Over the last two weeks, we have had the benefit of several reports that increasingly give us a clearer picture of our economy and our economic prospects.
We have had the Central Bank’s Economic Bulletin for January 2022, we have had the revelation that natural gas curtailment will continue in 2022 and that bpTT’s natural gas production remains significantly challenged.
We have also had the numbers from the Ministry of Energy that show even in a time of high commodity prices the country is missing major opportunities to earn revenue and hard-earned foreign exchange.
And finally, we had the revelation that the National Insurance Board and the Ministry of Finance were in discussions about the possibility of increasing the retirement age from 60 to 65 as we learnt that for the last two years the NIS contributions and investment incomes were insufficient to cover the cost of the benefits being paid out plus the administrative costs of the NIB.
All of these point to an economy facing significant challenges and even at a time when its main export commodity is fetching very good prices.
Its lack of prudent action over the last 15 years means that the country is in no position to reap the rewards, and worse, is in a situation where increasingly there must be worry about the government’s ability to find a soft landing to the now six-year depression we are in.
There has been for a long time culture in the country of turning a blind eye to the challenges that confront us. A sense that if we do nothing and hope everything will be ok, then the problems will be solved.
The challenges of the NIB have been exacerbated by the COVID-19 pandemic as the economic opportunities and earnings from investment have fallen, the number of people employed and paying NIS have also been reduced and with an ageing population the total amount of benefits are increasing.
Baring the COVID-19 pandemic, the actuarial reports going back more than a decade have all painted a picture of a smaller number of younger people being made to carry the burden of an older generation.
We should be happy that baring the risk of murder in this country, people are generally living longer lives, as improved medical care and greater knowledge of the causes and progression of diseases allow us to cheat death for a little longer.
That has however created a conundrum of how do we support people who have earned the right to their benefits, through their contributions, while at the same time ensuring its viability.
The issue of increasing the retirement age has been on the table for many years, as has been suggestions of increased contributions and many other changes. What have we done?
Kicked the can down the road, relying on the revenue from the investments to solve what is a fundamental challenge. In other words, do nothing and hope for the best.
The chickens are coming home to roost and yet the Minister of Finance is still happy to tweet about the investment earning of the NIB and not deal with the challenge of how do we find a way to ensure people who are healthy enough, interested in working continue to do so longer while not hurt the process of others progressing through their careers.
It is not an easy fix but to pretend there is no urgent problem is not the solution.
Oil and gas prices have been at their strongest since 2014, the last year of economic growth in T&T.
At that time natural gas production was almost 4 billion cubic feet per day (bcf/d), crude production was closer to 100,000 barrels per day and all our methanol and ammonia plants were operating. The lay of the land is now significantly different.
Natural gas production is averaging around 2.5 bcf/d, several methanol and ammonia plants are down, Atlantic LNG Train 1 is dead and our export of that commodity is down 48 per cent.
So the higher prices may help reduce the impact of falling production but it does not change what is a dire situation.
The truth is that a lot of the problems that have led to the production decline go back to the then Patrick Manning administration and was continued into the Kamla Persad-Bissessar regime and the present government has had major failures which we will be made to pay for, for years to come.
The failure of the Patrick Manning administration to recognise its uncompetitive fiscal measures for its bid rounds led to complete failure.
Not only that the issue of Petrotrin and its strategic pivot to focus on refining and marketing and not on exploration and development meant the collapse of infrastructure at the then Trinmar and the insufficient expenditure on what are essentially stripper fields but it left the company with the most amount of acreage unable to exploit it properly.
This was compounded by the UNC when it renewed Patrotrin’s licenses to all its acreage, seemingly without a thought of getting the private sector involved in the exploitation of what we all admit is acreage where modern technology could make a major difference in the production profile.
If we want to see how bad that decision was, just look at the success of Touchstone on land and we can see that both the UNC and PNM failed the country and the sector.
The UNC did, however, get bid rounds going and that has already led to the discovery of at least 5 trillion cubic feet of natural gas by BHP but that is deepwater gas and very expensive to produce. One has to see whether it will be developed and if it can be competitive.
The failure of the Rowley administration to have bid rounds for seven years is a colossal failure and with the world moving quickly to net-zero carbon, the reality is that this bid round is unlikely to attract new players.
The window and the appetite are just not there. The failure so far to find big oil in the deepwater has not helped the economics and while we may see the BHP and Shell of this world showing some interest, there is a major question on if the time has run out for the deepwater bid round to be very successful.
What is likely to have a lot of interest is the onshore bid round.
Touchstone has announced a major oil find and significant gas finds and this should allow for small to medium-sized operators to move quickly to find and develop the hydrocarbons we know are there.
T&T’s energy sector still has a lot to offer the country but the time is running out and kicking the can down the road is not a solution.
But who would bet against our government doing just that?