The Trinidad and Tobago manufacturing sector can boast of consistent growth from infancy in the 1980s to its powerful stance in 2008, nearly three decades of development and substantial non-energy sector contribution to our economy.
Over the last five years, however, coincident with the global economic decline, the manufacturing sector has not sustained such growth. It is not surprising that this period was also marked by a decline in the energy sector; indeed, the comfort that our manufacturers face in production remains inextricably linked to the economic rent that derives from our oil and gas.
It therefore begs the questions of how and when will our manufacturing sector become sufficiently capable of sustaining itself in spite of the vagaries that characterise our natural gas based economy? More specifically, when one considers the threat that shale gas poses to the future of Trinidad and Tobago’s natural gas exports to the United States, the elusive goal of economic diversification once again comes squarely into focus. The US Department of Energy (USDOE) states that ‘in the past five years, shale gas has been increasingly recognised as a “game changer” for the US natural gas and energy markets.
The proliferation of activity into new shale producing areas, or “plays,” has increased domestic dry shale gas production from 1 trillion cubic feet (tcf) in 2006 to 5 tcf in 2010 – about 23 per cent of total US dry gas production. Moreover, the USDOE’s Energy Information Administration (EIA) projects that the US will become a net exporter of natural gas by 2021 (eight years from now), and that by 2035, shale gas will account for nearly half of US natural gas production. Suffice it to say that the United States appears to be going in a new direction as far as natural gas is concerned.
Roughly seven years ago, the United States accounted for 89% of T&T’s exports of Liquefied Natural Gas. As of 2012, that figure was drastically reduced to just under 20%. Ultimately, when T&T’s long term gas supply contracts to the US come to an end, unless our economy is able to identify and attain markets for its gas, the non energy sector will be responsible for sustaining our economy. The relatively less expensive US shale gas represents a threat not only to our gas exports to that country, but will also compete with our exports of gas to other markets.
Concurrently, with our natural gas reserves dwindling, over time our manufacturing sector will no longer enjoy the low energy costs of the present, and will have to stand solidly on its own capacity to innovate, derive efficiencies, minimise costs and be self sustaining. In light of this, the TTMA advocates the implementation of Corporate Sustainability in the Manufacturing Sector.
Conceptually, Corporate Sustainability can be defined as a business approach that creates long-term shareholder value by embracing opportunities to refine, improve and strengthen every business process. It also looks at managing risks deriving from economic, environmental and social developments.
Corporate sustainability is an investable concept. This is crucial in driving interest and investments in sustainability to the mutual benefit of companies and investors. As this benefit circle strengthens, it will have a positive effect on the societies and economies of both the developed and developing world.
At the heart of the sustainability effort is the transformation of organisation culture. In a previous article to the Business Express, TTMA made reference to energy conservation in the context of developing a culture of savings, guided by strategies to become more efficient. A major emphasis of Corporate Sustainability in our local manufacturing sector will be energy efficiency at every stage of production, whether it may be in our factories or offices. Our policy makers have both the responsibility and the opportunity to create an enabling environment for all manufacturers to reduce their dependence on fossil fuel energy. The right combination of incentives for renewable energy applications and energy efficient technologies is needed to fulfil this purpose.
Let us for argument sake make the assumption that, based on the forecasts generated regarding US natural and shale gas economics and how it will affect our gas revenue streams, the manufacturing sector will eventually play a much more prominent role in our local economy. That puts the onus on our manufacturers to become more efficient in every sense of the word. We cannot wait until the future becomes the present to put our proverbial house in order. If we collectively respond in the right way, starting today, declining natural gas export markets can indeed be a blessing in disguise to our manufacturing sector’s future growth and sustainability.