CLICO leads the way

At Monday’s Petroleum Conference Professor Ken Julien, Chairman of the Natural Gas Export Task Force held up the example of the Clico Energy Company’s investment in the energy sector as the way to go for both State enterprises and the private sector. He was making the point that it was not enough for local contractors to get a piece of the action from foreign energy companies. There had to be greater involvement through increasing investment in equity in the sector, he advised.  This is where, he said Clico had taken the lead through its investment in five methanol companies and two ammonia plants. Through the creation of an operation and management company, Clico Energy had become the  largest employer on the Point Lisas Industrial Estate.

One result of this initiative was that Clico had kept all its dividends and taxes in Trinidad. Dividends that could be used to build more plants. The Clico example is instructive for the private sector. There are risks, of course, but the Clico Energy Company has demonstrated that the key to success lies in far-sighted planning, including a proper study of the relevant markets. Government’s announced decision to pursue a policy of greater State and private domestic equity investment in Trinidad and Tobago’s energy sector will provide increased returns as well as keep a larger share of the profits from oil, gas and energy-based industries in the country.

It is an aspect of the Singaporean model that we have been advocating for some time. What is left now is for Government to formulate a policy and establish mechanisms under which it will ensure that a percentage of all future investments in the energy and energy-based sector will be retained for the State and local capital. So that rather that continue the old system of expatriate control of all new investments in the sector, and with it the repatriation overseas of the burden of profits, a pre-determined percentage of sales and/or profits will automatically be kept here and/or remitted. This local content percentage should be established with reasonable dispatch, so that advantage can be immediately taken of the opportunities that Professor Julien says are there for the taking.

Government’s investment in energy, apart from the natural gas equity, has invariably been on the basis of reacting to any pull-out by international companies. This had been so when Government acquired a 50.1 percent equity in Trinidad-Tesoro Petroleum Co, Ltd, in July of 1969; Shell Trinidad Ltd, in August of 1974, and Texaco sometime later. It had been involved as well in the energy-based sector through methanol. Although there has been no detailing of specifics, nevertheless it is likely that the announced initiative will see Government involved as a major player at the outset in oil and gas exploration and liquefied natural gas plants, among others. 

Whatever the remaining life of crude oil and natural gas deposits in Trinidad and Tobago, given the current rate of exploration as well as an understandable increase, there is the perception that at long last a substantial portion of the profits will be retained in Trinidad and Tobago for the future development of the country and by extension the Caribbean community of nations. The new thrust under which there will be greater domestic involvement of state and private capital is a good sign for the future.