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The Great Crash of 2020

The Great Crash of 2020

As of today, Monday 20th April 2020, the fall in the West Texas Intermediate (WTI) oil price has been precipitous. Don’t understand the extent? Take a look at the graph below. This graph from Bloomberg shows the WTI price between 31 December 2019 to 20 April 2020, plotting Time (x axis) vs Price in US$ per barrel (y axis). We can see the STEEP drop to the right end of the graph. We can also see that there has been a steady decline in the price from December to now. THE PRICE OF OIL: WHY IS THIS HAPPENING: LAW OF DEMAND: A DECREASE IN DEMAND = A DECREASE IN PRICE = AN INCREASE IN SUPPLY LAW OF SUPPLY: AN INCREASE IN SUPPLY WITHOUT AN DEMAND TO SUSTAIN IT = THE MARKETS BEING FLOODED/OVERSUPPLY = A DECREASE IN PRICE COVID-19: Due to the COVID-19 pandemic, global operations have halted. This means the demand for energy commodities would have decreased. This would then cause an increase in market supply. Storage: Since the demand for oil has decreased. US oil producers now have to consider storage which can be very limited and will eventually run out. As storage capacity is running out, it will result in a drop which occurred today. The US is in a rush to get rid of their stored supply. THINGS TO NOTE FOR TRINIDAD AND TOBAGO: Different prices in oil: The two which are mostly discussed are WTI and Brent Crude. The price which crashed today was WTI which is mostly part of the US oil market. Most of the world transitioned to Brent Crude during the Shale Revolution, where the US became an exporter of energy commodities, instead of an importer. Most of the oil in T&T is sold in accordance with the Brent Crude prices. Though Brent Crude prices are higher than WTI (US$ 25.95 as of the current date and time), both prices are the lowest the world has seen in about (rough estimate) 20 years. This means that even though we deal in Brent Crude prices and not WTI, we will still be affected negatively. The latest budget of Trinidad and Tobago was based off an oil price of US$60 per barrel, in March 2020 it was then amended to US$40 per barrel. The price of natural gas: While T&T depends on oil revenue, it must be noted that we have a natural-gas based economy. This means that most of our energy revenue comes from the sale of natural gas. The price of natural gas is closely related to the price of oil. The Henry Hub gas price (as of right now) is roughly US$ 1.90. In T&T, however, we utilize the wellhead price of gas. According to the American Gas Association (AGA): “The wellhead price is the wholesale price of natural gas at its point of production. It is not regulated and the most important factor affecting natural gas wellhead prices is the competitive marketplace. Factors that affect wellhead gas prices include the available supply of natural gas, weather, overall gas demand, the prices of competing fuels (primarily coal and oil) and competition between gas companies for the supplies.” The latest budget of Trinidad and Tobago was based off a gas price of US$3.00 per mmbtu, in March 2020 it was then amended to US$1.80 per mmbtu. Production of oil and gas: Locally, we have seen a decline in the average production of both oil and gas between 2019 and 2020. Oil production in October 2019 – January 2020 stood at roughly 60 000 barrels per day. Oil production in March 2020 stood at 55 120 barrels per day. A decrease in oil and gas production = A decrease in energy revenue = A decline in the economy In early March 2020, the Minister of Finance announced that we are expecting a revenue loss of $5 billion for the year 2020. A figure of $3.5 billion was then added to that as time progressed and markets worsened, resulting in a projected loss of $8 billion for 2020. IMPACTS ON T&T: Potential loss of jobs Decreased revenue Economic instability Regional instability (particular attention must be paid to Venezuela. WHAT IS BEING DONE? GLOBALLY The Organization of Petroleum Exporting Countries (OPEC) has strike a deal where OPEC producers and allies have agreed to cut global oil output by 10%. This is the equivalent of roughly 9.7 million barrels of oil per day. This is the largest cut in oil production to have ever been agreed. The deal is scheduled to begin on 1st May 2020. DOMESTICALLY In early March 2020, the Minister of Finance announced the following steps to deal with the energy issue at hand: Tapping into the Heritage and Stabilization Fund (HSF) The HSF was established with the purpose of saving and investing surplus petroleum revenues. It is considered as our “rainy day” stash. According to the Office of the Prime Minister, the purpose of the HSF is to: (a) Cushion the impact on or sustain public expenditure capacity during periods of revenue downturn whether caused by a fall in prices of crude oil or natural gas; (b) Generate an alternate stream of income so as to support public expenditure capacity as a result of revenue downturn caused by the depletion of non-renewable petroleum resources; and (c) Provide a heritage for future generations of citizens of Trinidad and Tobago from savings and investment income derived from the excess petroleum revenues. The fund can only be accessed after the fiscal year has concluded, so this is a long-term solution. In order to access the HSF earlier, withdrawal can take place under the Disaster Measures Act…the Disaster being COVID-19. For this to occur, the HSF Act needs to be amended to include global pandemics. Sale of assets The Minister did not specify which assets they have in mind to be sold, but he indicated that that is an option for the country. Borrowing Cease in oil exports Heritage Petroleum today announced that it will store their oil instead of exporting at low prices. According to the Trinidad Guardian, “The company confirmed it has the ability to store its present production for up to two and a half months and sources say it would prefer wait it out, hoping for better prices, rather than effectively give away its oil.” If it costs Heritage $25 to produce one barrel and sells it around roughly the same price, this means that it may not be economically feasible due to the lack of profits Please note, this is a very basic overview of the current energy crisis, with focus on the impact on Trinidad and Tobago. Feel free to share your comments, questions and concerns.

2018 Matura Beach Cleanup

2018 Matura Beach Cleanup

Each year, between the months of March to September, Trinidad hosts some very special guests. More than 10, 000 leatherback sea turtles (Dermochelys coriacea) travel across the Atlantic Ocean to nest on beaches located on Trinidad’s east coast. SOURCE: TDC Leatherbacks are the largest surviving turtle species on earth. They can grow up to seven feet long and weigh more than 2000 pounds. They can live up to 45 years. It must be mentioned though that this species is endangered, which means that it has been categorized as very likely to become extinct. During nesting months, females swim ashore, dig their nests in the sand before laying, then covering the eggs over and returning to the sea. Two months later, the eggs hatch, and the baby turtles dig themselves out of their nests and venture out to the open sea. Few survive the predators and make it to maturity, but those females that do then return to the beaches on which they were born to begin the cycle once more. Both Grande Rivière and Matura are well-known and protected beaches in northeast Trinidad. Matura is considered to be Trinidad’s safest nesting beach because of the decline of the threat of poaching, which was once rampant. Even though, poaching is not much of a threat anymore, many other threats have arisen, including climate change and environmental degradation. Nature Seekers is a nature-based conservation group which has strong roots in Matura. They envision an empowered organisation supporting a sustainable ecosystem. The group hosts an annual beach clean up in preparation for the upcoming leatherback turtle nesting season. On Sunday 4th March 2018, eNRgyTT and Altech Energy collectively formed a group to participate in this year’s beach cleanup. Our group of 9 was just a small fraction of the total of approximately 2000 volunteers to come out in hopes of preparing the beach to host our reptile friends. Apart from our team, volunteers hailed from organizations such as the Environmental Management Authority (EMA), El Socorro Wildlife Centre, Forestry Division and the Ministry of Rural Development & Local Government, just to name a few. Over 100 bags of garbage were collected and sorted in recyclables and general waste. It is safe to say this undertaking was a tremendous success since the day after we participated in the Matura Beach Cleanup, four leatherback turtles came ashore to nest in the night. I am really proud of our team and I’m glad we could have contributed in our own little way. eNRgyTT’s Turtle Watching Tips: Please do not visit nesting beaches on your own. Always use a trained guide who will be aware of any dangers to the turtles and to visitors; Do not touch or disturb nesting turtles or hatchlings in any way. Keep a safe distance away; Do not remove eggs from nest; Lights (including flash photography), noise and activity tend to disorient both turtles and hatchlings. Try to be quiet and unobtrusive, and do not use flashlights or flash photography; Do not try to pick up hatchlings or impede their progress to the sea; DO NOT ride turtles; Do not drive on nesting beaches; the weight of the vehicle can crush eggs buried in the sand.

Trinidad and Tobago’s Energy Value Chain

Trinidad and Tobago’s Energy Value Chain

A value chain is a chain of activities that processes raw material through a number of intermediate stages to a marketable end product. For instance, natural gas after production must pass through a chain of activities that add value to the original material such that it is more readily usable by the final consumer. Although there is a cost attached to adding value, it is important to distinguish ‘cost’ from ‘added value’. The process of deriving value from gas resources is called gas monetization. This process is not a single stage one, but involves a chain of related activities starting from the extraction of the natural gas from the ground to its transmission to various market destinations. Natural gas needs a dedicated energy market and significant infrastructure even before it can be extracted. As a result, the gas monetization process is more complex than that of oil which can be easily loaded into a tanker and traded in mature commodity market to a number of well-established market destinations. Broadly speaking, the natural gas value chain is comprised of the upstream, midstream and downstream. Forms of Value Value may be reflected in terms of either: 1. Economic or monetary value: The primary form of value to all parties involved in the gas value chain is monetary in nature. To local and foreign investors, this value is in the form of dividends which provide a rate of return on the investor’s investment. With respect to investment in gas-based industries, over the last thirty years or so, over US$5 billion has been invested in gas-based plants at Point Lisas, and a further US$3.25 billion just in the LNG plants. To Government, revenues are collected in various forms all along the gas value chain through dividends, taxes and royalties. 2. Social value: a) Job creation and skills development Key skills, new jobs and generally economic wealth generally would have resulted from extensive growth of the industry over its years of existence. These may include gas well services, project management, estate and marine infrastructure operation and management, plant and pipeline construction, plant maintenance and operations, gas pricing and sales negotiation, marketing, market research and corporate law. In addition a lot of new service and supply industries would have been developed as a result of having to service the main investment. These indirect or supporting economic activities are what could be referred to as the multiplier effect of the new industry. b) Positive impact on communities Energy sector companies have embarked on a wide range of social programmes, including development of community facilities, human capacity and skills development, enterprise development, health, safety and environmental awareness, as well as contributions to educational, social, cultural and sporting initiatives.

Trinidad And Tobago Extractive Industries Transparency Initiative (TTEITI)

Trinidad And Tobago Extractive Industries Transparency Initiative (TTEITI)

What is it? The Extractive Industries Transparency Initiative (EITI) is a global standard which promotes open and accountable measurement of natural resources. This is done by encouraging transparency and accountability by companies and governments involved in the extractive industries, which include oil, gas and mining, by informing citizens of payments made between companies and governments, as an independent, unbiased third party. The Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) is part of a worldwide association of governments, extractive companies and civil society working together to improve openness and accountable management of revenues from the extraction of natural resources. Now this brings us to the question, What does the TTEITI really do: Independent assurance on the money T&T earns from all natural resources produced Accessible, relevant data on the energy sector Recommendations for the government to improve revenue collection and audit and assurance systems. 2017 Trinidad and Tobago EITI Report Summary The TTEITI produces an annual report on the extractive industries in Trinidad and Tobago. The title of the 2017 report summary is “Champagne History. Mauby Reality. Adjusting to The New Normal.” Most of us being Trinbagonians may understand the term “Champagne taste with mauby pocket”, but for those who don’t, it simply is a popular local term, which suggests that a person is living beyond their means. “Champagne history. Mauby reality” can be used to accurately describe the current economic climate of Trinidad and Tobago. Our fossil fuel based economy has provided us with a lot of revenue in the past, due to the abundance of natural resources, the high demand of those same natural resources and the high selling price of those resources. For example, in the financial year 2008, the country earned roughly TT$32.4 billion in oil and gas revenues when the global price of oil peaked to US$145 per barrel and the price of natural gas was at a high of US$13 per mmbtu. Now, however, with global oil and natural gas prices being low, coupled with a decrease in production, the economy of Trinidad and Tobago is not performing as well as it used to. Energy sector revenues fell to TT$6.58 billion in 2016 and continued to decline in 2017 to TT$6.53 billion. This low production output is as a result of: Aged/mature fields Natural gas curtailments due to maintenance work by major gas producers Insufficient investment in new exploration and production With this decline in energy revenues, we are now experiencing job cuts and layoffs, cuts in government spending, decreases in the fuel subsidy and shortages in US foreign currency. Still, as Trinbagonians, we have not properly adjusted much to this economic crisis. We still have subsidies on electricity and fuel, we still expect our government to pay our tuition, we spend frivolously without regard. Is Trinidad and Tobago spending beyond their means? Are we being efficient and wise with our revenue/income? Can we afford to operate as though we’re living in our champagne past rather than our current mauby reality? Link to TTEITI 2017 Summary Report

The Oil Price

The Oil Price

This title of this post is very straightforward and self-explanatory. However, the mechanics behind it, maybe a little more complex. We’ve been hearing a lot lately “This happening because the price of oil low”, but do we really know what that means for us and why is it happening? In Trinidad and Tobago, the energy sector accounts for roughly 40% of our Gross Domestic Product (GDP). The current (27.06.201) prices of oil and natural gas stand at: West Texas Intermediate Crude Oil = USD 43.51 per barrel Brent Crude = USD 46.01 per barrel Henry Hub Natural gas = USD 2.88 per MMBtu NOTE WELL: THE PRICE OF OIL IS CLOSELY RELATED TO THE PRICE OF GAS (view graph below to see the trend) What Drives the Oil/Gas Price? 1. Law of Supply and Demand When the global supply of oil/gas exceeds the global demand, the price of oil/gas drops since there is now an excess of oil, with no one to buy it. When the global demand for oil/gas exceeds the global supply, the price of oil/gas increases since there is now a decrease in the supply, causing oil/gas to be in demand. NOTE WELL: THE PRICE OF OIL AND GAS IS VERY SENSITIVE TO DEMAND AND SUPPLY 2. Geopolitics Global politics in the form of countries’ interactions with one another influences the price as well. For example, when the shale boom occurred in the United States and the U.S. transitioned from an importer to a producer of oil and gas, there was now an excess supply of oil (which was what the U.S. usually used). The Organization of Petroleum Exporting Countries (OPEC), whose objective is to co-ordinate and unify petroleum policies among its 14 member countries, decided to cut their production in the last quarter of 2016, to drive the oil price up. This caused tension between OPEC and the United States 3. Strength of the US Dollar There is an inverse relationship between the value of the U.S. dollar and commodity prices, i.e. dollar strengthens = drop in commodity prices. The U.S. dollar is the benchmark pricing mechanism for most commodities (including oil and gas) because the U.S. currency is the reserve currency of the world. It is viewed as the most stable currency in the world since the U.S. economy is the strongest and most stable economy in the world. When the value of the U.S. dollar drops, foreign buyers will have more purchasing power as it takes less of their currencies to purchase one U.S. dollar 4. Weather The demand for oil and gas (to be used as sources of energy) increases in winter and summer because in summer, more air conditioning units are used and in winter, more heating systems are used, thus increasing the global electricity demand which is fueled by fossil fuels. Recent History of the Oil/Gas Price As shown in the graph below, the two major recent falls in the oil price occurred in 2008 and 2014. In 2008, there was a large spike in the oil price in the first half, followed by a massive drop. In July 2008, the oil price peaked at around US $147.27 per barrel. Firstly, let us cover some reasons why there was a spike in the price: There was a decrease in supply from Non-OPEC members, which resulted in a surge in global demand. In February 2008, Venezuela cut off sales to ExxonMobil (an energy company) stemming from a legal battle over the nationalization of the company's assets in the country. Production of oil from the Iraqi fields did not recover from the damaged caused by war, and it was reported that in late March 2008, two main oil export pipelines in the south of Iraq were blown up, which cut the country's exports by 300 000 barrels of oil per day. Hurricanes Katrina and Rita hit the United States, causing major damages to infrastructure, thus contributing to a decrease in supply. This now brings us to the fall in oil prices in the 2nd half of 2008, which took place against the Global Financial Crisis aka The Great Depression. This occurred due to: Demand for oil dropped significantly globally due to the economic decline A decrease in demand since the prices were previously over US $100. If prices increase, demand will decrease. The Global Financial Crisis affected all the major "power players" or powerful global economies simultaneously, thus reducing their power and desire to import. In the United States, consumption fell by 1.8 million barrels per day or 8% causing their refineries to run at their slowest pace in 21 years. The US Dollar gained value which meant that the price of oil in dollars had to come down. Talks of bailouts and rescue plans for companies caused the stock prices to tumble, which in turn caused the price of oil to fall as well. In the 2nd Quarter of 2014, the oil price fell significantly once more. Global supply of oil was more than the global demand, this was as a result of: Increased energy efficiency and a growing interest to switch from oil to other fuels. Unrest in Iraq and Libya (two massive oil producers). America transitioned from an oil importer to an oil producer. Even though it’s not an exporter, the amount it once imported significantly decreased, creating a decrease in demand and an excess of supply. What does this mean for Trinidad? Low oil/gas price coupled with low production output means one thing for the economy of Trinidad and Tobago, the energy sector would contribute less to the total revenues earned. As seen in the graph below, energy revenues peaked in 2014, and then began to decline, coinciding with the fall in the oil price in late 2014. Source: TTEITI It can be inferred that shocks to the oil price directly affects the economy of Trinidad and Tobago. High oil/natural gas price = Economy doing good Low oil/natural gas price = Economy doing bad High oil/natural gas prices mean increased revenue for the country, whereas low oil/natural gas prices mean decreased revenue. The Future, as a result…? OPEC will stick to their production cuts to drive the oil price up further. This was announced in May 2017. Many more companies within the Trinidad and Tobago energy sector will continue to undergo cuts, to cope with their loss of revenue from low oil prices. It is reported that by the year 2035, China may be the largest consumer of oil. In the 2030s the USA may be self-sufficient in oil, due to their success with shale. There will be an increase in efforts to achieve decarbonization, as well as transition further towards renewable sources of energy.

eNRgyTT Storm Watch!!!

eNRgyTT Storm Watch!!!

As I sat there, located in the south-east of Trinidad and Tobago, surrounded by gusty winds and heavy rainfall, someone asked me "How do storms and hurricanes affect the energy sector?" Now I know what you're thinking, "Well people not gonna be able to work.......DUHHHH!!!" While you may be right Captain Obvious, there are many more effects, both direct and indirect. Since Trinidad and Tobago (in recent history and to my knowledge, cause I'm a tad bit young) has not been affected immensely by a hurricane or high magnitude storm, I intend to use other countries and their experiences as case studies, to give you an inkling as to what may happen to us if ever God decides to stop be a Trini. I also hope to take an international approach, instead of solely a local one, to illustrate how hurricanes and other adverse weather systems can affect the global oil and gas markets. The Effects: 1. Shut-down in Operations The first obvious effect would be the shutting down of platforms. Since platforms are located offshore (as shown in the picture below), if harsh weather conditions, which include heavy rainfall and dangerous winds, are expected, companies usually shut down any ongoing work on the platform and evacuate, if possible, any non-essential personnel. Those who remain are referred to as the "skeleton crew" which comprises of basically one member of each discipline, amounting to approximately 15 people in total (give or take a few). 2. Damage to infrastructure This is another obvious effect of harsh weather conditions. Platforms and vessels located in the ocean are prone to damage from rough sea conditions and gusty winds. Onshore facilities and plants may also be affected by heavy rainfall and dangerous winds. Buildings and light poles may always be destroyed during these periods. One example is Petrotrin's Point-a-Pierre facility which is prone to flooding when heavy rainfall occurs. It is reported that this is due to the removal of the mangroves that were found close to the facility. These mangroves would have prevented the flooding. An international example would be when Hurricanes Rita and Katrina hit the United States in 2005, 115 platforms were destroyed, 52 were damaged along with 535 segments of pipelines. 3. Disruption in distribution Not only do storms affect oil and gas, but they also affect electricity transmission. Abnormal wind and rain patterns, as experienced with storms and rain, can cause damage and extended power outages on the largely Overhead and Transmission Distribution Systems. Fallen trees, debris and lightning may act as obstacles in the attempts to restore power. 4. Halt in Production If weather systems are extremely dangerous, there would be a shut down of plants. If plants shut down, there would be no production of commodities such as methanol, ammonia and natural gas, which would affect the following problem. 5. Decrease in Supply = Increase in Demand = Increase in Price If as mentioned before, there is a halt in production, there would be a decrease in supply, which would result in an increase in demand. An example of this happening is when gas stations are forced to shut down to brace for the oncoming storm, people would flock to their local gas stations to fill up their tanks, to avoid having to suffer from the shortage of gas. 6. Energy Price Volatility Along with causing millions of dollars in property damage, hurricanes and storms also create volatility in financial markets, especially regarding energy prices. The evacuation of the platforms causes a disruption in the supply of oil and gas into the market, which then causes the price to increase (as mentioned before with the supply and demand relationships). For example, when Hurricanes Katrina and Rita hit the United States in 2005, they both cause record spikes in the cost of gasoline and natural gas. This was as a result of the hurricanes hitting the oil-producing areas in the Gulf of Mexico. That being said, I hope everyone was safe during the last couple of days and I hope your families and homes were not severely affected. So now that we're aware of some of the potential effects hurricanes, storms and harsh weather countries on not only our energy sector but our economy and country, on the whole, I ask you: Can our economy and country recover from a natural disaster?

“The price of gas went up!”

“The price of gas went up!”

Now as citizens of Trinidad and Tobago, we are no strangers to “the price of gas going up”, ie. Gas being “more expensive”. In the last fiscal budget, the Minister of Finance indicated that the price of diesel and super gasoline would increase. Now, what does that really mean? At the end of this, I’m hoping you’d be able to tell me… In Trinidad and Tobago, the costs of fuel and electricity are subsidized, which, as mentioned before in the first blog post, simply means that money is granted by the government to ensure that the price of a commodity, in our case electricity and fuel, remains low or competitive. Basically, the government covers a portion of the cost, resulting in more affordable prices for the average citizen. The government does this to decrease the cost of production and encourages suppliers to increase output, without major price inflation occurring. How do subsidies work? 1. Fuel Subsidies Both the Government and Exploration and Production (E & P) companies share this burden. Petrotrin supplies the commodities to the domestic market, NP and Unipet, at a market price which is below the international price. The Government and the E&P companies will then compensate Petrotrin for that loss which occurred in the sales. 2. Electricity Subsidy T&TEC buys natural gas from the National Gas Company (NGC) at a price that is significantly lower than the average market price. T&TEC then pays independent power producers, such as Powergen, Trinity Power and Trinidad Generation Unlimited (TGU) to convert the natural gas to electrical energy. This means that NGC forgoes the amount of money they could have gained by selling the natural gas at the market price. God is a Trini: Price Comparisons The average price of electricity (per Kilowatt per hour) in Trinidad is: ONE THIRD the price of electricity in the United States and nearly ONE EIGHTH the price of electricity in Barbados. The average price of super (95 octane level) gasoline (per litre) in Trinidad, is : nearly HALF the price in Barbados, and approximately ONE QUARTER the price in the United States. The average price of diesel (per litre) in Trinidad is: roughly HALF the price in Barbados, and around ONE-SEVENTH of the price in the United States. The average price of Compressed Natural Gas or CNG (per litre) in Trinidad is estimated at ONE FOURTEENTH the price of CNG in the United States. It is quite evident that the prices of the commodities paid by Trinidadians are waaaaaaaaaaayyyyyy lower than the prices paid by Americans and Bajans. In the Caribbean Trinidad and Tobago allocates higher than the average (in per cent of GDP) when it comes to subsidies. Benefits of subsidies… This is evidently an advantage for the citizens of Trinidad and Tobago since power and gasoline is now made more accessible and affordable to them. Also, by subsidizing the cost of Compressed Natural Gas (CNG), the Government of the Republic of Trinidad and Tobago is now encouraging citizens to start using the cleaner alternative form of fuel for their cars. Cheaper fuel costs = Lower public transportation fees. Cheaper electricity rates = Lower electricity bills. Is There a Downside? The answer to that question my friends is a big, resounding YASSSSSSSSSS!!!!!! Apart from the obvious benefit of cheaper prices, on the flip side, there are many disadvantages to having fuel and electricity subsidies. These include: 1. Expensive for the Government: Subsidies are basically taxes in reverse. In Trinidad and Tobago, approximately 50% of the country’s annual budget is allocated to transfers (eg. GATE) and subsidies. 2. Higher Taxes: The money being forwarded to our subsidies must come from somewhere right? Since our climate does not promote the growth of money trees, subsidy money is most likely derived from taxes. In order to maintain fuel and power subsidies in this economic situation we are now facing, the government may have to raise taxes to accommodate them. 3. Wastage of Commodities: If we’re getting electricity at such a cheap cost, what is going to stop people from “wasting it”? It can be argued that “people waste electricity and fuel because it’s cheap”. If people we’re being billed the market price for power, they would be more motivated to monitor how much electricity their homes and businesses use instead of leaving their appliances plugged in, lights on in their home and using air conditioning units all day. 4. The money… The money being used for subsidies can be pumped elsewhere, into other sectors to benefit our economy. Instead of spending so much money on fuel and electricity subsidies, the government can use that money for projects such as improving our agriculture sector, or investing in renewable energy, just to name a few. 5. Climate Change: I know what you’re thinking, here we go again with this Climate Change thing….but to be honest, it’s a serious issue that is plaguing our planet and it needs to be handled ASAP. Low energy subsidies contribute greatly to carbon emissions. If gasoline and electricity is so cheap, why would any sane person want to invest in renewable sources of energy for their cars, homes and businesses? And to be fair, they have a valid point. The initial start-up costs of using these renewables would obviously be more expensive than these subsidized prices we are currently paying for power and gas. 6. Inequity: Subsidies tend to benefit the rich more than the poor. How you may ask? Well, since both the upper and lower classes pay taxes (which may sometimes be high), and the cost of fuel and power tends to be the same for both the upper and lower classes, the upper class tends to come out on top since they are capable of spending more, but they end up spending the same amount as the lower class. Still confused? Look at the following picture… ​ What should be done? It is wise for the Government to reform energy subsidies. The subsidy should be gradually lessened and eventually phased out. While that may seem unreasonable to consumers, the population may be more receptive to the move of this action is accompanied by the following: improvements and new investments in public transportation and transport planning; cheaper alternatives to gasoline and diesel as transport fuels, CNG being a viable option; investments and promotion of renewable energy use in homes and businesses; education of the general public on the pros and cons of subsidies and how they affect the economy; transparency with regards to where the money being saved from subsidies, is being used. Now that you are aware of what “the gas price going up” really means, the next time the price of fuel or electricity is increased, you can now comprehend exactly why the government is doing this. Finally, let me leave you with this: Would you consider subsidies as our country spending beyond its means?

TT and the Paris Agreement

TT and the Paris Agreement

I’m sure as of recent, you’ve been hearing a lot on this infamous Paris Agreement, also referred to as COP21, thanks to Donald Trump and his plan to exit it. Many aren’t aware of what the Paris Agreement actually is and what it signifies for the world, and exactly how it affects our energy sector in particular. So let’s kick this off… What is the Paris Agreement/COP21? We all know about the issue of climate change and the increasing effects of its impacts over the years. Institutions have been put in place to acknowledge the effects, mitigate, adapt and prevent further damage. One such institution is the Conference of the Parties (COP) which is the ultimate decision-making body (aka the big dogs) of the United Nations Framework Convention on Climate Change (UNFCCC). The COP meets yearly, which brings us to COP21, which took place in Paris, France, from November 30th to December 11th, 2015. The atmosphere heading into Paris in 2015 was different since the detrimental effects of climate change were making themselves now apparent. The main goals to achieve in Paris were: to implement a legally binding agreement that will limit and lessen greenhouse gas emissions, and to aim to keep the warming of the earth to below 2⁰C. Many developments came out of this meeting in Paris, including: for the first time, all countries were required to report their: emission reduction strategies; emission reports. countries must allow themselves to be internationally reviewed, each country must officially submit their own climate actions and is obligated to implement them, Intended Nationally Determined Contributions (INDCs) were stated, where a “bottom-up” approach (meaning individual countries propose what seems to be achievable and reasonable emission trajectories for their cases) was used instead of a “top-down” approach (meaning a collective global emission target was established and the negotiators divided country-level responsibilities to achieve this target), increased involvement from countries who previously did not view Climate Change as an issue (e.g. China & India), increased participation of the private sector in the fight against climate change, increased interest in renewable energy. How is being a part of the Paris Agreement beneficial to us? Trinidad and Tobago is referred to as a small island developing state (SIDS). This means that the country is susceptible to the effects of climate change, which includes rising sea levels, changes to precipitation patterns, increases in temperature, increased flooding (as we ALLLLL know), increased frequency and intensity of hurricanes and loss of coastal habitats to name a few. “We feelin’ hot, hot, hot!!!” It has been recorded, over the last 3 decades (or thirty years), there was an increase in temperatures. The T & T Meteorological Service (TTMS) found that the yearly average temperature has warmed over the period 1981-2010 by 0.8⁰C, when compared to 0.5⁰C between 1961-1990 and 1971-1990, for Trinidad and Tobago, respectively. I can promise you this heat is not as a result of the increase in the population of beautiful women in our country. “Shape up…..or ship out!!!” Trinidad and Tobago has one distinguishing characteristic when compared to other SIDS. We have a heavily industrialized economy, and we are the leading Caribbean producer of oil and gas. As discussing in previous blog posts, oil and gas is the leading economic sector in our country and accounts for 40% of our GDP and a whopping 80% of our exports. When considering the effects of climate change, as well as our fossil fuel-based economy, implementation of climate change action, including mitigation policies, is definitely regarded as a necessity. The Government of the Republic of Trinidad and Tobago, as a signatory of the UNFCCC, has recognised the importance of addressing, mitigating and eventually prevention further Greenhouse Gas emissions. Implementing the INDCs is therefore critical and necessary to ensure sustainable development within the country that will benefit us in the short, medium and long terms. By reducing carbon emissions and climate vulnerability in all sectors, the following benefits will occur: many “green jobs” will be created, increased quality of air, decreased public health costs, and enhancement of the coping ability and capacity to the negative effects of climate change. Now that you have all the information necessary to formulate your own opinion on the matter, I post these questions to you: Do you agree with Donald Trump on pulling out of the Paris Agreement? Do you believe Trinidad and Tobago can achieve carbon reduction? Do you think the Paris Agreement will be a success?

Renewable Energy or Nah?

Renewable Energy or Nah?

So my friends the million-dollar question being asked by everyone is, “Why didn’t we invest in renewable energy yet? To be fair, that is a very valid question and it shows that our population at least cares about being sustainable. However, there are many determining factors which contributes to the successful implementation of renewable energy in Trinidad and Tobago. Honestly, we have real things to see if we really want that to work. We start from scratch here, so stay tuned… What is Renewable Energy? As the name suggests, this is energy derived from renewable sources, which essentially means it won’t run out. Examples of renewable sources of energy include: solar, wind, geothermal, hydro tidal. These are the total opposite of oil and gas which are non-renewable resources, that would eventually run out one day. Why should we transition to Renewable Energy? HEAT! Every. Single. Dayyyyyyy y’all complaining, “Oh goshhhhhh!!! Why the place so hottttt??” Y’all ever wonder why? The surface temperature of the earth is now on the rise thanks to this lil pest called climate change (any Trump supporters, please skip to the next section)… Yea so back to business…CLIMATE CHANGE!!! When we burn fossil fuels (in our case oil and gas), we release greenhouse gases into the atmosphere. These gases form a layer around the earth, trapping rays from the sun (Ultra Violet rays) and heat, therefore warming the surface of the earth since the heat cannot escape. *Football reference alert*: In other words fellas, this greenhouse gas layer is basically Bonucci…nothing is getting past it and everything is trapped under it. I’m pretty sure you understand now So now that we established that M1 was telling the truth and we really hot on the inside…Climate change not only causes high temperatures, but it also causes harsh weather systems (like massive hurricanes), melting of the polar ice caps, coral bleaching, and rising sea levels, which would cause flo-e-o-e-ods on not only the main roads *cues Ataklan* Natural Gas can be used as reserves or further down in the downstream sector So if let’s say now, we use renewable energy sources for power generation instead of Natural Gas…wouldn’t we have extra NG to use in other places? That Natural Gas can be used as reserves, or they can be used in the downstream sector (refer to previous blog post to refresh yourself on what the downstream sector is). Currently there is a shortage of natural gas in the downstream sector, which can be solved by…you guessed it!!!! RENEWABLE ENERGY SOURCES TO GENERATE POWER!!! I knew you knew that. Intended Nationally Determined Contributions (INDCs) Yes, yes…I know you’re thinking “What she really talking about here now?!” Allow me to elaborate. An INDC identifies the actions a national government intends to take under the Paris Agreement agreed in December 2015 at the 21st session of the Conference of the Parties (COP21). INDCs are, therefore, the basis of post-2020 global emissions reduction commitments included in the climate agreement. Yes, I know it’s a lot to read, so please read slow… Trinidad and Tobago’s INDCs include: reduce greenhouse gas emissions by 15% by the year 2030 by 2021, 10% of the energy generated must come from renewable energy sources As clearly stated above, based on our INDCs, it is imperative that we start investing in renewable energy, as a nation. So if all this bacchanal happening to the world, why not invest in renewable energy sources right? What is preventing us from using Renewable Energy in Trinidad and Tobago? First and foremost….IT’S ILLEGAL!!! It is illegal in Trinidad and Tobago to put power back onto the grid, which means if you invest in renewable energy, you have to be completely off T & TEC’s electricity grid. To do that is a whole other set of dramas. You need special permission to be off the grid, so that’s real paperwork (which Trinbagonians not too fond of) and You’d have to store or the energy harnessed and lemme tell you, something people, it is REALLY expensive to do. Price of Power As indicated in the first blog post, the price of power in Trinidad and Tobago is one of THE cheapest in the WESTERN HEMISPHERE!!! Let’s be real here…If you paying next to nothing for electricity, you really going to spend money to invest in solar panels and thing for your house? After all, Trinis LOVE cheap prices. You could really blame us though?! Public Awareness In Trinidad and Tobago, there isn’t much information available on renewable energy. This lack of info results in the public being uninterested and closed to the idea of using renewable energy in their homes and business places. Financial incentives…. As you may have guessed, it may be a bit costly to initially implement renewable energy. The start-up costs are a big deterrent for domestic use aka using it in your house. In the grander scheme of things, most companies in the energy sector find it hard to invest in renewable energy because plain talk, bad manners…have very little in it for them. There are not many profits in it for them. This is a huge no-no to them. In a perfect world, we would hope they would care more about clean energy than money…but c'monwe here to keep it real. So what should we do? 1. Change legislation T&TEC Act: to allow power to be put back onto the grid Feed-In Tariffs: a payment made to households or businesses generating their own electricity using methods that do not contribute to the depletion of natural resources Net-metering: a billing mechanism that credits solar energy system owners for the electricity they add to the grid 2. Offer tax breaks and other financial incentives By sweetening the deal, more companies would be encouraged to invest in renewable energy 3. Educate the public 4. Reduce the subsidy on electricity By reducing the subsidy on electricity, citizens would now have to pay more for electricity in the country. By doing this, the government eliminates wastage, as well as motivates the population to find cheaper alternatives to the electricity being provided. Since renewable energy is cheaper in the long run it will be their next choice. So after I just preached about renewable energy, from both perspectives… I pose this question to you: “Renewable Energy or Nah?”

Compressed Natural Gas (CNG)

Compressed Natural Gas (CNG)

I’m sure as of recently, you’ve been hearing and seeing a lot about CNG in Trinidad and Tobago. Being your neighbourhood, friendly eNRgy girl, I thought maybe I could shed some light on the topic, for those who are still in the dark. What is CNG? CNG or Compressed Natural Gas is commonly referred to as the cleanest of all fossil fuels. It is a clear, odourless, non-corrosive gas that can be used as a cheaper, cleaner and more efficient alternative to the traditional fuels used in our vehicles. It is called COMPRESSED Natural Gas because it is compressed so that sufficient fuel can be stored in the vehicle to extend the driving range. Why should we use CNG? 1. Better for the environment There are many benefits to using CNG. As previously mentioned, CNG “burns cleaner” in comparison to traditional petrol and diesel. In CNG powered cars, carbon monoxide emissions are reduced by approximately 80%, when compared to gasoline-powered cars. CNG also produces 45% fewer hydrocarbons than gasoline. Natural gas is still a contributor to greenhouse gases, however, the emissions are significantly reduced. CNG is also a non-toxic fuel, which means it doesn’t pose any danger of contamination to groundwater. 2. Better for your car CNG combusting leaves little or no residue when compared to traditional gasoline, which means damages to pipes and tubes in the vehicle’s engine is quite less. Also, there’s less particulate matter that may potentially contaminate your motor oil (fewer thingies floating round in your oil guys…. YAY!!). Whilst unleaded super and unleaded premium has octane levels of 95 and 97 respectively, CNG has an octane number of 125 which increases engine performance and efficiency. This simply means that “The octane rating of a fuel is a measurement used to indicate its resistance to engine knock. A fuel with a higher-octane rating will have more resistance to knock”. What exactly is this knocking you may ask? All you need to know is that engine knock es no bueno mis amigos. The higher the octane level, the less likely the fuel is going to pre-ignite or explode unexpectedly. All these things, therefore, mean that the maintenance cost of your vehicle will be cut down since there can be long periods between tune-ups and oil changes. You know what that means…. MORE MONEY FOR KFC…. I mean tuition and groceries and other FUN adult responsibilities. 3. No smoke, no fire brigade. Please alert Bunji, this is a fire-free zone. Since the ignition temperature of CNG (600 degrees celsius) is higher than that of gasoline and diesel (320 and 285 Degrees Celcius respectively), CNG vehicles are less likely to catch fire under any circumstance. If a leak occurs, CNG is lighter than air, which means it will dissipate into the atmosphere, unlike in the case of gasoline or diesel, which will pool in the ground and serve as a fire hazard. 4. Less likely to go BOOM! CNG has a flammability rating of approximately 5 to 15%, which makes it less flammable and much safer than other fuels 5. Cheapness = Happiness CNG is nearly one third the price of Super. CNG = $1.00 TT/L Super = $3.58 TT/L Premium = $4.00 TT/L Diesel = $2.30 TT/L 6. A little something in it for you The Government of Trinidad and Tobago has removed Motor Vehicle Taxes and Value Added Tax (V.A.T) on imported vehicles (less than 2 years old) that are manufactured to use natural gas. That no tax thing sounding pretty good eh… Also, one can receive a 25% tax credit on the cost of converting (limit of $10 000 per vehicle) to CNG. 7. Win win win, no matter what… Not only do you benefit, but the government benefits as well. CNG use reduces the Government’s fuel subsidy (discussed in previous blog posts). It also generates foreign income from the sale of the liquid fuels which aren’t used. What are the concerns with CNG? As with anything in this world, there are also disadvantages to CNG. These are the setbacks for people who may be considering the conversion to CNG: 1. The weight of the vehicle is increased. This is because of the installation of the pressure tank holding the CNG. 2. CNG vehicles are subjected to stricter safety measures. 3. Less vroom. The engine power is reduced by 5-10% in converted vehicles 4. CNG filling stations. There is not a great distribution of CNG filling stations in Trinidad and Tobago. There are about 20 stations (give or take a few) and most of them are located near to urban areas. 5. CNG vehicles have a shorter travelling distance in comparison to traditional gasoline vehicles. What’s your choice? There are many improvements which must be made if the Government wishes to encourage the population to convert to CNG. One of which MUST BE the increased availability of CNG nationwide, which means the establishment of more filling stations. Another is public education. The average citizen knows little to nothing about CNG and its benefits. If they are made aware, they can then make an informed decision. Thank God for this blog lol, y’all can make an informed decision. So now that you’re aware of the pros and cons to Compressed Natural Gas, I leave you with the question, Would you choose a CNG powered vehicle over a traditional gasoline one?

Our Energy Sector: "De Whole Scene..."

Our Energy Sector: "De Whole Scene..."

Ever sit and wonder to yourself, “What is the real scene with our energy sector?“…well wonder no more. Gather round, let me give you the basic rundown. Here are 6 quick facts about our local energy sector: 1. What is the energy sector? The energy sector is a general term used to summarise all of the industries involved in the production and sale of energy (oil and gas) including exploration, extraction, refining, manufacturing, marketing and distribution. The sector is divided into these three parts: upstream: exploration and production midstream: transmission, and downstream: manufacturing, processing, retail. The relationship among these sub-sectors is referred to as the energy/oil and gas value chain. 2. “Old like the road…” The energy sector of Trinidad and Tobago is roughly, over 100 years old. 1857 – the first well drilled for oil in Trinidad was 61 metres deep in the vicinity of the Pitch Lake by the Merrimac Company. 3. “Where all we money does come from dad-dayyyy?” *Erphaan voice* The energy sector contributes to approximately 40% of our Gross Domestic Product (GDP). GDP is the total value of goods produced and services provided in a country during one year. This means a large portion of our revenue comes from the export of oil, natural gas and petrochemicals. For the past four decades, the energy sector has been the backbone of Trinidad and Tobago’s economy. 4. “Sweet sweet T & T…” The price of gas in Trinidad and Tobago is subsidized. What does this mean? A subsidy is a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive. Basically, the government covers a portion of the cost of fuel, making it more affordable to the common citizen. The current price of gas stands at: Super – $3.58 TT Diesel – $2.30 TT Due to our current economic climate and the current price of oil, the fuel subsidy is expected to decrease further, causing the prices to be paid by the consumers, to increase. Apart from our fuel subsidy, The price of electricity in Trinidad and Tobago is also subsidized, making it the cheapest electricity rates in the Caribbean. The residential cost of electricity in Trinidad and Tobago is US$0.04 per Kilowatt-hour, which is well below the regional average of US$0.33 per Kilowatt-hour. 5. “The land of oil and music……and natural gas?” Somebody call Machel and King David Michael Rudder to remix the song one time!!! We moved from a dominant oil industry to mainly a natural gas-producing one in the late 1980s, early 1990s. Trinidad and Tobago is the largest producer of oil and gas in the Caribbean. Globally, we are a major gas producer, with a total gas production of 4,325 million standard cubic feet per day. 6. Our exports… T & T is the world’s largest exporter of ammonia 2nd largest exporter of methanol. There are 11 ammonia plants and 7 methanol plants in Trinidad. 7th largest exporter of Liquefied Natural Gas (LNG), accounting for 43.4 % of US Imports in the year 2010. So if you feel all we good for in T & T is Carnival, soca, doubles, rum, beach and gyal…yuh better think again!!!! Stay tuned for more info, where we delve deeper into the ins and outs of our energy sector.

Tighten Your Belt...The Continuation

Tighten Your Belt...The Continuation

As we, Trinbagonians, are on the eve of the 2017-2018 fiscal budget, which is carded for Monday 2nd October 2017, it is imperative that we prepare ourselves for what may potentially be in our future. According to the Bourse Report, the following occurred during the 2016-2017 fiscal year. It can be broken down into two major sections: Revenue Expenditure On the revenue side of the equation…. GDP Growth SOURCE: CENTRAL BANK OF TRINIDAD & TOBAGO In 2014 and 2015 GDP growth was -0.6%, which further increased negatively t0 -2.3% in 2016. The IMF (International Monetary Fund) expects for 2017, that there will be a positive GDP growth of 0.3% due to an increase in production in the energy sector with regards to natural gas and relative production stabilization within the oil industry. Energy Sector Contribution to GDP In 2012, the petroleum sector accounted 41% of GDP (approximately $60.5 billion). In 2016, the sector generated around $27.5 billion dollars or 19% of GDP fortune. The non-energy sector contributions would have remained relatively constant over the years. SOURCE: CENTRAL BANK OF TRINIDAD & TOBAGO Decreased Revenue Lower levels of production mean that less energy commodities can be manufactured and exported, therefore generating less revenue. The Government Total Revenue in 2012 was $47.1 billion dollars, where 29 915 000 barrels per day were being produced, in comparison to $41.7 billion in 2016 (26 164 000 barrels were produced per day). Total Revenue is directly proportional to the Energy Revenue which stems from the amount of crude oil being produced, and by extension, natural gas as well. SOURCE: CENTRAL BANK OF TRINIDAD & TOBAGO On the expenditure end… Increased expenditure. SOURCE: CENTRAL BANK OF TRINIDAD & TOBAGO In 2015, central government expenditure stood at TT$ 31.8 billion and it increased by 1.8% (TT$ 0.4 billion) to TT$ 32.2 billion in 2016. There were not much changes to the composition of the total expenditure, and it must me noted that Transfers & Subsidies usually account for roughly 50% of all government expenditure. Increase in Fiscal Deficit. A fiscal deficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings. In 2016, there was decrease in revenue and an increase in expenditure. This meant that there was an increase in the fiscal deficit by TT$ 3.9 billion, from TT$ -5.5 billion in 2015, to TT$ -9.4 billion in 2016. SOURCE: CENTRAL BANK OF TRINIDAD & TOBAGO Increase in Debt-to-GDP Ratio. The debt-to-GDP ratio is the ratio of a country's public debt to its gross domestic product (GDP). By comparing what a country owes to what it produces, the debt-to-GDP ratio indicates the country's ability to pay back its debt. A low debt-to-GDP ratio indicates an economy that produces and sells goods and services sufficient to pay back debts without incurring further debt. A high debt-to-GDP ratio means that an economy does not sufficiently produce and sell goods and services to pay back debts without incurring further debt. The total Debt-to-GDP Ratio increased from 58% in 2015 to 61.5% in 2017. SOURCE: CENTRAL BANK OF TRINIDAD & TOBAGO What Can We Expect in the Upcoming 2017-2018 Fiscal Budget? It is safe to say that many changes are necessary in order to cope with our current economic climate, as well as prepare for what’s in store for us in the future. We can expect further job cuts, removal/amendments of certain transfers (e.g. GATE) and subsidies (gasoline and electricity), increase in taxes and possible implementation of the rumored property tax. In an address to the nation today at the “Spotlight on Trinidad and Tobago’s Financial Circumstances: The Road Ahead” conference, Prime Minister Dr Keith Rowley stated that: “We have to trigger growth process in the economy. The basic strategy is getting the private sector involved in targeted industries: export, manufacturing, tourism, housing, maritime services, agriculture, financial services and creative industries.” What do you, as a citizen of Trinidad and Tobago, expect out of the upcoming 2017-2018 Fiscal Budget? Stay tuned for the subsequent Post-Budget analysis coming to you, next week.