Downstream retrenchment part of energy industry malaise

In this January 2020 file photo, OWTU president Ancel Roget meets with Yara employees at Paramount Building, Circular Road, San Fernando. -
In this January 2020 file photo, OWTU president Ancel Roget meets with Yara employees at Paramount Building, Circular Road, San Fernando. -

Tragically in the news this week has been the grievance referred to the Industrial Court regarding the retrenchment of 15 workers from Yara Trinidad’s plant, which had closed in 2019. It is especially tragic as it comes on the heels of claims of some alleged 30,000 associated contract, transport and entrepreneurial employees in the energy sector, in and around the Point Lisas Industrial Estate, potentially losing their jobs due to non-availability of gas, which is essential to downstream industrial production.

The retrenchment of 149 high-income, skilled professionals from BP starting this month is testament to the breach in the chain of production and energy sales that begins, as all supply chains do, with the existence of a market to sell to. That market is shrinking rapidly worldwide, as non-petroleum based sources of energy are preferred.

Trinidad and Tobago knew this would happen 20 years ago, as we had then, and have now, abundant supplies of solar and wind energy waiting to be harnessed, but decided to ignore that thinking that the supply of fossil fuels would last forever because “God is a Trini,” The BP retrenchment, part of a global exercise of redundancy of thousands illustrates that God is indeed a Trini: he supplies us with an ongoing alternative source of energy. But we continue to ignore God’s gifts while other people accept them and move on with gratitude.

The accuracy of the estimated 30,000 figure of employees in the Point Lisas area to be affected cannot be verified statistically, but the accuracy of the retrenchment figures certainly can be, as retrenchment figures must be reported to the Ministry of Labour and recorded.

The role of the NGC, a government-owned organisation which has the monopoly on sales and pricing of natural gas, is seminal to the continuation of downstream companies in the energy industry in TT and has the responsibility of ensuring that supply meets the demand to the extent that it can.

The ethical-governance question of whether the government should go into business in competition with a private sector that supports its very existence through taxation is a thorny question with no clear answer. It has to be balanced against government's obligation to honour the contract signed 25 years ago creating the architecture by which Shell and BP became major stakeholders in Atlantic LNG. This was lauded as being consistent with government’s then stated mission to attract foreign investment. That mission is still part of government economic policy.

Then came a recessionary period, the wrench in the woodpile. Consumer markets for commodities such as oil and gas declined, as excess supplies internationally became available. The Prime Minister and Minister in the Office of the Prime Minister Stuart Young, on behalf of the government of TT, negotiated with BP and Shell, the other major stakeholders of Atlantic LNG, regarding an increase in the cost of sales of LNG to offset the profits those two major shareholders were losing.

You may remember the loud and angry reaction in the press that appeared as the results of those negotiations became known and as those increased costs were passed on to the downstream industries: Methanex, Yara, Tringen, etcetera – the downstream industries that provide most of the employment (and most of the taxes) in the Point Lisas Industrial Estate.

At the same time, the supply of local gas has become more costly as exploration moved into deeper waters. That is how supply chains work. System analysis tells us that each cost that affects one step in the operation affects every other. If your left foot becomes infected, unless dealt with at once, the infection spreads toxins right through your body. And you die.

Which brings me back to Yara and their retrenchment exercise.

Of course, the OWTU has to fight the retrenchment. That is what they are paid dues by their members to do. And if, back in 2019, when the Point Lisas energy companies saw the writing on the wall and covid19 walked in, instead of facing the retrenchment that the economy had injected into the energy system, as "compassionate organisations" they found niche work for redundant employees and continued to employ them. They must have known it could not go on forever.

Some contracts guaranteeing a fixed price and the guaranteed provision of LNG were signed with Atlantic, in hope that conditions would change. But they may turn out to be marriage contracts that cannot be consummated.

BP and Shell, in the meantime, like old-time lovers, as shareholders were able to negotiate their contracts with Atlantic directly with the Prime Minister, outside the market, leaving the other downstream industries to compete for whatever supply shortages remained.

Existing contracts will be honoured lest legal suits force Atlantic to buy gas at a higher price externally than they will be able to sell it at locally. Will that not place the industry between a rock and a hard place? What is a government, as the major shareholder, to do? Let Atlantic go bankrupt? If downstream industries that provide employment have to compete with government as a major shareholder even to get, much less pay, for higher-priced natural gas – without which they cannot produce – will this make their products unmarketable? They sell on an unforgiving world market where competition is stiff and suppliers can now sell at a cost cheaper than our companies can produce. Do they just sink into debt and have to close down, department by department, inch by inch, until they are also forced into retrenchment as well?


"Downstream retrenchment part of energy industry malaise"

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