Key Lessons from Trinidad and Tobago
Keynote address by Dr. Dax Driver, President and CEO, Energy Chamber of T&T
4th Annual Southern Africa Oil & Gas Conference
Century City Conference Centre, Cape Town, South Africa
19 & 20 March 2025
I am guessing that there might be a few of you in the audience thinking “what lessons can we possibly learn about oil and gas from a Caribbean island?”. Surely – you might be thinking - the lessons from the Caribbean should be about tourism, rum cocktails and cruise ships or about calypso, carnival and steelpan?
Well, that last item – steelpan – might just give you a hint about Trinidad and oil and gas. We actually have one of the oldest oil industries in the world, with commercial production stretching back to 1908, so we have had a lot of oil drums lying about the place. Back in the 1940s some creative young men in one of the most deprived communities of Trinidad discovered that they could tune the steel drums and make sweet melodies and not just percussion. So, Trinidad is proud to be the home of steel pan.
Today, I want to focus on the gas industry, which is where Trinidad has really made its mark. Back in the 1950s we started using natural gas for electricity generation and then we moved into petrochemicals and then into LNG in the late 1990s. While many countries have flared associated gas to concentrate on producing oil, we harnessed our natural gas to build industry and developed a significant gas infrastructure.
After providing a bit of context, I am going to give you three lessons that can be learnt from Trinidad & Tobago’s success, but also from some of our challenges.
Those three lessons can be summarized as:
Gas industry development requires long-term investments over many decades, so basic policy consistency and stability are vital.
All players along the gas value chain most remain competitive – for a successful gas industry you need upstream gas developers, a midstream to transport and process gas and a downstream sector to transform gas into products.
Invest in human capital ahead of the curve.
Before I get a bit more detail on these lessons, let me provide a bit of context.
Trinidad & Tobago is a small twin-island state in the southern Caribbean, just off the coast of Venezuela. We share much of the same geology as Venezuela. We have a small, racially diverse population – 1.2 million – and a stable democratic government.
Trinidad is the bigger island and the home to our industrial sector: you can see all of the oil and gas fields on the map. The oil industry originally developed onshore Trinidad and since the 1950s off the west coast towards Venezuela. In the 1970s we moved off the east coast and then in 1990s we saw the north coast marine area come into production. More recently we have had deepwater finds out into the Atlantic ocean.
Tobago is the smaller island - beautiful and more tourist dependent.
Trinidad is highly industrialized with a strong world scale petrochemical sector, including 10 ammonia plants and 8 methanol plants. We are one of the world’s top exporters of both commodities. We also have secondary downstream production including urea, melamine and UAN, as well as iron and steel and cement. Around fifty percent of our natural gas production goes into this downstream industry, ten percent into electricity generation and the remaining 40% is exported as LNG through the three train Atlantic facility. We also export LPG and crude oil.
Our current total gas production is around 2.5 billion cubic feet of gas per day, or in oil equivalency terms around 450,000 barrels per day, with another approximately 50,000 barrels per day of crude oil. Our production has declined since a peak of 4bcf/d in 2010. More on that later.
We were in the past a refining centre, for both our own domestic crude and imports, but the state-owned refinery was losing money and was mothballed in 2018. We are hoping that the refinery will again be up and running in the near future through a lease to the Nigerian oil company, Oando, which is also cross listed in Johannesburg (so we might be soon welcoming South African capital to Trinidad).
The industrial development in Trinidad means we are one of the wealthiest countries in the Americas, with a GDP per capita of a bit over USD 20,000.
In energy terms, we have universal access to electricity, all from gas-fired power generation, with a stable grid and very competitive rates – around 4 US cents per kwH for most households. I believe that is about a third of the average tariff in South Africa. The cheap electricity is a blessing and has helped in the development of a diverse light manufacturing sector but has caused some problems which I will mention later.
We have universal free primary and secondary education and free means tested tertiary education, universal free health care and a fairly extensive social security net. If I am making it all sound like a paradise, I should also mention that we do have some very serious social problems, especially with violent gun crime, like most other countries in the Caribbean and central America.
Let me move now to talk about three key lessons I think Trinidad & Tobago can provide for other countries, in particular those embarking on new gas developments.
The first rather obvious point is that developing a gas industry requires long-term investments over many decades. Unlike oil, you have to develop the offtake infrastructure or the gas remains in the ground. This takes time. The long-term nature of gas development means that consistency in the investment climate is crucial.
One of the successes of Trinidad & Tobago has been that when Governments change projects continue. In our past ten elections we have had six changes of government, but the basic policies and attitudes to international investors have remained. We have often had projects that started negotiations under one government and were completed by the next. It is important to have a long-term vision for industry, which is widely shared and accepted by the population.
Trinidadians are proud of our gas industry and especially the Point Lisas industrial estate, home of most of our major petrochemical industries. It is universally seen as important for the country’s future. Significantly, the original vision for the Point Lisas estate did not come from the government but from the private sector and specifically from my predecessors in what was originally called the South Trinidad Chamber. Trinidadians are proud that we export significant volumes of ammonia for fertilizers that feed growing populations around the world and that our LNG keeps the lights on in cities from Asia to Europe and Latin America.
For long-term investor confidence, sanctity of contracts is crucial. Sometimes governments end up with contracts that with the benefit of hindsight do not provide the returns expected, often due to changing international conditions, but these still need to be respected.
We faced that issue with our LNG industry, which was originally anchored on the US market, back in the days before shale gas when the US offered premium prices. After the rise of shale gas and the long-term trend of lower US prices compared to Latin American, Asian and European markets, Trinidad found it was losing a lot of potential value on our LNG exports, contractually priced against Henry Hub but actually physically going to higher value locations. When the agreements with the shareholders – bp and Shell - were up for renewal, the Trinidad government was able to renegotiate new marketing contracts benchmarked against Asian and European LNG and oil prices.
Renegotiations between countries and operators can be justified but must never be imposed unilaterally or you will just destroy investor confidence and without that it is impossible to build a gas industry.
The second major lesson that Trinidad can offer for the development of a gas industry is that it is vital that all players along a value chain remain competitive. You need all elements of the value chain in place to ensure that the gas industry is sustainable. If upstream investment dries up, gas production declines and there is a threat to the downstream industry. Without a downstream industry in place to offtake gas, upstream investment will not take place. So governments have to take care to make sure that all players along the value chain remain competitive and continue to invest.
Trinidad introduced many innovations in our gas marketing arrangements that have helped companies along the value chain be competitive, including commodity price linked gas contracts, where the state-owned midstream gas company took on some of the commodity price risk of the downstream plants.
I had mentioned earlier that Trinidad’s gas production has fallen since 2010. The root cause of this is that we were not attracting enough capital into upstream exploration and production to offset natural reservoir decline of around 15% per annum. If you want to sustain a 4bcf per day industry you need very significant investment into exploration and development every single year: you have to run fast up the down escalator just to remain in place. If you want to attract the sort of investment you continuously need upstream, then you have to make sure that the rewards match the risk faced by upstream producers. And as a basin matures you are often going after smaller reservoirs, or more challenging deeper horizons or deeper water; so more risk.
During our growth period in the 1990s and 2000s the focus of the government was on creating downstream demand. The guiding policy idea was that once the demand for gas was in place then upstream producers would inevitably go after the fields and deliver the upstream investment. This worked brilliantly, until it didn’t. In many ways we were a victim of our own success. But in a world where upstream capital was more constrained, especially after the 2014 price collapse, we found that we were not attracting the investment we needed to maintain our production levels.
There are policy levers that can be pulled to help the risk-reward equation, including changes to fiscal terms and increasing the pace of approvals, to reduce the time from a bid round to first gas. Increasing offtake pricing can also obviously help but always being cautious that the downstream plants also need to be profitable if they are to stay in business and crucially invest in maintenance. The government has made changes and we are seeing high levels of activity upstream, but there is of course a lag before gas actually flows.
On the issue of gas pricing, let me quickly mention the issue of cheap electricity I raised earlier. We are able to have such low tariffs because the upstream producers are all required by the state-owned monopoly midstream gas company to sell them a tranche of very low-priced gas, which they then in turn sell to the state-owned electricity utility for the gas fired power stations. Essentially this is an additional in-kind royalty.
There are of course very good social reasons to provide all households with a cheap tranche of electricity. In 2025 there should be no child on this planet doing homework by candlelight. However, the rates are also low for wealthy households using significant amounts of electricity to run pumps for their swimming pools or to mine cryptocurrency. The top 20% of households consume 50% of the total residential electricity, paid for by a resource that belongs to all citizens. This is both inequitable and undermines the competitiveness of the gas value chain.
The final major lesson that Trinidad can provide is about investing in human capital development, at the same time as attracting direct foreign investment. One of the successes of Trinidad & Tobago has been in the development of a workforce to support the industry primarily made up of nationals. Over 99% of the contractor workforce in the downstream gas industry in Trinidad & Tobago are citizens and almost all of the leaders of the industry are nationals.
This has not happened by accident but rather by a deliberate policy of investing in education. We have two well respected Universities and most of the professionals employed in the industry studied at those universities.
Perhaps even more importantly, there has been a focus on high quality technical and vocational training. This has built up the cadre of skilled craft workers and technicians – the drillers, welders, pipefitters, E&I technicians, inspectors, riggers, scaffolders, sandblasters and painters needed for the industry to function.
Trinidad & Tobago has also placed a lot of emphasis on building a strong safety culture and ensuring that service companies have robust health, safety and environmental management programmes. There is a lot of industry collaboration on safety and I am happy to share more on that in the discussion period.
This work on developing human capacity and the capacity of local service companies is central to any local content effort. These efforts to build local companies and develop skills are more important than legislation: we actually do not have local content legislation in Trinidad.
The other thing we have learnt is that it is also very important to concentrate on the development of human capital in regulatory agencies – not just the core Ministry of Energy but also safety and environmental regulators. These agencies must be equipped to understand the industry, the driving forces behind investments, risk and the importance of timely decision making.
I will just make a plug here for having strong trade associations. A lot of the recent success we have had with accelerating action has been driven through joint efforts between the industry and the Ministry. Trade associations have an important role to play in relationships between companies and the State.
So to conclude – over more than a century Trinidad & Tobago has built a world-class gas industry and this has driven economic growth and social development. The prerequisite to any gas development of course lies in the rocks, but if a country does have the resources there are three main lessons that Trinidad can offer.
Firstly have a long-term vision and stay the course; policy consistency and investor protection is crucial. Respect the contracts that are signed.
Secondly, make sure that all players along the gas value chain from upstream producers through to the downstream off takers can operate profitably and continue to invest in production and in maintenance. Subsidies and incentives can be important to get an industry moving but be careful with the distortions that they introduce.
Thirdly, invest in human capacity development ahead of the curve. Don’t just focus on the professions – engineering, geology, accounting and law – but also on the skilled craftworkers and technicians. Even if your industry does not develop as you hope, a skilled workforce is a good thing in any scenario, so invest ahead of the curve. Don’t wait for the steel to arrive before starting to train the welders to construct an LNG facility.
Finally, I started by saying that we are not a tourist island, but Trinidad & Tobago is a wonderful country I would encourage everyone to visit. And if you want to learn more about the energy industry in Trinidad & Tobago I would encourage you to attend our annual T&T Energy Conference, which we hold annually in late January. And you can stay for Carnival in February.