Posted March 17, 2002
By Raffique Shah
Originally published February 24, 2002
IMAGINE if you would, government revenues leaping from the $13.8 billion realised in the year 2000, to somewhere in the vicinity of $20 billion a year in the next three-to-five years. That is not wishful thinking on the part of greedy politicians. It is a realistic evaluation of what lies ahead for Trinidad and Tobago, based on recent proven oil and gas finds that will see both commodities double in production within the time frame. It also sounds too good to be true. But it's worrisome for Kerston Coombs, a pioneer in this country's industrialisation thrust, who fears that we could end up frittering away the vast sums of money coming our way and remain a "wannabe" developed country.
Coombs is an engineer who started out in 1964 with the first major downstream plant in the energy sector, Federation Chemicals (also called Grace Plant, now owned by Hydro-Agri). Almost 20 years later, when the Point Lisas Industrial Estate began expanding following the first oil boom (1973-1980), he moved to the National Energy Corporation, which was headed by the PNM government's industrialisation czar, Professor Kenneth Julien. He was among those who oversaw the construction of the country's first methanol and urea plants. He then joined Clico in 1989 and served as that company's point man as it moved to become the first local private sector company to invest in heavy industry-the result being the Caribbean Methanol Company.
Sitting in his office at Synchem Limited, a Point Lisas based supplier of industrial chemicals of which he is chairman, Coombs told Business Express he had no doubt that a boom in the energy sector was on the way. "That major oil find by BHP Billiton off the North-East coast is expected to yield 100,000 barrels of crude a day (bpd), which will almost double our oil production. This after a decline in production that saw production fall from around 140,000 bpd to just over 100,000. The BHP find also includes an estimated 2.5 trillion cubic feet of gas. These discoveries alone-and bear in mind there are dozens of other firms exploring for oil and gas both on land and off-shore Trinidad and Tobago-are likely to double government's revenues from oil and gas," he said.
"Realistically, therefore, we could expect government's revenues to reach anywhere close to $20 billion a year in another three to five years. That's a huge sum for a small country like ours, but what bothers me is what we'll do with it." Coombs added with a cynical smile on his face: "Are the politicians going to outdo each other by promising to raise old age pension to $2,000 a month? Will they fall over each other by simply giving each national a sum of money, as some crazy people suggest? Will the corrupt be the ones to benefit from this massive windfall?"
He explained that the country's energy sector currently utilises around 1.5 billion cubic feet (bcf) of gas a day. "That's with all the methanol, urea and Atlantic LNG's Train I plants on stream. Soon, we'll have the biggest methanol plant in the world coming on stream-Atlas. It will produce 5,000 tonnes of methanol a day, twice times what the company's other plant, Titan, currently produces. CL Financial is about to begin construction of another similar plant, that in addition to other plants the company has under construction. And Atlantic's Trains II and III are also underway. The demand for gas will double when all these plants come on stream. And since government collects its royalties at the well-heads, you'll understand the kind of increased revenues we are talking about."
Coombs said even if oil and gas prices drop at any point, that is hardly likely to affect this country negatively to any large extent. "You see, gas contracts with firms involved in methanol or urea or aluminum are long term arrangements. These are billion-dollar investments, so companies do not commit themselves to such projects unless they have long-term markets for the end products. They won't get financing under other circumstances. The result is they must also have long-term contracts for the supply of gas, which is where the National Gas Company (NGC) rakes in money. In other words, with all these plants being either on stream or under construction, the government is assured of generous revenues from oil and gas for at least another 20 years."
But the St Vincent born energy expert said his concerns, as a citizen and a businessman (he is also a past president of the Trinidad Chamber of Commerce), are how we go about utilising the money. "The reason I'm speaking out is I believe we who know the energy sector well have been almost secretive about what's happening there. And I think that's wrong. The population must also know what revenues are coming from what is their patrimony, how much money the government is getting, and how they are spending it."
"People tend to be cynical about 'oil booms' because they have seen them come and go, and their lot has not changed much. Which is why it is so important to educate people in oil and gas and the energy sector generally. It should start in the nation's schools, but should not exclude adults. I'm happy to see we have people writing on matters pertaining to it in the Express and Guardian. If the people know what's happening, then they are less likely to allow governments to get away with wasting what is really the wealth of the nation."
The affable pioneer in the sector believes that previous oil booms should have put this country in a much better position than any of its Caribbean neighbours. "But I walk the streets of Kingstown in St Vincent and I don't have to watch out for holes through which I can fall and injure myself. In Port of Spain or San Fernando I need to watch where I put my foot! There should no open, sewer-like drains anywhere in this country, least of all in the main cities and towns. I think just about seven per cent of the population enjoys tertiary education: Singapore is aiming for 100 per cent! Our schools are the entire education system needs to be overhauled to meet the demands of this new order and to cope with the opportunities that are sure to come our way."
He said that in the case of the BHP Billiton discovery, that company now has to have a wide range of equipment in place to extract the oil from beneath the sea and ready it for shipping or refining. "Almost everything they need will be made in the USA! Why, after so many years in petroleum, do we not have the expertise to build platforms and provide much of the equipment required for such operations? The answer lies in our whole focus in education....we need to change that."
Coombs agreed with much of what Harvard Professor Jeffrey Sachs said at a symposium last week. Sachs pointed out that "rich Trinidad and Tobago" spends between four and 4.5 per cent of its GNP on education, whereas Barbados spends about seven per cent. And expenditure in health stands at 2.5 per cent, well below the five-to-six per cent that's the norm in developing countries. "Look at what our education system is producing, more dropouts than graduates. Our health system is still in the Dark Ages. Why? If we were to utilise part of the revenues we shall be getting over the next 10 years in upgrading our infrastructure, we shouldn't have to worry much about the state of Caroni or similar failed enterprises. All the people employed in such companies could be absorbed in a massive programme to upgrade all our roads, drains, schools, health facilities and so on."
He spoke with passion, too, about making our beaches more "presentable", and about initiating a reforestation programme. "No one seems to care about these areas which are important to the future of the country. We also ignore the arts and culture, two potential revenue earners of the future. We have people here who are very talented...we should allocate money to promote and uplift the arts and culture."
Coombs, who heads the Chamber's committee on matters pertaining to energy, spoke glowingly about the future of ethylene. "Besides the prospect of an aluminum smelter plant, there is much scope in producing ethylene. We shall have sufficient feedstock for such a plant after Atlantic's Trains II and III come on stream. From ethylene, we can go downstream to polyethylene and plastics. Manufacturers of plastic bags and other plastic products will then not have to source their raw material from abroad."
"These are the prospects for this country-if we manage our revenues wisely. But a key to it is for the average citizen to be aware of what happening in the sector, what kind of money is coming into government's coffers. We can blow it, as we have done before, to an extent. Or we can make it work for us and for future generations. If we do, I can see the day when we shall have to implement strict immigration policies, since people from abroad will flock to a prosperous, well managed Trinidad and Tobago."
Copyright © Raffique Shah