Transcript T&T's Local Content & Participation Policy
Oil and Gas
Where is the Value Added?
How Do You Get it?
Extracting from an Extractive Industry
Maximising Local Value in the Trinidad & Tobago Energy Sector
Anthony E. Paul Managing Director, Caribbean Energy Specialists [email protected]
Dakar, 7 th Feb, 2008
Contents
• • • • • •
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CONTEXT The Premise Where we started
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The Vision Energy Vision 2020
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Energy Sector’s role in national development
Policy Development Strategies Current Status Summary & Lessons Learnt
Anthony E. Paul © February 2008
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Trinidad & Tobago - Location
USA
T&T
Venezuela
200 M.
GRENADA TOBAGO TRINIDAD VENEZUELA Eastern Venezuela Basin – one of most prolific in the world Ideally situated for accessing major/high value markets
R I V E R O R I O EASTERN VENEZUELA BASIN
GUIANA SHIELD Anthony E. Paul © February 2008
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Oil & Gas Production
History & A Conservative Forecast - 2023 ALNG IV Ministry of Energy & Energy Industries Anthony E. Paul © February 2008
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Context
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The Premise
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Past experiences
The “Plantation Economy” “Resource Curse”
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• •
We have another chance to get it right
For ourselves For future generations Anthony E. Paul © February 2008
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Context
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– –
• • •
Where we started
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E&P
Big natural gas discoveries (1990s) Major field developments Increasing production and operations
Downstream
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Natural gas industry growth LNG Chemicals
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Services Growth
Anthony E. Paul © February 2008
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Leverage Upstream Opportunity
Sustained and Continuous Upstream Growth , underpinned by great exploration success story – Natural Gas is DIFFERENT 4000 3500 3000 2500 2000 1500 1000 500 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 Anthony E. Paul © February 2008 2020 2022 2024
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Major Upstream Third Party Service sub-sectors & spend Some Services enable transfer to other sub-sectors and industries Engineering, Fabrication Anthony E. Paul © February 2008
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Contents
• • • • • •
– –
CONTEXT The Premise Where we started
–
The Vision Energy Vision 2020
–
Energy Sector’s role in national development
Policy Development Strategies Current Status Summary & Lessons Learnt
Anthony E. Paul © February 2008
9
The Energy Sector Plays a Major Role in T&T’s Development
The energy industry is the primary driver of economic activity in T&T, accounting for an average of 36.6% of the country’s GDP over 2001 to 2005 (based on constant 2000 prices). For 2006, this has risen to 45.1% Because of its scale and scope, the energy sector will continue to be a major driver for economic development, while providing a platform for significant development of: People, Enterprises The Capital market and Innovation and Technology These are key ingredients in achieving the “Vision 2020” goals. This allows us an opportunity to use the energy sector as an agent for sustainable development and diversification.
Trinidad and Tobago has embarked on an ambitious and far-reaching programme to achieve widespread and sustainable development by the year 2020.
Anthony E. Paul © February 2008
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Increasing Local Value-Add
– The Trinidad & Tobago Framework E E N N T T E E R R P P R R IS D E V E LO E E P P ME H H U M C A A N P A B ILI T Y M M A A R R K K E E C C T T A A P S P S IT A A L L Local Value-Add building blocks:
Human Capability
– employment, training, development and internationalisation (making globally competitive) of Trinidad and Tobago nationals in: • • Operations skills - technical, operational and managerial capability.
Strategic business skills - commercial, analytical, business development and leadership capability..
Enterprise Capability
• • governance tools, – improving the value-add, know-how and innovation capability of local businesses and institutions, by developing and enhancing: access to and adoption of best-in-class business practices, knowledge,
technology
, processes and standards • • • market share and reach (locally and internationally) · level of local control and ownership
transferability to government, education & other sectors
Capital markets
– encouraging the growth of the use of the local capital market through its role as: • A source of debt and equity financing.
• A mechanism for:
i.
increased levels of in-country profit retention and
ii.
public trading of Trinidad and Tobago businesses, to: - promote good corporate governance and - wider wealth distribution.
Moving up the pyramid enhances sustainability through the creation of transferable capability
Source: A.E. Paul 2003
Anthony E. Paul © February 2008
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Vision
To be an integrated and fully developed energy sector that is a key driver of a sustainable and flourishing local and regional economy while attaining global competitiveness in all of its sub-sectors by 2020.
•
sustainable, operating transparently with the full support of the government, through effective governance
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will include locally owned and managed energy based companies … throughout the complete value chain … both local and global
•
Trinidad and Tobago will :
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become the regional financial and energy trading centre, supported by
a strong and vibrant capital market world-renowned educational institutions
a technology hub that stimulates innovation and entrepreneurship a strong public-private sector partnership.
Anthony E. Paul © February 2008
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Vision 2020 – Energy Sector Goals
1.
2.
3.
4.
5.
6.
7.
8.
9.
Optimise exploration and production
(pace & volume)
Maximise wealth creation, capture and distribution Development of human capital Robust & respected institutions and regulatory framework Transparent governance Competitive and sustainable local energy companies Industrial development and diversification to high value-add service industries Protection and enhancement of the natural environment Sustainable investment in social capital
Anthony E. Paul © February 2008
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LOCAL CONTENT POLICY
Value Maximization
Government & Country can Maximize Value from Resources through: 1.
Fiscal Measures
Taxation and Royalty Policies Government Expenditure
2.
Non Fiscal Measures
Local Participation Local Content
3.
Local Capability Development
transfer of technology and know-how form international partners capabilities that can be transferred to other sectors cluster developments with other industries that have a natural synergy with the energy sector (e.g. ITC, Education & Maritime)
Anthony E. Paul © February 2008
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Local Content and Participation Policy Statement
To achieve the goal of maximum local content and participation in the energy sector, all participants will be selected, engaged and managed in a manner that: 1.
Identifies WHERE to enable local value added opportunity capture, by
selecting specific goods and services for focusing efforts
2.
3.
.
Determines HOW to enable delivery of maximum local value-added by :
Managing the pace and scheduling of the programme of sector’s activities Targeting local capability development by increasing in-country activities Giving preference, firstly, to locally owned, controlled and financed enterprises, then to those that demonstrate a clear culture, commitment and capacity for maximizing local value-added, participation and capability development consistent with T&T’s aspirations and vision Focusing on improving local skills, business know-how, technology, financing, capital market development and wealth capture and distribution,
Ensures DELIVERY of Maximum Local Value Added by: Setting targets Measuring and reporting
Establishing benchmarks, targets and opportunities for improvement and the transfer of best practices
Anthony E. Paul © February 2008
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Contents
• • • • • •
– –
CONTEXT The Premise Where we started
–
The Vision Energy Vision 2020
–
Energy Sector’s role in national development
Policy Development Strategies Current Status Summary & Lessons Learnt
Anthony E. Paul © February 2008
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Managing The Resource To Maximise value
Roles & Responsibilities of Stakeholders
(Illustrative)
OWNERS
• Country • People •
VISION LEADERS
• Parliament • Cabinet
FIRMS
Ministers & Ministries CEOs •
POLICIES
•
Legislation
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OBJECTIVES
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Development
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Poverty Reduction
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Sustainability
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Wealth Creation
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STRATEGIES
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Priorities MANAGERS State Companies
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Private Companies SUPPORTING AGENCIES
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Regulators
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Capacity Development Institutions
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Service Companies
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ACTION PLANS
• • •
OPERATING REPORTING IMPROVING
• • •
Terms of Engagement Contracts Regulations CIVIL SOCIETY Anthony E. Paul © February 2008
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Training and Skills Development Programmes and Institutions
- From the bottom up MULTI SKILLED CRAFTSMAN (JOURNEYMAN) SKILLED CRAFTSMAN -
NESC - TTIT
• •
2-Year Diploma in Technology
• •
4-Year B.Tech Degree
• •
Continuous Professional Development
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Customised Short Courses for Industry
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Community College
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SFTI / JDTI
NESC CRAFT CENTERS
• •
Welders & Pipe Fitters
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Electricians
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Instrument Fitters
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Millwrights, etc .
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YTEPP
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Secondary Schools
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P OINT L ISAS
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P OINT F ORTIN
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M ACOYA
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S TE. M ADELEINE
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B ARRACKPORE
Anthony E. Paul © February 2008
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Some upstream activities are better positioned than others in their ability to achieve SD’s multiple strategic aims UPSTREAM ACTIVITIES Deep Analysis of the value chain to identify sources of value CHARACTERISTICS
$ upstream spend Job creation potential Cyclical nature Gas/Oil price sensitivity Value-added skill content Innovation potential Technology potential Knowledge transferability Non-energy transferability JV attractiveness
High Moderate Low
Anthony E. Paul © February 2008
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Fabrication, engineering and construction and drilling/well services are upstream activities which have high potential for broadly achieving LC&P multiple aims UPSTREAM SUB-SECTORS
High Sustainability sectors High impact sectors
CHARACTERISTICS
$ upstream spend Job creation potential Cyclical nature Gas/Oil price sensitivity Value-added skill content Innovation potential Technology potential Knowledge transferability Non-energy transferability JV attractiveness
High Moderate Low
Anthony E. Paul © February 2008
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Contents
• • • • • •
– –
CONTEXT The Premise Where we started
–
The Vision Energy Vision 2020
–
Energy Sector’s role in national development
Policy Development Strategies Current Status Summary & Lessons Learnt
Anthony E. Paul © February 2008
21
Current Status What’s been happening since
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Aggressive Exploration
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Nearshore, including Deep drilling,
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Land (deep & shallow),
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Deep water
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Heavy oil & tar sands
– • •
Major downstream developments
– – –
Natural Gas Chemicals, Metals, Power, LNG Oil Refining (upgrade/expansion) Marginal and heavy oil field development
– • •
New Contracts (Production Sharing Contracts and E&P (Tax & Royalty) Licences) align with value-added policies and include: local content and participation policy Training and development & Research and development requirements Anthony E. Paul © February 2008
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New Production Sharing Contracts (2006)
Policy Objectives
Encourage greater exploration and development activities Encourage diversification of investors Ensure availability of supplies for domestic and export markets* Ensure new revenue stream for future generations Maximise Value Capture for T&T Maximise Revenue to State Increase Local Value-Add * Government participation in the full value chain
Contract Re-opener Clauses
Anthony E. Paul © February 2008
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Contract Terms Availability of Supplies for Domestic and Export Markets
GOV ’ T to advise of its preferred marketing arrangements GOV ’ T to develop separate marketing arrangements for its Share Contractor to include an analysis of marketing options, including supplies to existing or potential projects in the
internal market
.
Source: MEEI, Nov 06 Anthony E. Paul © February 2008
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What Are We Doing?
Local Value-Added Building Blocks
Institutions, Policies & Procedures
1.
2.
3.
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People Development
• • • • •
Capacity building Universities – UWI/UTT Technical schools High school programmes Primary school curriculum
• •
Pre-school Community engagement & enhancement Media training Civil Society Network
– – – – –
Enterprise Development
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Local Content & Participation Business Support – Centre for Energy Enterprise Development (www.ceedtt.com)
• • •
Diversification Deepening & broadening in energy
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Downstream vs. LNG Oil vs. Natural Gas Other value chain activities (shipping, trading, distribution, etc.)
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Building other sectors From energy (e.g. services, training) Clusters alongside energy (e.g. ITC, maritime)
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Innovation & Technology UTT eTecK Downstream Industries w. technology focus Capital Market/ Revenue Stabilisation Funds –
• •
Private Equity & Mutual Stabilisation & Heritage
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Trading & Distribution TTLNG Anthony E. Paul © February 2008
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Learnings: Setting up a fair and realistic local content policy , adapted to the existing skills base is a necessary, but not sufficient condition.
1.
2.
– – – – – – – –
Have a very high level champion Think Strategically, Act Practically Analyse, Analyse, Analyse Focus on services Disaggregate Be Selective, based on strategic value Engage early in the life cycle and contract for it (do not make it optional) See Capability Development as an investment Take a business-like & business-friendly approach It should be desirable,but achievable) “Do it in Country” first. “ Do it with locals”, will come next.
3.
4.
5.
6.
7.
8.
– – – –
The question to be asked: is not: “what can we do with existing local capability?” Rather: “what can we build with existing and projected demand, so as to enhance local capability and allow us to capture more value in the future?
ID current capability and gaps Set Targets Build capability
• • •
strengthen or build institutions, set and maintain high standards Don’t remain static (monitor, change and improve) Regulate local content and knowledge and technology transfer – it doesn’t work if it’s an option to the IOCs and International service companies. Pick partners who support your strategy and will help deliver it Measure performance, Report it, Learn from it, Build on it. Involve (Engage & Empower) Civil Society from the Outset.
Anthony E. Paul © February 2008
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Socio-Economic Scenarios
Input-
Business As Usual / Status Quo
Cohesiveness Output Focused
SOCIAL INTERVENTION Extraction from Extraction UTOPIA
Government re-distribution and intervention Steady growth of basic services only Basic skill sets and low cost
Economic
Steady growth of basic services only Basic skill sets
Social
Few large players dominate all industries Socio-economic inequality Cheap workshop for other countries Export orientated of value-add services Low cost labour provider to high productive and value provider Diversified economy Leader in energy skills Re-distribution of wealth
Economic Value-Focused
Export orientated of value-add services Low cost labour provider to high productive and value provider Diversified economy Leader in energy skills Wealth not translated through society
PARADISE LOST GOLD RUSH
Fragmentation
Anthony E. Paul © February 2008