By: Kimberly Ramkhalawan
August 16, 2022
TT Energy Chamber shares latest findings
Restricting the ability of energy sector operators to procure goods and services to locally owned companies will not have an impact on the value retained in the economy. Instead, a call is being placed that there is a proper system be put in place for suppliers within the country and identifying good and services currently imported be sourced locally.
The view is one being put forward by Dr.Thakwray Driver, CEO and President of the Energy Chamber of Trinidad and Tobago, and comes after findings from data collected by the Chamber’s Local Content Management System (LCMS).
A system that was put in place in 2017 by the chamber after it decided to take matters into their own hands after much frustration. Dr.Driver says the Chamber called its stakeholders back in 2017 to sign onto a charter that requires them to report their progress. This resulted in the creation of the Energy Chambers Local Content Management System (LCMS).
Dr. Driver, who also sits as a member of the Permanent Local Content Committee, PLCC, which was established under the 2004 Local Content and Local Participation Policy and Framework, and remains the guiding policy document for local content in Trinidad & Tobago some 18 years after, saw the drawback in the lack of no systems put in place to measure this local content it has defined, despite upstream sector companies required to report to the Energy ministry on their local content policies and how well they have performed.
His chamber has called time after time for an “objective and transparent system to measure local content in Trinidad and Tobago”. Without this proper data, the committee does not have a basis to support its proposed policies and retooling of the current guide on local content. While the reports are collected and reviewed internally, no data is collated and shared with wider industry stakeholders.
The topic also comes up following much comparison occurring between longstanding energy player Trinidad and Tobago and upcoming energy giant, Guyana and their individual handling of local content and the policies that surround them. Dr.Thakwray Driver, CEO and President of the Energy Chamber of Trinidad and Tobago is sharing his two cents on the topic.
According to the ministry, Local Content is defined as “the sum of the inputs of local goods and services, including employment, provided in oil and gas operations”. Similar to Guyana, Trinidad and Tobago also adds that “Local Content can only be achieved when operators hire nationals and utilize companies that are beneficially majority owned by nationals”. In turn, “this relates to Beneficial Ownership, which is defined in terms of the person(s) who ultimately benefits from the proceeds of a company. Local Content therefore is the outcome of companies’ hiring and procurement activities”.
The findings coming out from the last year of collecting data over some 482 companies through the LCMS, show important issues the country faces when it comes to maximizing retention of value.
As to how the LCMS works, Dr.Driver explains that questionnaires are filled out by companies who sell goods and services within the sector in Trinidad and Tobago, and looks to determine what percentage spent by operators stays within the local economy. Set as the yardstick definition of “value retention”, it is what is used the Trinidad & Tobago public procurement legislation, and which has also been adopted by the PLCC and the Energy Chamber through its Local Content Charter created.
Service companies and contractors dominated local content, as they managed to achieve the highest scores by mainly “providing services which do not require large investments in equipment and/or raw materials or consumables sourced outside of Trinidad & Tobago”. Listings also showed that civil engineering services often overlapped and was the most common service provided. Services which included provision of equipment, often expensive, have to be imported, realizing into heavy costs associated with providing these particular goods.
Companies that recorded having less variation on average in their scores for ownership and employment, something that all companies appear to do well nevertheless, was as a result of having greater inputs they had to source locally.
It is from this perspective, Dr. Driver sees the restrictions on procurement to only locally owned companies not working to ensure value is retained in the economy. His solution, he calls for a well updated inventory on what is currently imported and can be supplied locally. Once that is supported, it can also aid in local financing, a factor also measured in the LCMS.
As can be seen, the “value retention” definition contrasts with the definition used by some other countries, such as Guyana, that places the emphasis solely on ownership and employment.
Currently, in Trinidad and Tobago where there is a more mature service sector, its “‘value retention approach’ concentrates how much of the spend of operators circulates in the local economy”, which was also used in the Chamber’s LCMS.
Dr.Driver however plays a bit of devil’s advocate, when he also proposes “to maximise the retention of value in the region if equipment could be more easily moved between the three main markets of Guyana, Trinidad & Tobago, and Suriname”, with the pending growth of the energy sector among these other CARICOM states. While seeing it as opportunities, the energy chamber head says he sees “removing barriers to the free movement of equipment around CARICOM” as having the potential to “actually help boost value retention in all economies of the region”.
However, for this to be effective, calls for CARICOM nations to approach its local content with “more analytical, data-driven approach similar to its LCMS, to help develop policies needed at the levels of specific companies.
To Dr. Driver, his “hope is that this system, now fully entrenched in the industry, can become the basic tool that is used to measure and monitor local content”.