Job, revenue losses, recession to come

Kevin Ramnarine
Kevin Ramnarine

FORMER Energy Minister Kevin Ramnarine is forecasting more job loss, erosion of tax revenue and the possibility of a recession as a result of the disappointing result of BPTT’s infill drilling programme and its inability to supply gas to Atlantic LNG Train One which could result in closure.

BPTT, in a statement, confirmed the disappointing results from its infill drilling programmes and the material impact on forecasted production especially in 2020 and 2021 and the challenges to supply gas to Train One after 2019.

But another Energy Minister Carolyn Seepersad-Bachan and economist Indera Sagewan-Alli are questioning the lack of impact on this particular train in which the Government of TT is a stakeholder, while the other trains remain unaffected.

Seepersad-Bachan asked whether it was a “negotiation ploy.” Sagewan-Alli also commented on the fact that Train One which is in a joint arrangement with the Government of TT is the one that is challenged, but the other trains owned completely by the multinationals seem not to be affected.

“That begs the question of the whole issue of use of transfer pricing that we have been hearing a lot about in recent times and where transfer pricing is resulting in the country being significantly shortchanged in terms of the financial benefits it should be deriving from the exploitation of our natural gas resources.”

Point Fortin Mayor Abdon Mason

Point Fortin mayor Abdon Mason in whose Borough the Atlantic operation is located and whose constituents have already borne the brunt of the closure of its major employer, Petrotrin, in the last six months, is holding out hope the shortfall would not result in the two-year projected closure to further affect the community.

Mason said he was informed about the anticipated shortfall, “but in terms of what it would mean to operations in Point Fortin I am not fully apprised of that.

“I don’t have all the facts as yet. I suspect Atlantic will put the necessary measures in place to treat with any shortfall in natural gas that would affect their operation. Until I am fully apprised of what is going on, I would only have to be hopeful.”

Ramnarine said the results, including failures on the Cannonball drilling programme will impact the country’s overall natural gas supply negatively.

Indera Sagewan-Ali

Sagewan-Alli said downstream producers may have to make tough decisions including moving its investment elsewhere if there is shortfall.

As Government, buoyed by the “turning around of the economy” gets ready to present its 2019 mid-year review of the budget, Ramnarine, who is out of the country, took to Facebook to state what the development might mean to the TT economy.

“The consequence of the most recent news is the likely closure/mothballing of Train One, with related loss of jobs, loss of business for contractors, erosion of GDP and loss of tax revenue,” Ramnarine wrote on his FB page.

“Given the way GDP is calculated and its reliance on natural gas output, the loss of anticipated natural gas production could trigger a recession in 2020.

What has happened shows how vulnerable the TT economy is to the changing fortunes of the energy sector. It also emphasises that although we have been applying the best technology such as 3D OBC seismic, uncertainty in the sub-surface can never be eliminated.”

He said BPTT was expected to defend a minimum average annual production of 2.1 billion cubic feet per day (bcfd). That in 2018, they averaged just under 2.1 bcfd and it was anticipated that in 2019 they would average 2.3 bcfd.”

“It is now unlikely that this level of production would be achieved in 2019 and production may fall further in 2020 to under 2.0 bcfd.”

Sagewan-Alli said what was happening certainly had implications for the projected increase in natural gas the government spoke about last year and what would have been the basis for the country moving from a situation where gas supply, particularly to the downstream industry was in the significant shortage, to a situation where it would only meet current demand in 2021.

“Now with this particular result that creates a shortfall, it means that the projected gas supply onto 2021 is now compromised, If that is compromised, it means that government revenue is also compromised. It means the basis on which the Minister of Finance Colm Imbert is arguing that we are seeing a turnaround and the basis on which he is hoping to get the revenue in order to further propel the turnaround into significant positive growth is now challenged.”

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