- 4 months ago
Delving deeper into the prospect of the Dragon Gas Deal, we connect via Zoom with Economist and Lecturer at the University of the West Indies, Professor Roger Hosein.
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00:00Delving deeper into the prospect of the drag and gas deal, we connect via Zoom with economist and lecturer at the University of the West Indies, Professor Roger Hussain.
00:09Professor, thank you so much for joining us this evening.
00:13No problem. Thank you for the invitation.
00:16All right. So let's get straight into it.
00:17There has been a lot of to and fro between, well, the prime minister and then yesterday we heard from the opposition, in particular, former energy minister, former prime minister Stuart Young on the drag and gas deal.
00:31Professor, in that case, can you clarify for us the process of getting drag and gas a reality, given we are still waiting on that OFAC license and we've been given essentially no time frame by which that will be issued?
00:47So the fact that we have been given no time frame is something to keep in mind.
00:53This whole process could take, in terms of receiving gas to our plants, could take up to five years.
01:00So the medium term, we still are without substantive amount of gas for our plants.
01:06Our plants are at about 20, we produce at about 2,600 MMCF per day.
01:12So whilst the announcement by the prime minister that the drag and gas deal is back in process and there is a possibility we could get it going in the medium term, we have to keep in mind, and this is where policymakers must be kept sober, we have to keep in mind that in the period, say, 2027 to 2032,
01:35we would be at roughly the same position at about 2,800 MMCF per day, including manatee, coconut, ginger, and so it's a tight management.
01:50And I hope that whilst we take, you know, we are thankful for the prospects of drag and gas that we put in place all those necessary measures to generate fiscal revenues and export revenues from the other sources and the other places that would be more long run and sustainable.
02:13That's my concern as an economist, this constant up and down we get in the economy in the 1970s, we saw it then in the 80s, then we saw it with the rise of LNG and now the collapse of the economy.
02:26This volatility is not good for the economy and so, yes, we take drag and gas if it comes, we are thankful, we have the plants here, the plants are short of gas, Venezuela has the gas, Shell could provide the infrastructure,
02:38but we need to think about the other non-energy areas that could possibly bridge some of the gaps. I always like to say that to keep us sober.
02:48So I do completely get that, but how do you expect Venezuela, do you expect Venezuela will want to deal with TNT under this new regime?
03:02The UNC has managed to bridge gaps with the U.S., whereas the PNM in their previous term managed to bridge gaps with Venezuela.
03:14Do you expect, given the posturing of the UNC while in opposition, even now with the narco trafficking, that posturing, the talk,
03:24the Prime Minister a short while ago referred to Delce Rodriguez as Madam Delce, you know.
03:29Your thoughts are on this relationship. Can this UNC government find harmony with the Venezuelan regime for drag and gas?
03:44Why not? You know, Bob Marley once sang a song, who God bless no man curse.
03:49And if it is, this deal is to go forward, and Trump supports it, and we use the right diplomatic language in the relevant meetings,
04:01of course it can go forward. I mean, no one government is superior to another government.
04:06So if Stuart Young could negotiate in a particular way, I don't see why Kamala Persad-Bissessa can't negotiate in the same way.
04:13And I am hopeful for my country, and I'm hopeful that everyone is pulling in the same direction to see if we can get this gas.
04:22But what I don't want policymakers to get carried away is the sort of one-track behavior we had in the plans.
04:30Where was there? There was this heavy, excessive focus on drag and other types of gas.
04:36Whilst non-energy exports collapsed, the labor force participation rate collapsed, the murder level surge, and the economy basically crashed.
04:45I'm hoping that there is more balance this time around in pushing forward.
04:49But yes, to answer your question, I am hopeful. It would be difficult, but I am hopeful.
04:53You seem very optimistic, but I do have to point out that they have to be mature enough to disagree, if you may, about this narco-trafficking,
05:05the bombing that occurred today, yet still agree to agree when it comes down to energy.
05:13Of course. And yes, remember, the Venezuelan economy needs hard cash.
05:18It is in a tight position. A lot of their citizens are here.
05:22Maybe it would be good for China and Tobago to take three or four Venezuelans as part of our negotiating team.
05:28And I mean, it's very possible. We have so much of them here now.
05:32And work in a manner and form that when we are finished with the negotiation that Venezuela gets manufacturing goods,
05:40hard cash as the prospects from China and Tobago, we get the gas, our plants benefit, and everybody is better off.
05:46But this is not a downplay, the current situation. I think today was the fourth pirog we saw blown up.
05:57This is not a downplay at all. I'm saying that given the needs on both sides of the sea,
06:03that there is ample, intelligent room for a solution to be found.
06:07Now, I do have to point out that former Prime Minister, former Energy Minister Stuart Young,
06:11did say yesterday that those discussions with Venezuela, those 13 times he visited Venezuela to discuss drag and gas,
06:20he described those discussions as very difficult.
06:23Now, aside from geopolitical issues, what do you suspect will be some sticking points?
06:30Former Minister Young did reference payment terms,
06:33saying that part of the OFAC license required that they be paid in FIAT.
06:40Well, one of the sticking points would be whether or not Shell will finance the whole process.
06:47So, I am not sure that Shell will take up the entire infrastructural cost of the subsea tiebacks
06:54and the pipelines and compression process.
06:58Maybe they would want other partners, and therefore, that could be a potential sticking point.
07:02But those things pale, I think, in significance.
07:05If it is, the go-ahead is given.
07:08I think finance could be raised from other multinationals.
07:12The sticking point would really be the nature of the particular discussions for the go-ahead.
07:17But I'm hoping that with U.S. support, that in the middle somewhere, in the mix somewhere,
07:23that somehow this deal could work.
07:26And if needed, the government of Cheyenne Tobago could ask the former Minister of Finance
07:31and the former Prime Minister of Cheyenne Tobago to accompany them.
07:34He is versed in the process, and given the terrible state of the economy,
07:39he should be more than willing to help, in my humble opinion.
07:41This is a time where all nationals have to work together.
07:45So, I'm hoping that Stuart Young will be part of the negotiating team, if needed.
07:50I was just about to ask you, Professor, who do you expect will lead that team?
07:57Do you expect the Prime Minister herself?
07:59Do you expect Energy Minister Dr. Rudan Munilal?
08:03I expect the Prime Minister herself, given the nature of this intervention,
08:09would probably lead the first few rooms of the conversation.
08:12Of course, the Minister of Energy will be the lead person as it progresses.
08:18But I'm saying that we are in such a delicate position,
08:22and former Prime Minister Stuart Young knows this,
08:25that I don't think he would hesitate to assist the current government
08:29if he is called upon in the negotiation process.
08:32I can't say it.
08:33Now, just to shift gears a little bit, Professor,
08:36we do have a budget that is due this month.
08:39We were actually expecting it to be Monday, but it doesn't seem so, at least not yet.
08:46What do you expect this fiscal package to contain,
08:50and what do you expect the deficit to be?
08:54Well, the deficit I'm expecting to be about $10 billion to $15 billion.
08:59It's going to be a big deficit, and no doubt about that.
09:02Revenues are down, expenditures remain buoyant,
09:05and you have already heard the current government make certain utterances
09:09that they are not going to cut here, and they are not going to cut there,
09:12so that you expect a deficit.
09:14And this is the best time for they to use this deficit opportunity
09:19to inject capital into the economy,
09:22to get the supply side of the economy going,
09:24to get the export-oriented side of the economy going.
09:28And therefore, I think their focus should be on three main variables.
09:32I always suggest three variables.
09:35Improving the labor force participation rate from 54.8%,
09:39working towards the next five years to bring it close to 70%.
09:42Improving the non-energy fiscal balance from about minus $25 billion,
09:47bringing that down to about minus $5 billion over the next five years or so.
09:51And significantly improving non-energy export revenues,
09:56including from manufacturing, including from agriculture,
09:59including from tourism, and including from remittances.
10:03And I think in this whole process, the commercial banks have a role to play.
10:08The commercial banks, well, in my opinion and understanding of the facts,
10:12they played a big role in the poor state of the economy today
10:16in terms of the amount of non-tradable sector loans that they gave
10:20that helped to lead to a drain on the foreign exchange.
10:24That's what I understand when I look at the data.
10:26So I think the polluter pay principle should apply,
10:29and they would play voluntarily some role in helping to fix this problem.
10:33And I keenly look forward to see how they would come forward
10:37to assist the government in some form in improving the foreign exchange situation.
10:42Now, Professor, CSO, well, second quarter labor market data is due from the CSO shortly.
10:49likely next week.
10:51Do you think the labor force participation rate will improve?
10:56I mean, we're seeing so many, well, URP, Ministry of Sports, CPAP workers.
11:02What do you suspect will happen?
11:05I suspect it would be about 55.1%, 55.2%.
11:09What I urge the Minister of Planning and the Minister of Labor to do
11:13is to work backwards, set a target of about 68% to 70% by 20%.
11:19This particular budget for me is just one step of a five-step process,
11:27and I hope that they would work backward from a 70% labor force participation rate
11:32in 2030 to represent and build that five-step layer in such a manner and form
11:40that they improve ease of doing business.
11:43They improve the accessibility of funding for small entrepreneurs.
11:49Already we have seen the murder level based upon some of the WhatsApp messages I see circulating
11:55decline considerably.
11:56If they can now bring down home invasions so that business and consumer confidence can improve,
12:02we could start to see a ripple effect taking place in the economy,
12:07building consumer confidence, building business confidence,
12:10and therefore slowly but surely get more domestic capital injection alongside
12:15government capital injection that could see a widening of supply capacity
12:19for the benefit of the economy.
12:21I am hopeful.
12:22Professor Roger Hussain, economist, lecturer, it's always a pleasure.
12:26Thank you so much for joining us.
12:27Thank you for your time.
12:29Have a good evening.
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