The Energy Chamber of Trinidad and Tobago has commissioned a major study into the value added by the energy sector to the local economy. The preliminary results of the study were presented at the annual Trinidad and Tobago Energy Conference in January 2018 and showed that the sector adds significant value to the economy above and beyond direct taxation. Note, this does not mean we should ignore the value of tax return. Using 2016 as the base year, the study showed that the energy sector added four and a half times more overall value to the economy than if you only considered taxes paid to the government.
This is an important finding and highlights the need for overall economic policy to rethink the role that many policymakers have traditionally ascribed to the oil and gas industry, namely just as a provider of tax revenue, which is then dispersed to the rest of the economy through government spending. The study highlights the need for policymakers to think more about how the oil, gas and petrochemical operators do business in the country and how they interact with local fi rms and individuals and not just how much tax they pay.
Perhaps more significantly, the study showed that while Trinidad and Tobago was doing relatively well in terms of maximising the value added by the industry to the economy, compared with many other countries, there was still a very significant prize that could be won through successful local content policy. The preliminary calculations indicated that the level of additional value could be in the order of billions of U.S. dollars for the economy if we maximise the full potential of local content.
Using a propriety methodology, the study assessed the competitiveness of energy service firms and contractors in Trinidad and Tobago, compared to their international counterparts. Generally, Trinidad and Tobago-based firms stacked up fairly well, meaning that there is good potential for these firms to compete and win business in-country. There are of course areas of business in the sector which are highly capital-intensive and in which there are only one or two companies in the world who can offer the particular service, but overall there is significant potential for high levels of local content in Trinidad and Tobago in most of the value chains in the sector.
The full results of the study will help drill down into the specific sub-sectors that have the biggest potential to add more value to the economy both directly and through the multiplier effect. These findings will be important to help focus attention on specific areas where we can gain greater value through increased local content. This will require a collaborative effort between all stakeholders including the government, the operators, service companies, research and training institutions and many others. If we can all collaborate successfully, the results could be very significant.