Expect heavy energy sector losses over next two years—Ramnarine

One former Minister of Energy is predicting that there will be rough waters ahead for the local energy sector for another couple of years but says there will a light at the end of that dark tunnel.

Kevin Ramnarine, who served as energy minister under the People’s Partnership administration (2010-2015), expects energy companies operating in this country to report historic levels of losses for 2020 and 2021; but he 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) [www.caribbeangovernance.org], addressing governance challenges in the energy sector. The audience included leaders in the banking, energy, manufacturing and services sectors.

According to a release from the CCGI, the former minister describes as “conservative”, the International Monetary Fund’s forecast negative growth of 4.5 percent for T&T in 2020.  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. In addition, Government may not collect any Supplemental Petroleum Tax from March 2020 into 2021,” Ramnarine says, “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.”

He added: “T&T’s methanol and ammonia plants are now among the highest cost producers in the world, with the cost to produce a tonne of methanol here roughly US$175 per tonne. That makes most methanol production at Point Lisas uneconomic in the current price environment. These plants were among the first to shut down. Currently 35 per cent of the plants at Point Lisas are either closed or idled.”

“As prices go back up, they will be the last to start back,” Ramnarine predicted.

The former energy minister maintains the key challenges that government must confront eventually, include: 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, Kevin Ramnarine cautioned that one critical issue the country must address at some point was energy efficiency and energy conservation. He noted that 15 percent 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 admits to being optimistic about T&T’s prospects in the not too distant future.

“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, there must be change in how those Boards were appointed and constituted. He suggested that the Statoil (now Equinor) and Saudi Aramco models could be looked at in this regard, noting that these allowed for the appointment of directors from various interest groups, as well as the appointment of foreign directors.

CCGI CEO Kamla Rampersad De Silva reports that the Institute 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”.

The next session to be hosted by the CCGI is scheduled for Friday June 12th. It will focus on the legal obligations of non-profit organisations in light of the Non-Profit Organisations Act—passed in June 2019—which comes into full effect at the end of this month.