T&T Needs Reinvestments to Benefit from Higher Oil Prices

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(Trinidad Guardian, 10.Mar.2022) — While the increases in oil prices driven by the conflict between Russia and Ukraine can benefit oil-producing nations, countries like T&T and Venezuela will struggle to capitalise.

Responding to a question from Guardian Media at the University of the West Indies’ Vice-Chancellor’s Forum, titled Of Ukraine Oil, management consultant at Seladon Petroleum Associates Limited, Bashir Badawi, said the two countries have issues regarding reinvestment. He said oil projects need continuous reinvestment to extract more volumes.

“We call this improved oil recovery programmes, so countries like Trinidad, who are very much dependent on the oil majors, will ultimately have to find a way forward as these oil majors like BP, like Total, begin to commit to net-zero and to the energy transition. That implies that the indigenous companies should begin to rise to fill this gap. The oil-producing nations in the Caribbean will have a struggle in the international oil industry market to guarantee the supply of the investments required to maintain their oil production. If you do not maintain that investment, your oil production goes down with time,” Badawi said.

While Venezuela met with a United States delegation on trade last week, Badawi said the neighbouring state suffers tremendously from the lack of investment. Therefore, it is unlikely to increase production without heavy investments in oilfields. As for Guyana, Badawi said that country is currently the hottest prospect in the oil industry. As for the non-oil-producing Caribbean nations, Badawi’s grim prediction was that they would feel the full force of the increase in oil prices, which will have ramifications on inflation.

“At this stage, I do not really have an answer for how the non-producing Caribbean countries can see a way forward.”

Ambassador Dr Richard Bernal, Professor of Practice, said there are grave economic implications regardless of the outcome or length of the Ukraine-Russia conflict. While the world already feels the impact of increased oil and gas prices, there is also instability in the foreign exchange and stock markets. But food prices and availability will also come into play, as Russia and Ukraine are among the largest wheat exporters. Already, COVID-19 has led to increasing food prices and with many African countries depending on wheat import from the conflict countries, it can interfere with the global supply, he said.

Bernal said a rise in inflation would accompany increased fiscal stress, as countries have already begun to allocate additional expenditure to economic support. It will increase public debt worldwide and be a dire situation for countries with an already high deficit.

Bernal believes the crisis is an opportunity to strengthen regionalism in the medium term, pointing to energy-producing T&T and Guyana for petrochemical supplies. It is also crucial to food security for the region, as products become more expensive.

Bernal said the crisis also shows the importance of a diversified, non-aligned foreign policy.

“I think that the non-aligned movement could play a mediating role and that the Caribbean should continue to voice its support and its participation in the non-aligned movement. The non-aligned movement needs to assert itself because these decisions about the implications are being made by a few countries. The vast majority of countries and mankind have no say in how this is being resolved,” Bernal said.

A reason for the approach, he said, was that those countries supported the USA’s hard-line approach against Venezuela’s governance. Now that the discussion between the USA and Venezuela could see some resumption of oil production, he said those countries should not look for empathy from South Americans.

However, those who continue to express their appreciation for the relief provided by PetroCaribe would be in good stead to benefit from a resumption of a fuller relationship with Venezuela, he noted.

“Note how quickly the United States modified its position on sanctions and already met with Venezuela. And, of course, the discussion would be some kind of trade, offering reduced sanctions for increased oil supplies. The Caribbean must learn a lesson here and the lesson is not just in a non-aligned policy but to try as far as possible to act as a group.”

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By Kevon Felmine

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