President Paula-Mae Weekes must be commended for eschewing platitudes at the opening of Parliament and instead using as the theme of her address that “the people are hurting”.
I’m afraid things will get even worse, Excellency.
For almost six years I warned this country about the global energy revolution. Because this administration failed to act, there is now grave danger for T&T. Can the Government deny it? For example, because of the revolution, the Finance Minister will not realise his projected revenue of $47.7 billion for 2020. His budgeted oil and gas prices are ridiculously unrealistic given the prevailing global conditions.
It is the revolution that has pushed down energy prices. For example, despite a tight physical market due to Russia’s pipeline contamination crisis and US sanctions on Iran and Venezuela, oil dropped to US$55 last Friday. And last year, all over the world, natural gas prices fell by about 40 per cent and have continued downwards to US$1.87 last week. Colm Imbert’s budgeted gas price is US$3 mmbtu. Our intractable deficit will therefore be much larger than the already sizeable $5.3 billion forecasted for 2020. The suffering will continue!
But the real trouble is we will never again earn as before. The breadwinner has got a deep wage cut. And it is permanent because the revolution is here to stay. Not even the possibility of a US/Iran war could send prices soaring. Two driving factors are mainly responsible: the global oil glut produced mainly from US shale which reached over 13 million bpd last week; and renewables, the fastest growing energy source, is increasing market share, now 22.5 per cent, heading for 33 per cent of global power capacity by 2023.
This year it will become the primary source of Britain’s power. More and more electric vehicles being manufactured and sold, heading to 125 million on the road by 2030, contributing to dampening demand for oil. Without these factors, oil prices would have soared into the stratosphere from Middle-East tensions and Trinidad and Tobago would be dancing in boom times once more. But never again!
We had better wake up. The global oversupply of oil and gas will continue, compounded now by weak demand. Guyana has exported its first shipment of one million barrels. Norway’s oil production is expected to jump in 2020-2023 to a nine-year high. And artificial intelligence (AI) is making successful discoveries more likely all over the globe. Last year saw new discoveries of nearly eight billion barrels. Global supply will rise by 1.6 million barrels per day (b/d) in 2020, more than global consumption, resulting in rising global inventories which are already nine million barrels above the five-year average. Non-OPEC countries will increase production by 2.6 million b/d this year, more than offsetting reduced production from OPEC members. The glut will grow.
And in natural gas, our main revenue earner, the LNG flood could turn into a tsunami. In addition to increased production from the world’s largest exporters, Qatar, Australia, and the US, Russia’s Arctic Yamal Peninsula is already supplying 42 million tons per annum (mtpa) to the market; Argentina has started exporting from its impressive shale basin, with some 27 billion barrels of resources; and on the way are 54 million mtpa from mega LNG projects in Africa, Canada and Mexico. Further, as the earth warms and the ice melts, the phenomenal Arctic energy resources are increasingly accessible to nations with territories within the Arctic Circle including Russia, the United States, Canada, Norway and Denmark. Low LNG prices will persist.
The irony is while global gas prices are low, the Prime Minister and his “Garry Sobers” Minister Stuart Young, went to bat and negotiated an increased price paid by NGC to upstreamers — BP, Shell, EOG, BHP and De Novo — resulting in an increased price paid by downstreamers and threatening the future of the Point Lisas Industrial Estate which has already been suffering from curtailment of supplies. BP chief economist Spencer Dale recognises “big declines” in our natural gas, and questions whether we could be competitive in a market getting “tougher and more integrated”.
Indeed we are dwarfed by the US next door, with proven reserves alone at 341 trillion cubic feet, now the third largest LNG exporter, shipments soaring by 60 per cent last year, and attracting by 2018, 334 petrochemical projects, together valued at US$204 billion. The survival of Point Lisas is very uncertain. We have already had closure of the Mittal steel complex, two MHTL methanol plants and the Yara plant. The future of the Titan Methanol plant is in serious doubt.
We are in real trouble, folks. Didn’t this administration see the writing on the wall when Saudi Arabia, the largest oil producer, started diversifying about three years ago? Even Big Oil was moving into renewables. Today Saudi diversification efforts are beginning to bear fruit and their economy could expand by two per cent this year and 2.2 per cent in 2021 as their non-oil industries gather pace. Saudi Arabia’s neighbours are also diversifying. Dubai has drafted a record 2020 budget of US$18 billion and Abu Dhabi is spending US$13.6 billion under a three-year package, both with projects expected to move their economies away from oil.
But for four and a half years, our improvident administration vacuously waited for another energy boom. They did no diversification for new foreign earnings but borrowed massively for consumption. Foreign exchange outflows exceed inflows and our foreign reserves, the nation’s economic security, have been in free-fall and could vanish this year, says the International Monetary Fund. Let no one fool you with their delusionary talk. We are in real trouble!
LINK ORIGINAL: Trinidad Express