointe-a-Pierre refinery. What about Point Fortin? Where does it fit in, Ladies and Gentlemen? That has been a matter that has been discussed quite recently with the Venezuelan Authorities, and the Venezuelan State Oil Company "Petroles de Venezuela" is at this time examining the possibility of that refinery being identified for upgrading, in the context of the discoveries and the programme that the company is embarking on, in respect of heavy oil production in Venezuela.
So that, all in all, ladies and gentlemen, we are in a very active period in the energy sector. As oil production declines more and more on land, the country and the companies involved will have to go into lease operatorships and farm outs. There is no question about it. There are economic considerations here and the policies of the Government will be addressed in such a manner as to facilitate these arrangements, which have already demonstrated a capability to achieve some of the objectives that we as a society have set for ourselves.
Much of the things of which I have spoken this evening, together with others, will find their way in a document that is about to be made public. It is the Energy Policy of the Government of Trinidad and Tobago. The Budget is next week Friday and in the Budget Debate it is expected that that document will be laid in Parliament as a Green Paper and be available for public comment. After appropriate comments from the public it will be suitably modified and converted into a White Paper and adapted as the policy of the Government of Trinidad and Tobago.
Ml in all, ladies and gentlemen, there are two messages that I am trying to bring you. The first is that there is indeed a shining light on the horizon. Secondly, the economic life of the country, particularly the energy sector, is in very capable hands.
Permit me Mr. Chairman, to congratulate the outgoing President Mr. Azad Khan and his Executive on the work which he and his Executive have done for the Geological Society of Trinidad and Tobago, and I want to wish God speed to the incoming President, Mr. Eric Williams, and his Executive, and I hope that you all have a very successful term of office.
Thank YOU and may God bless you all.

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