Despite the fact that upstream activity is set to increase in 2018, most service companies operating in Trinidad and Tobago report that they are still not confident about their business prospects and future growth. The Energy Chamber of Trinidad and Tobago’s (Energy Chamber) quarterly survey of energy service companies shows that over 60 per cent of companies report that both the volume and value of their business was below normal levels with around half of the companies surveyed reporting that they reduced staffing levels in the fourth quarter of 2017. 

This lack of business confidence in the services sector exists despite the fact that there are very significant levels of investment set to take place in Trinidad and Tobago’s upstream gas sector over the coming months and years. Trinidad and Tobago’s major gas producers, namely bpTT, Shell and EOG Resources, have all announced significant drilling programmes and new project developments, while BHP continues with a major deepwater exploration campaign. A total investment in the region of US$10 billion is being projected for Trinidad and Tobago over the next four to five years. 

Despite this very positive overall picture for the upstream gas sector, confidence in the services industry remains low. Following the global pattern, many service companies operating in Trinidad and Tobago report that they continue to be pushed to cut their pricing and offer further discounts by operator companies. The day rates of offshore rigs operating in Trinidad and Tobago, for example, have decreased significantly over the past few years. 

According to international press reports, the Transocean Deepwater Invictus drillship, contracted by BHP for its 2018 deepwater campaign, has seen its day rate slashed by two thirds since 2014. While the day rates for the Rowan rigs already operating in Trinidad and Tobago, or due here later this year, are listed as ‘undisclosed’ in their fleet status report, most rigs in these categories have seen significant declines in day rates over the past few years. According to Rigzone, global rig utilisation rates remain low, at around 50 per cent utilisation at the end of 2017, compared to around 80 per cent when the oil price downturn started in September 2014. 

While lower rig rates are good news for the upstream operator company’s ability to profitably develop new oil and gas resources, and hence ultimately for government revenue, these lower rates will also pass through to other subcontractors supporting drilling programmes. 

Business confidence levels in the Trinidad and Tobago services sector are also likely to be negatively impacted by the continued uncertainty over the future direction of stateowned Petrotrin. While the Trinidad and Tobago hydrocarbon sector is dominated by gas production, the state-owned oil company has remained a very important customer for many companies in the sector, in particular, many of the smaller locally owned service companies. Continued uncertainty over the future direction of the company has created a lack of confidence for the many contractors servicing the sector. 

To date, there have been few service companies that have finally closed their doors, unlike in the 1980s downturn, but many companies have reported reduced staffing levels, pay-cuts and reduced time, all in an effort to control costs. Internationally, the low-price environment has led to some service industry consolidation and it remains to be seen if a similar pattern will emerge in Trinidad and Tobago.