THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Mr. Vernon De Silva Director, Energy Research & Planning Division

Sustainable Development Issues:-

Local Content & Participation

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Background to Government action with respect to

Local Content and participation in the Energy Services Sector

Issues related to Work Permits in the Energy Sector

The following two (2)areas will be addressed:

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Introduction

• Sustainable development is a stated priority of the Government of Trinidad and Tobago (GORTT) in its effort to transform society, establish a strong economy and engage communities.

• A key objective of the Government’s sustainable development programme is “the increase in local content participation and ownership in energy projects, throughout the value chain”

• Local Content is intended to aid the Government’s sustainable development goals by providing economic opportunities for Trinidad and Tobago (T&T) businesses to capture greater value added and by allowing locals to have more meaningful participation in the energy sector and its decision making process.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

POTENTIAL BENEFITS OF LOCAL CONTENT TO TRINIDAD & TOBAGO

• National development including ownership of new

business by individuals & increased employment opportunities.

– Subsequently increasing the country’s Gross Domestic Product.

• Development of Human Capability in key areas of the energy sector.

• Greater retention of foreign exchange earnings.

• Export of local services and skills.

• Long term sustainable development and growth.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Background

• National Policy Guidelines for the Utilization of Local Goods and Services for Government and Government related projects were initially applied in the development of the Atlantic LNG Train I Project and subsequently , during the Atlantic LNG Trains II and III Expansion Project.

• Specific Targets for Expenditures on local goods and services were included in the Project Agreement.

• Similarly Targets were set in the Project Agreement for Train 4.

1999-2003

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Permanent Local Content Committee (PLCC)

• In recognition of the significance of local content and local participation, Government appointed a Permanent Committee on Local Content in April 2004.

– “The establishment of a Permanent Committee to continually & closely monitor the various activities in the energy sector to ensure that, as far as possible, all energy projects include opportunities for the development of the expertise of nationals and maximize the level of local content & local participation”

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

• That dedicated human and financial support, as required to conduct future activities of the Committee be made available, subject to the appropriate approvals from the Minister of Energy and Energy Industries .

• That the 1994 Treaty between Trinidad & Tobago and the Government of the United States of America concerning the Encouragement and Reciprocal Protection of Investment be renegotiated to address the significant barrier presented by certain clauses of this Treaty.

• (These measures have not been yet implemented.)

The Government also agreed to the following:

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

The PLCC finalized a policy document on local content & local participation with key areas of focus include:

The policy document was approved by the Government and

launched in February 2006.

Key areas of focus include people centered development, maximizing local value added and ensuring that existing regulations & processes, like the work permits, are aligned with overall sustainable development goals.

Aggressively promoting & rigorously applying this policy wherever State controlled resources are involved.

Measures to maximize the level of usage of local goods & services, people, business and financing

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Local capability development

Removing barriers for local participation in the energy sector

Selecting from time to time specific goods & services for local content participation & supply capability

Maximizing local value added

Ensuring compliance with the above policies

1. Have these measures been implemented?

2. What is the result or success six (6) years later?

Continued

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Provisions for Local Content

• Following Government’s approval of the Local Content Policy Guidelines , the subsequent negotiated Production Sharing Contracts included greater provisions for local content. The new provisions relate to:-

The unbundling of contracts to match the capability of local suppliers in terms of timing, finance and manpower;

Ensuring that seismic processing work is undertaken in-country;

The transfer of technology and business expertise in the Energy Sector to Nationals;

The selection and training of Nationals consistent with operators performance standards; and

The advertisement of invitation to bid for contracts in the local media.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

• In 1 downstream contract, an example of a reasonable preference clause is as follows:

“The company shall provide the EPC Contract that in the award of sub-contracts reasonable preference will be given to qualified local contractors or Suppliers who meet the quality, cost and schedule requirements.”

• In terms of monitoring , the Company will use all reasonable endeavours to ensure that Local Contractors or Suppliers and non-local Contractors and Suppliers maintain records to facilitate monitoring of local content by the Government and the Company ,and must certify the cost of local materials, labour and services used with supporting documentation, all of which will be subject to audit.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Success Story

• FABRICATION

In 2004, one major success story has been with the country’s first specialised Fabrication Yard established in La Brea and provides specialised facilities necessary for the manufacture of jackets and topsides for large off-shore platforms and structures up to a maximum of 3,000 tonnes.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Company Date Capacity Total Expenditure Local Content Expenditure

TT$ TT$ %

BHP Kairi 1 Platform August 2004 700 ton $340.1Mn

BP Cannonball Jacket

& Deck

May 2005 1000 ton jacket/900

ton

$340.2Mn $136.1Mn 40%

EOG Oilbird Jacket &

Deck

June 2006 1800 ton deck/2000

ton

$606.1Mn $238.2Mn 39.3%

BP Mango Jacket &

Deck

March 2007 1000 ton jacket/ 900

ton

$504Mn $126Mn 25%

BP Cashima Jacket &

Deck

March 2007 1000 ton jacket/ 900

ton

$655.2Mn $163.8Mn 25%

BG Poinsettia Deck December 2009 1300 ton drill

deck/2800 ton

$5040Mn $1058.4Mn 21%

EOG Toucan Deck January 2009 1800 ton deck $696Mn $215.1Mn 30.9%

BP Savonnette Jacket

& Deck

February 2009 1000 ton

deck/2000ton

$472.5Mn $94.5Mn 20%

BP Serrette Jacket &

Deck

2010 1000 ton deck/2000

ton

$600.0 Mn

BHP Angustura

Ventboom & Bridge

Ongoing October

2009

500 ton bridge/120

ton

$648.9Mn $356.9Mn 55%

Total & Local Content Expenditure on Platform Fabrication in Trinidad & Tobago

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Main Challenging Issues

• Regulatory Measures - do not exist to ensure mandatory compliance

with local content objectives. How should these issues be addressed?

• Institutional Capacity - is necessary to implement, monitor and audit

local content targets? What institutional arrangements should the Government put in place?

• State Support - does it encourage R&D, technology transfer, skills

development or business incubation ?

• Local Financing - is not mobilized to support the energy services sector. How

should this be addressed?

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

• Legal Barriers – Do existing treaties limit local content implementation.

What is the way forward?

• Work permit procedures - Are they stringent or consistent enough?

• Dissemination of Information - to local service sectors on project

schedules and awarding contracts is inadequate .

• Are there sufficient resources and Institutional arrangements available–efficient & effective development the local content and participation objectives.

Main Challenging Issues

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Highlighting Work Permit Issues

A work permit is a legal authorization which allows an individual to be employed in a country where he or she does not hold

citizenship.

• The Work Permit Advisory Committee (WPAC), chaired by the

Permanent Secretary of The Ministry of National Security, supports local content objectives by ensuring that nationals/residents are not denied employment opportunities because of expatriate employment.

• Where expatriate employment is necessary the WPAC assigns an understudy to the expatriate, in order to facilitate the transfer of knowledge and expertise to the local workforce.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Some examples of Common Issues & Challenges faced by the WPAC

• Complaints of Discrimination against Local Individuals Organizations & individuals file complaints about companies:

– entering T&T with wholly foreign work crews

– refusing to employ nationals that are equally as qualified as their foreign counterparts

– employing a token amount of locals to escape the attention of the WPAC.

• Complaints by Local Energy Services Companies Local Energy Services Providers voice their discontent with oil & gas companies which:

– Prefer to give contracts to foreign contractors while denying locals the chance to prequalify

• Monitoring of Understudies – Monitoring not being done on a regular basis

– Companies are not adhering to the training of locals making it difficult for understudies to assume key management positions in the energy sector.

• The disbanding of the Monitoring and Evaluation Unit of the Ministry further exacerbated the problem

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO Issues identified by Energy Service Companies

• Developing a suitable definition for Local Content

to include terms of ownership, degree of control & financing as well as local value-added.

• Enacting legislation

to directly influence the business communities cooperation with local content issues

• State companies must lead by example having a unified approach to Local content development .

• Implementation of Institutional framework to promote, manage, measure and audit compliance to established local content targets.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Issues identified by Energy Service Companies

• Utilisation of a phased approach

to efficiently engage the country’s limited resources.

• Development of a Local Capital Market to support entrepreneurial advances.

• Enforcement of ‘Understudy Training Progress Report’

to follow-up on the transfer of knowledge to nationals.

THE GOVERNMENT OF THE

REPUBLIC OF TRINIDAD AND TOBAGO

Thank You