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UWI TODAY
– SUNDAY 1ST MARCH, 2015
CAMPUS SEMINARS
The Faculty of Law
at The UWI St. Augustine campus
is keen to develop Oil and Gas law because it addresses
an area that is critical to the developmental needs of
the Caribbean region and Trinidad and Tobago in
particular. In the second semester of the 2013-2014
academic year, Mrs. Alicia Elias-Roberts, law lecturer
with a Masters in Energy, Environment and Natural
Resource Law from the University of Houston, was
key in developing an Oil and Gas Law course that was
The impact of falling oil prices
has profound implications
for the state of the Republic, not only directly on the
economy, but for what it portends for a recalibration of
T&T’s focus. On January 30, 2015, the Trade and Economic
Development Unit (TEDU) atThe UWI, hosted a pertinent
seminar,
“The Need for Economic Diversification: Falling
Oil Prices and its Implications on the T&T Budget,”
which
attracted more than 300 persons.
The panel included Professor Andrew Jupiter of
the Department of Chemical Engineering, Dr. Anthony
Birchwood, Mr. Gregory McGuire, and Dr. Roger Hosein
from the Department of Economics. The feature speaker
was the former Governor of the Central Bank of Trinidad
and Tobago, Mr. EwartWilliams, who is also a distinguished
fellow at the Department of Economics.
Prof. Jupiter shared literature highlighting the response
of the energy sector to falling oil prices, and surprised the
audience when he indicated that oil giants Exxon Mobil,
Shell, and BP have all made plans to reduce expenditure by
US$5.5 billion, US$9 billion, and US$2 billion respectively,
with Shell abandoning a US$6.5 billion petrochemical plant
in Qatar.
Some of the far-reaching consequences expected will
include increased unemployment within the energy sector,
the reduction and/or removal of subsidies related to oil
revenues and increased pressures on floating exchange
rate regimes.
Dr. Birchwood detailed the implications for the
exchange rate in the context of the falling oil prices. He
rejected the IMF’s decision to maintain the exchange rate
at its present value, and noted that 60% of OPEC countries
have already devalued their currencies, and the remaining
40% boast greater reserves of oil than Trinidad and Tobago.
He recommended a gradual decline in the exchange rate to
allow greater flexibility, whilst removing the pressure on
the demand for the US currency. He alluded to the fact that
non-banks have become licensed foreign exchange dealers;
enabling these entities to acquire US currency directly from
the Central Bank of T&T, as well as to purchase currency
at the banks.
“This is a double whammy. These companies can get
two bites of the cherry,” he said. This came on the heels of
the cries of the local business community of a shortage of US
currency on the market to conduct business. Dr. Birchwood
was alarmed that as of January, the Central Bank had already
injected a quarter (US$400m) of the total injection of the
previous year (US$1.7b) in order to keep the exchange rate
stable. This action was deemed unsustainable.
Mr. Gregory McGuire offered a wealth of information
on the facts of the present oil price dilemma. He noted that
a significant portion of Government revenues is obtained
from the oil sector. From this discussion the audience was
made aware of the difficulties of diversifying away from the
oil sector, and the challenges of finding suitable alternative
sources of government revenues. Both Mr. McGuire and
Dr. Hosein believe that the revenues from the oil sector are
the engine that will afford the nation the opportunity to
diversify into other sectors. Mr. McGuire added that since
2010 there has been no new investment in the gas industry
of Trinidad and Tobago.
Dr. Hosein, the Co-coordinator of the host unit, TEDU,
highlighted the need for diversification within the very
present threat of shale gas to the gas-based economy of
Trinidad and Tobago. He noted that the US had approved
a bill aimed at increasing exports of LNG to the market
that will be game changing for suppliers of neighbouring
countries to the US. This threatens the existing and future
market of natural gas producers in Trinidad and Tobago. He
added that the current economic climate and the shale gas
boom introduce characteristics of a newnormal to the global
economy. He pointed out that the State had absorbed surplus
labour, whilst leaving the manufacturing and agriculture
sectors starved for labour. He made calls for optimal
resource use and labour reallocation as the foundation to
diversify the T&T economy. He further added that there
Oil, Gas and other matters
Exploring the need for economic diversification
was an urgent need to reduce wastage in the economy by
amending transfers and subsidies, including GATE and the
fuel subsidy, and to open up the economic spaces of T&T
via the construction of various highways.
Former Governor of the Central Bank of Trinidad and
Tobago, Mr. Ewart Williams, began his speech by giving a
brief recap of the origins of the Heritage and Stabilization
Fund. He pointed out that with the tumultuous fluctuations
in the oil price during the1970s and 1980s, we, as a state,
ended up in a standby arrangement with the IMF, A
structural adjustment requirement from theWorld Bank and
also sought debt rescheduling from creditors. He outlined
the transformation of the Interim Revenue Stabilization
Fund (IRSF) to the Heritage and Stabilization Fund and how
funds were accumulated since its establishment.
The HSF was expected to represent a device for
increasing national wealth and promoting fiscal discipline
but this has not happened especially due to the fiscal deficits
since 2009; also only about 8% of energy sector taxes were
entered into the fund which amounted to TT$16 billion
out of the TT$210 billion collected, and finally the high
level of spending supported by the energy revenues which
ultimately forced us as a nation into a very textbook Dutch
Disease situation.
He calculated that we have not saved enough in the
HSF and given the lower reserves on the horizon, we need
to accelerate the rate of accumulation if the fund is to
become substantial. He concluded that permitting the HSF
to participate in some high quality domestic investments
could carry substantial advantages and recommended that
an open discussion of forceful governance partnered with
transparency standards to moderate risks and political
turmoil can lead to a better balanced HSF.
There was a general sense of consensus that the
perpetuation of the current conditions will inevitably lead
the country to another 1980s type of recession. This notion
was the impetus for the questions and concerns raised by
the audience. When the floor was opened for comments
and questions, the audience was very eager to express their
views, comments and questions. While some comments
weremore political than others, there seemed to be a general
consensus among the audience that the solution for T&T
is diversification. The audience generally believed a lack of
political will prevented T&T from diversifying.
From these discussions it was clear to the organizers
that more opportunities for dialogue are required and as
such a decision was taken to host other installments of the
seminar focusing on key macroeconomic issues. A tentative
date for another session at Presentation College in San
Fernando was set for Wednesday, March 25, from 6pm. At
this session the diversification discussions will continue.
This report on the seminar was prepared by Don Charles,
Nazim Gittens and Akeeta Ali of TEDU.
offered at The UWI for the first time.
Currently the Faculty of Law is organising its inaugural
conference and workshop on Oil and Gas Law with the
support of bpTT. This conference and workshop, themed:
“Introducing Caribbean Oil and Gas Law: Emerging legal
issues in a time of Oil Price volatility,”
is extremely important
to the Faculty and one that will have regional appeal. It would
be of particular interest to lawyers, students, government,
workers in the energy industry andmembers of civil society
interested in this area.
The conference takes place at the Hyatt Regency,
Port of Spain on Thursday 30th April 30 and Friday
May 1 from 8am-4pm on both days. The deadline for
registration is April 25, and the costs are as follows:
Normal Registration fee:
............................... $US800
Early Bird
(before March 28, 2015): ............. $US750
Group package
(3 or more): ................$US700 each
Introducing Caribbean Oil and Gas Law
