Former Minister of Energy and Energy Affairs of Trinidad and Tobago Kevin Ramnarine says that the Twin-Island Republic will be hit hard by the fall in oil and natural gas prices which is wreaking havoc in the energy market now, and being further compounded by the global pandemic COVID-19.
Writing a blog post on LinkedIn on Tuesday, Ramnarine, now a consultant and university lecturer, said Trinidad and Tobago has had its fill of issues prior to the current shocks affecting the industry.
“The fall in oil and natural gas prices will hit Trinidad and Tobago’s energy sector very hard,” he wrote. “Before COVID-19, there was weakness in the sector as evidenced by plant closure, refinery closure, falling oil production and major companies losing money.”
He noted that the fragility was not helped by a fiscal regime that did not adjust for a low-price environment. He added that before COVID-19, Shell and BPTT were not drilling, so they really are not that affected at the moment. “I can’t see how Heritage Petroleum is making money at these prices. Rystad said at $US30 / bbl most oil companies have zero Free Cash Flow so Heritage would more than likely be in that boat. Natural gas production in T&T needs a breakeven of around $2.00 per MMBtu at the well head. In this environment that isn’t happening. So, the sector is in big trouble the kind that was last seen in the late 1980’s.”
Ramnarine said he expects that as a result of the crises, some capital projects will be shifted to 2021 as companies reduce their 2020 CAPEX budget. “That is going to affect us down the road. We are going to be in a low price environment for a while (maybe a slight rebound in mid-year) but generally the lower for longer might persist,” Ramnarine said, adding that fiscal policy that has been inflexible since 2016 has to adjust to keep the sector afloat.
He said as part of the response, Trinidad and Tobago has to address ease of doing business across the board.
Writing in a Jamaica Gleaner column on March 15, David Jessop, a consultant to the Caribbean Council, said that the falling prices and the pandemic will damage Caribbean growth.
In normal times a sudden drop in the price of oil would elicit a collective sigh of relief among Caribbean governments and Central Bankers. However, these are not normal times. The ill-judged decision by Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia, to pump more oil at just the moment the global economy is reeling from the impact of the coronavirus has created a global shock that will touch the Caribbean in ways that may suppress growth for years to come,” Jessop wrote.