Ladies and Gentlemen, it gives me great pleasure to welcome you to this third annual Local Content Symposium. My role this morning is to give some general opening remarks and to set the stage for subsequent presentations and, most importantly, the discussion sessions. We have structured this symposium to create maximum time for discussion and feedback – in the Energy Chamber we strongly believe that dialogue and consensus building creates the best policies and programmes of action.
This session is taking place in the context of an extremely difficult time for the Trinidad and Tobago energy sector. We have been hit by a double blow of both low energy prices and shortfalls in production. That means that everyone in the sector has had to grapple with cost-cutting and efforts to increase efficiency. It is apparent to me that the rest of the country is – amazingly – yet to fully appreciate the difficult position in which we find ourselves.
The reality of the energy sector today means that there is limited potential for growth in the volumes of oil and gas production in Trinidad & Tobago over the medium-term. Over the long-term there are some good prospects for increasing production, for example from deepwater or from cross border gas, but over the medium-term the reality is that our battle is all about maintaining current levels of production and not seeing them fall further.
Most pundits are also not holding out much hope for a short to medium-term increase in oil or gas prices.
These realities mean that if we want to see any economic growth from our energy sector we are going to have to concentrate on increasing the value coming to the country from the current level of production and at current prices.
This is where local content policies come into play and form an important part of overall national economic policy - maximising the retention of the value of money spent by the industry within the country an important element of an overall strategy to increase the value of the sector to Trinidad & Tobago.
In Trinidad & Tobago’s Public Procurement Act (2015), local content is defined as “The value added to goods, works and services measured as the amount of money remaining in Trinidad and Tobago after the production of the good or performance of the works or services”. The Energy Chamber has adopted this definition of local content, with the focus on adding value rather than concentrating on the first spend by operators with locally-owned companies.
As we in the sector understand, but many outside of the sector do not seem able to appreciate, simply maintaining the current levels of production requires significant additional capital investment each and every year to overcome the natural decline rate of oil and gas reservoirs. The majority of this investment has come from and will continue to come from large international oil and gas companies.
This means that policies that aim to maximise value retention within the economy but threaten the competitiveness of the sector, and decrease the attractiveness of Trinidad & Tobago to international capital, will undermine the overall objective of continued growth of our oil and gas industry. So far we in Trinidad & Tobago have managed to maintain fairly high investment - and hence activity - levels through the current downturn in prices, but we cannot assume that will continue into next year and beyond. When capital expenditure budgets are being slashed across the globe we cannot just assume that we will somehow be immune.
Policies aimed at increasing the value added by the energy sector to the overall economy must, therefore, also have a major objective of increasing the attractiveness of Trinidad & Tobago to international investors, if we are to ensure sustainability in the medium to long term.
Earlier this year the Board of the Energy Chamber had a one-day retreat where we took a close look at our strategy on local content and tried to build consensus on the approach that we would take to this issue. Given the realities of the industry we decided that we needed a strategy that shifted the focus of local content from what might be called a defensive “share of the pie” approach to what we see as a more developmental focus. Using this more developmental focus, our local content strategy would aim at increasing the capacity, capability and competitiveness of local energy service companies and ensuring that international oil and gas operators have access to world-class services in-country.
The Energy Chamber’s focus is, therefore, on a proactive and positive strategy that concentrates on retaining value and on developing capacity, capability and competitiveness of the local energy services sector so that it can compete at home and abroad, rather than on a defensive strategy that seeks to protect local energy service companies from foreign competition.
Our long history in the energy sector means that Trinidad & Tobago already has a relatively well developed energy service sector with many local companies with significant experience and capability developed over many decades. Many of those companies are represented here today.
The vast majority of the labour force in the energy sector is national, in both the locally-owned and foreign-owned companies. In many sub-sectors of the industry there are already many local companies able to secure business from the major operators in the country. Despite this we have not had a well-developed national strategy that takes into account all of the factors that are a challenge for our local energy service companies.
One example where we have lacked a well-developed national policy might be in the area of manpower planning, where there has been limited success in ensuring that the training institutions turn-out people with the right skills and attitudes needed by the energy service companies. Another area might be in infrastructural improvement plans, so that our energy service companies have to struggle with inadequate roads and ports and limited access to properly designed industrial estates.
While there are many of these cross cutting issues that impact companies across the industry, a national strategy to develop the energy services sector needs to take into account the different realities of different sub-sectors within the industry. The factors facing a service company in the onshore drilling sector might be quite different from a company in the sub-sea fabrication sector.
Given the need to take into account the different realities in different sub-sectors, there needs to be a mechanism to ensure dialogue and achieve alignment between different stakeholders, including operator companies, service companies, the Government and training and research institutions. This session today is one such opportunity to ensure dialogue, but others are needed as well, and we especially need to create appropriate mechanisms for continued dialogue between all stakeholders in the industry and the government.
In the absence of a national strategy, individual operators have often set their own company level local content strategy, but there has not been a mechanism to create alignment between the various company-level strategies. In order to ensure alignment between all of the operator companies, both upstream and downstream, the Energy Chamber has been consulting with all of the companies to create a written document or charter though which they will all commit to work collaboratively to achieve the objectives of maximizing value retention in Trinidad & Tobago.
We are not yet in a position to have a charter to which we can all commit, but I anticipate that this is something that will be agreed upon in the not too distant future. In the meantime, the Energy Chamber has also been facilitating increased dialogue between the supply chain functions within the main upstream operator companies with a view to creating greater alignment.
The Energy Chamber has had some clear successes in creating industry-wide programmes in the past, most notably with the Safe to Work initiative, where we have successfully created transparent industry-wide pre-qualification progamme to replace the previous individual operator company pre-qualification systems. We should not underplay the scale of this achievement – this is a progamme that many other countries have tried and failed to implement – and we now have over 400 service companies and contractors certified under STOW.
We have also seen the success of the PLEA basic safety assessment process and, also in Point Lisas, the success of the new apprentice progamme. Later today we will have a presentation that will show how we might be able to build on the success of both those programmes to address the thorny problem of competency certification.
Cleary the industry is able to act collectively to address issues when we challenge ourselves. Today we must challenge ourselves to find constructive and feasible mechanisms to address the issue of local content.
It is not about pointing fingers, but rather about open and honest dialogue about the different problems we face and most importantly on solutions to those problems. I look forward to hearing the outcome of those discussion.