• Ambassador John Estrada, US Ambassador to the Republic of Trinidad and Tobago
• Ravi Suryadevara, President, American Chamber of Commerce of Trinidad and Tobago
• Amcham members
• Invited guests
• Members of the media
Good afternoon and thank you for this opportunity to speak with you.
I would like to congratulate you for the timeliness of your theme – Partnerships for Growth and Prosperity. I am particularly drawn to this theme because of a deep personal belief that sustainable growth and prosperity cannot occur without effective partnerships. To cite an African proverb, “If you want to go fast go alone. If you want to go far go together.” In a speech I made earlier this year, I expressed this belief by emphasizing the need for various actors in our country to turn our spears outwards rather than inwards as we deal with a significant downturn in the oil and gas industry. This theme and forum provides an excellent opportunity to further expand on that thought.
Let me first remind us of a challenge we all face, the global environment. From a high in 2014 of around $115 per barrel, Brent crude plummeted to around $38 per barrel at the end of 2015, close to a 70 percent decline. Then, for the first quarter of 2016, Brent crude only averaged $34 per barrel, the lowest quarterly average for 12 years. There are varying views on how long the current price levels will last but at BP we expect prices to be “lower for even longer but not forever.”
The current environment is painful for energy companies and energy producing countries. Bloomberg recently released an article in which it was noted that the sustained price plunge will transfer US$3 trillion a year from global oil producers to global consumers, “setting the stage for one of the largest transfers of wealth in human history." Closer to home, the significant decline in revenue for Trinidad & Tobago has been well publicized and the challenges for energy companies in Trinidad & Tobago are enormous and have resulted in painful job losses. In addition to the well-publicized challenges, at bpTT we face the acute challenge of finding the right balance between managing costs while continuing to invest for the future.
The news is not all bad for Trinidad & Tobago though. High investment levels are making it easier to use the opportunity that low oil prices present to make difficult but necessary changes that will benefit the country in the long run. As part of the good news, at bpTT we have demonstrated our confidence in the future of our business in Trinidad & Tobago by committing to a record US$1.8 billion of capital expenditures in 2016. Others are clearly demonstrating this confidence as well because Trinidad and Tobago seems to be faring better than most oil and gas producing countries where foreign direct investment is concerned. While job losses understandably grab the media headlines, there is a need for the population to understand that the energy industry here in many ways is not experiencing the severe contraction in activity that is occurring across the globe. In places like North America, the North Sea, Canada and Australia there have been massive declines in rig counts and the shelving of many capital projects. In contrast, in 2016 Trinidad and Tobago will see record levels of foreign direct investment in the energy sector as there is significant investment taking place in the upstream including drilling activity, deep water exploration, and new projects such as Juniper, all of which provide activity for the local energy service providers and jobs for T&T nationals. This for me is a clear demonstration of partnership for growth and prosperity – without these investments the economy would be in even worse shape.
It is important to note that in the case of BP, such investment is taking place in Trinidad and Tobago at a time when BP’s capital budget is being reduced globally. This is essential for Trinidad and Tobago because without these investments we would see significant declines in oil and gas production and further economic contraction.
In the midst of one of the worst downturns in oil and gas history then, there are really positive developments and real signs of partnership. And, in a way, I wish this was where the story ends. Unfortunately though, not all signs point towards partnership. There are many pockets of unhelpful discord that I believe work against growth and prosperity. For a few minutes, I will highlight one area that I can speak to with a fair amount of knowledge and data. I speak of the current and increasingly common practice of bashing multinational companies.
There are some who would have us believe that multinationals do not have the country’s interest at heart, or that much of the value we create is moved out of the country, but allow me to paint a different picture by using BP as an example.
In BP’s 55 years of operations in Trinidad, our upstream business alone has generated over US$50 billion or over $TT 300 billion of operating cash flow. Out of that, bpTT has
• Paid approximately 50% to the government in taxes and royalties,
• Reinvested approximately 35% in our local operations to continue to find and develop new oil and gas resources; and
• Returned approximately 15% to the shareholders in bpTT
This, by the way does not take into account our significant current investments in Atlantic or Atlas Methanol, or in entities we no longer have a share in but have historically invested in such as Titan and Powergen. Over the 55 years, we have made significant investments in improved safety standards, capacity and capability building, social programmes, arts and entertainment, and research & development. Further, the multiplier effect of the economic activity generated from our operations, including importantly for local companies who do business with us, who employ nationals and who themselves buy goods and services to support upstream operations is enormous. True partnership has real value in terms of growth and prosperity and our results demonstrate that both country and company have benefited materially from our partnership with Trinidad & Tobago. I am sure this is also the case for a vast majority of multinationals in Trinidad & Tobago. Are there opportunities for improvement in this partnership? Of course there are, but the overwhelming evidence of benefits speaks for itself.
Now, I certainly appreciate why energy multinationals like bpTT might not be the flavour of the month when our tax payments have declined with lower prices, lower production and increased investments. Oh, and by the way these are the real reasons our taxes are lower. The sensational stories about decreased taxes due to changed fiscal incentives and 100% one-year write-offs for projects such as Juniper have no basis in reality. Even if the tax codes had not been changed two years ago we would still have the same reduction in taxes because of deeply depressed prices and reduced production. And, consistent with the tax code, we are writing off development spend over three years, not one year as has been commonly reported. I also appreciate the calls for diversification. In fact, I support those calls and believe that the energy sector can play an important role in the diversification agenda.
In the interest of time, I will constrain myself to highlighting just this one major area of unhelpful discord. There are many more. The important point is this: While we are distracted by unnecessary fights, other countries and jurisdictions are using the downturn to improve competitiveness. I cannot over-emphasize this point. We must all commit to being partners in making Trinidad and Tobago as competitive as possible, because if we are not competitive there will be no sustained growth and prosperity. We need to collectively focus on issues such as productivity, fiscal policy, elimination of bureaucracy, reduction in crime and corruption among other things. We all know the list. And, we must always bear in mind that values such as safety, respect for all individuals, and taking care of the disadvantaged are sacrosanct. I know that at times I may sound repetitive but it’s always important to remember that we are competing with other destinations for capital investment, and at a time when many companies are cutting budgets and shelving new projects. Trinidad and Tobago must demonstrate that it has a competitive investment climate to ensure continued growth and prosperity. Other countries are not standing still and we have to stay ahead of them.
Now, sticking together in pursuit of competitiveness won’t be a cake walk. The concerns of the government, business community and the public at large are real and it is a time of significant economic adjustment for us all. The government is taking some tough but necessary decisions to adjust to the current economic reality such as the reduction in the fuel subsidy, increased taxes on luxury items and the like. There are lots of debates about the pros and cons of a hydrocarbon based economy and I have noted the many news stories in which people are asking the question “Is it time to move on from oil and gas?” Diversification is a common and necessary theme and it is a topic that is gaining currency as we face the reality that T&T’s main revenue earner is at this point in time not generating much revenue for the country. These are all potentially divisive issues. We all know that in tough times the easy route is to point fingers and find someone to blame for the country’s woes – some blame the government, some blame the opposition, some blame multinationals, others blame the unions - but now is not the time for the “blame game”. Now is the time to let go of long entrenched positions and to work together as the business community, the labour movement, civil society and the government to find solutions. The clarion call must be let’s collectively put country first so all can be first.
The energy industry will remain important to T&T and must be viewed as a part of the solution, not as part of the problem. We have developed highly skilled nationals, a strong local supply chain and built industries around the sector. Much of this skill and know-how is transferable to other sectors and therefore the opportunity exists to use the energy sector as a catalyst to drive diversification. Trinidad and Tobago has a world-class energy sector and it is fortunate to have continued investment in the sector at a time when investment is slowing in other countries. While the conversation on diversification continues we should also think of how the energy sector can help to achieve those goals.
So, I close by reminding us to turn the spears outwards, focus on competitiveness, protect the vulnerable and put country first so all can be first. Not my party first and your party last or my race first and your race last. There are enough first place medals for all of us to share if we work in partnership. You have bpTT’s continued commitment to work in partnership with all well intentioned stakeholders to ensure the growth and prosperity of Trinidad & Tobago.