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Trinidad and Tobago Faces Big Energy Questions As Country Prepares for Election

Published: 12 May 2010
Trinidad and Tobago is preparing for elections that could spell an end to Prime Minister Patrick Manning's nine-year rule.

IHS Global Insight Perspective



Prime Minister Manning's decision to call snap elections could backfire and pave the way for a new government led by a coalition of opposition parties.


Judging by the electoral manifesto presented by Manning this week, if re-elected, energy investors can expect continuity. The opposition's policies are still quite vague but it appears that they would want to have a fundamental review of projects planned under the current gas industrialisation policy as well as a broader examination of how to promote linkages between the energy sector and the rest of the economy.


Trinidad and Tobago does need to evolve beyond a gas economy and a broader debate would be welcome, although a change of government could lead to some uncertainty and delays to projects in the short term.

Trinidad and Tobago Prepares for Elections

Trinidad and Tobago is preparing to go to the polls on 24 May after President George Maxwell Richards in April dissolved parliament, upon request of Prime Minister Patrick Manning, who had been due to face an opposition-sponsored motion of no-confidence. An electoral alliance reached last month between five opposition parties led by the United National Congress (UNC) means that Prime Minister Manning has a tough fight on his hands if he is to stay in power.

The main opposition party, the UNC, is eager to gain political capital from various corruption allegations involving members of Manning’s party, the People's National Movement (PNM), while the electorate's main concerns are crime and a controversial property tax. This means that the energy sector is likely to be of low priority in the electoral debate. Nonetheless, for a country where the oil and gas sector is the largest single earner of export revenue, contributing over 50% of total government revenues and around 45% of GDP, it deserves more attention. This is especially the case as the sector, in many respects, currently stands at a crossroads.

Crunch Time for Country's Oil and Gas Sector

Trinidad and Tobago's significant gas reserves, discovered in the early 1990s, provided the platform for average annual economic growth at a rate of approximately 9% from 2002 to 2007. However, slower growth in the energy sector in 2008 and 2009 has drawn attention both to the risks posed by the government's heavy dependence on energy revenues and to the shortcomings of the current government's energy policy. Low domestic gas prices, along with delays in the signing of new contracts and the implementation of a new fiscal regime have been regarded as deterrents to new investment in exploration. In turn, the slowdown in investment in exploration has prevented the country from reversing the decline in proved gas reserves seen since 2002, prompting increased public debate about whether Trinidad and Tobago has sufficient gas reserves to keep up with the pace of demand from the expansion of its downstream sectors. Indeed, ever since the start-up of Train 4 at the Atlantic LNG plant in late 2005 there has been a slowdown in new gas industrialisation projects coming on line, without any actually being formally abandoned. There has also been some debate as to whether the types of project supported by the Manning government are the most effective in terms of creating job opportunities for local people and, in the case of a proposed aluminium smelter, the environmental impact. Indeed, during the 2007 elections the UNC said that it was against the construction of any smelters.

The vagueness of the party policy platforms means that it is difficult to assess exactly where the main parliamentary groupings stand on these issues. Nonetheless, things are starting to get clearer following the presentation of the PNM's electoral manifesto this week, which suggests that if Prime Minister Manning is reelected there would be no change in policy direction. According to local press reports, the 2010 manifesto contains little in terms of new promises and varies little from the party's 2007 manifesto, retaining an emphasis on Vision 2020—the government's plan to achieve developed-nation status by 2020 and one of the driving forces behind its current energy policy. Even some of the projects included in the previous manifesto have been retained, including an aluminium smelter plant and plans for a US$2.5-billion gas-to-polypropylene plant. The UNC-led coalition has been more vague, although the UNC's deputy leader Roodal Moonilal, speaking at an industry event yesterday, laid out some of his party's plans with regard to the energy sector, according to a report by Trinidad & Tobago’s Newsday. Moonilal reportedly pledged to "de-politicise" the management of the energy sector if the opposition won power. He said that the party will establish a gas utilisation and pricing policy and review all gas-based projects as and update laws in order to ensure greater transparency. He reiterated his party's opposition to the construction of an aluminium smelter "without proper consultation with all stakeholders" and expressed support for the creation of a parliamentary committee on energy including government ad opposition legislators. He criticised the current government for not doing enough to create broader linkages between the energy sector and the rest of the economy. He also said that his party would submit legislation to support energy conservation. The UNC/COP manifesto is due to be unveiled in the coming days.

Outlook and Implications

Prime Minister Patrick Manning won re-election in 2007, but he has been prime minister since 2001, which means that if the UNC-led coalition manages to retain its unity and secure victory (a strong possibility given that its support base crosses the traditional ethnic dividing lines and that there are high levels of electoral fatigue with the government due to its failure to effectively combat crime and corruption) this will inevitably bring some uncertainty for investors. Unlike other recent elections in the region there are no strong ideological rifts between the ruling PNM and the country's main opposition party the UNC and irrespective of who wins the elections the government is likely to continue to actively promote foreign investment and maintain its strong commitment to economic stability. Instead, the main uncertainty lies with regard to support for new megaprojects such as the proposed aluminium smelter and the prospect that a change in government could lead to delays in the approval of new projects including the possible launch of a new deepwater oil licensing round. Other issues that require further attention going forwards, irrespective of who wins the election, include how best to diversify the economy and provide a sustainable basis for growth that is not so heavily dependent on gas resources and how to improve the climate for investment. This means reducing bureaucracy and corruption as well as ensuring that the legal framework is attractive for investors.

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