In his feature speech at the Trinidad and Tobago Energy Conference 2016, the Prime Minister, Dr. The Honourable Keith Rowley, stressed the importance of diversification as one way of weathering the effects of the current downturn caused by the precipitous drop in international commodity prices. The Prime Minister urged companies both in and out of the energy sector to take the initiative and seek opportunities for expansion outside of Trinidad and Tobago. The Prime Minister’s words echo the message that has been consistently given by the Energy Chamber for the need for the energy sector to diversify Trinidad and Tobago’s exports away from commodities towards services.
Diversification has been frequently discussed in Trinidad & Tobago for many decades, but despite this frequent discussion there has been limited growth of non-energy sector exports. Much of the discussion about economic diversification in Trinidad and Tobago has been based on the idea that a diversification strategy should be driven by Government support of new and emerging sectors. By contrast, the Energy Chamber has promoted the idea that the diversification strategy needs to focus on established firms who are able to compete in international markets.
Over the years numerous consulting studies have identified the energy services sector as having a core group of specialized and experienced firms who have a great potential to be internationally competitive and break into new export markets. An Inter -American Development Bank’s private sector assessment report identified the energy services sector as having the greatest potential to develop international markets and recommended that diversification policies should concentrate on assisting firms in this sector. Until very recently the policy on diversification has generally been to ignore the energy sector if you wanted to drive diversification. The mandate of key Government agencies driving business development specifically excluded any firms working in the energy sector.
This idea is based on a two misconceptions. Firstly it is based on the idea that we should be diversifying away from the energy sector as a whole, rather than trying to diversifying away from reliance upon a handful of commodities for our export revenue. The energy sector holds the promise to diversify our exports through both the export of energy services and the export of more complicated products downstream of the existing petrochemical plants. For many years, the Energy Chamber has been promoting the idea energy sector must be an integral part of the diversification thrust.
Secondly, the concept of ignoring the energy sector is based on the assumption that the energy sector comprises large multi-national or state-owned production companies and that these firms do not need any Government support to develop export markets. While the majority of gross domestic product from the sector is accounted for by a few large companies, the majority of firms within the sector are actually small to medium-sized service companies and contractors, typically family-owned businesses.
These are the firms who sell services to the large multi-national and State-owned production companies and who account for the majority of people employed in the energy sector. As the sector has never had trade barriers preventing foreign competition these firms have had to be internationally competitive just to survive and they have had to develop sophisticated management systems in order to do business with the multi-national energy companies.
There has been a long-standing tradition of Trinidadians migrating to work for energy service companies in other parts of the world and Trinidadians have developed a very strong reputation for their technical abilities in the energy sector, especially in services related to drilling. Furthermore, Trinidad & Tobago has developed a strong international reputation for its ability to effectively develop a world-class gas-based industrial sector and Liquefied Natural Gas (LNG) export sector. This reputation means that the Government of Trinidad & Tobago is often approached by other countries seeking advice on the development of their gas-based industries. Inevitably this means significant opportunities for consultants, companies and training institutes associated with the expansion of the Trinidad & Tobago gas industry. Both of these factors mean that Trinidad & Tobago already has a good international reputation in the energy services sector, which can be built upon to develop a Trinidad & Tobago energy services sector “brand”.
Leveraging on this brand, the Energy Chamber has led many outgoing trade missions to various countries. To date the Energy Chamber has visited Suriname, Guyana, Cuba, Nigeria, Ghana, Uganda, Tanzania, Kenya Rwanda, Brazil and French Guiana. Dax Driver, CEO of the Energy Chamber explains that the goal has been to assist strong local companies to export their services regionally and internationally. He explains that the Energy Chamber “firmly believes that the potential and existing strength of the Trinidad & Tobago energy services sector can be further developed to create and sustain an industry that can export services everywhere in the world”.
For the Energy Chamber, trade missions are just one part of the bigger picture of promoting energy services internationally. The Energy Chamber also sees that having competitive local companies is a pre-requisite for being able to export. The Energy Chamber has implemented several initiatives to assist local companies to be more competitive in order to fully benefit from international opportunities, including the Safe to Work initiative, competency development initiatives, a learning centre focusing on HSE training and an initiative to improve corporate governance practices in member companies.
After many years of lobbying by the Energy Chamber, the energy services sector was recognized as a key sector for diversification of exports in the official Government planning documents of the previous administration (especially the plans developed by the Economic Development Board). It was also recognized as a key sector for export growth by ExporTT. This change in policy meant that for the first time locally-owned firms in the energy services sector are eligible for direct support from the Government export promotion agency and we do hope that this recognition and support continues.
The Energy Chamber believes, however, that further shifts in policy are still required, for example, with respect to innovation policies. The innovation thrust led by Government agencies has placed an emphasis on finding, support and encouraging new entrepreneurs through things like the Ideas to Innovation competition and the various incubator projects. While these programmes can help unearth new ideas they might be missing the opportunities for innovation that exist within well- established existing firms. Policy measures are also needed to develop innovation within the existing companies who have been successful in the domestic market to get them into new export markets. The Energy Chamber believes that energy services companies need to be at the centre of any diversification and innovation policy.