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Saarah Khan - Sustainability and Local Content
Linking Sustainability to Local Content
By Saarah Khan
Local content programmes can provide a foundation for ESG and sustainability initiatives within the private sector as they already touch on the social, economic, and environmental aspects of conducting business within the country.
The oil and gas industry has been the main economic driver in Trinidad and Tobago for quite some time, the country having been involved in the petroleum sector for more than one hundred years and being the largest oil and natural gas producer in the Caribbean.
Hydrocarbons contribute more than 40% to overall public sector revenue and energy exports make up over 80% of total exports according to the Oxford Business Group 2020 Country Report. Given the sector’s importance to the economic stability of the country, the introduction of the Local Content and Local Participation Policy Framework for the Republic of Trinidad and Tobago Energy Sector in 2004 was a necessity. And aims to maximise the local value retention, participation of nationals, and foster capability development within the local economy.
Generally, local content policies offer significant benefits to the countries that implement them, ensuring the development of a skilled local workforce as well as the enhancement of manufacturing capabilities and building capacity in country. They also ensure that the resources often being harvested are used to serve the local communities and develop nationally associated upstream, midstream, and downstream industries, rather than this value being leaked overseas.
While it is obvious how two of the tenets of sustainability – social and economic - are met, it is less so how the environmental aspects of sustainability are met within the local content policy framework. However, there are several benefits of a local content policy on managing environmental impact, especially given the targets set by the 2030 Sustainable Development Agenda and their importance within the energy sector context.
When considering the impact on carbon footprint, for example, through developing local industry, expanding local markets and training national communities, there is less of a need for importation of goods, services and foreign knowledge base. Trinidad and Tobago made the decision to support fabrication of offshore platforms locally, rather than sourcing from the USA or Mexico, as had been done in the past, and from 20032017 fabricated eight of these platforms in country.
According to industry estimates, bpTT, in a joint venture with Trinidad Offshore Fabricators Unlimited (TOFCO), facilitated local fabrication instead of sourcing from the USA and realised over $11 million USD in savings. Energy publication Offshore stated that “Similar cost savings can also be found in the production of chemicals within the industry, which account for up to 80% of chemical formulations.”
By sourcing these products locally, not only does the local economy benefit, by the development of industry, creation of jobs, support of local facilities, etc., but the carbon footprint of the final product is significantly decreased, resulting in greater Environmental, Social, and Governance (ESG) ratings for the company adhering to the policy.
In fact, the world-class facility at Point Lisas Industrial Estate has developed to serve Trinidad and Tobago’s petrochemical sector and, through its network impact, contributed to the establishment of the nearby e TecK’s Phoenix Park Industrial Estate. The flagship project has been projected by the government to meaningfully diversify T&T’s economy into manufacturing, logistics, distribution, ICT, biotechnology, and new material technologies in years to come. The port of Point Lisas, also allows exporters the ease of access to regional and international markets.
Recognising the importance of local content within the industry, the Local Content Charter was signed in 2017 by 23 locally operating companies, securing a voluntary industry-led commitment between signatories to work together, and with other stakeholders, such as The Energy Chamber of Trinidad and Tobago. The objective is to increase local content in the companies’ operations, by developing the local supply chain. An essential part of ensuring that the local content policy is effective in
meeting its objectives is the measurement of impact and value retention, as well as monitoring adherence to compliance from the international companies.
With the importance of oil to the Guyana economy, and their own legislative decision regarding local content, the spotlight has been placed on local content and its effectiveness in recent years. While we cannot overlook the successes of the local content policy, like the achievements in fabrication from TOFCO, and the petrochemical industry, the actions of which International Petroleum Industry Environmental Conservation Association (IPIECA) indicated “encouraged the development of nearby SMEs, increased local employment in a previously deprived area of Trinidad, and paved the way for wider export opportunities in oil and gas fabrication”. Trinidad Local Chamber expert Anthony Paul also stressed the importance of ensuring accountability and transparency within decision-making processes.
In recognition of these concerns, the Local Content Management System (LCMS) was launched by the Energy Chamber of Trinidad and Tobago on September 9th 2020, the first of its kind in the region, aiming to measure, monitor, and report local content participation, value retention in the local economy, and to ensure that the local energy sector remains competitive internationally. At the launch, Dwight Mahabir, outgoing Chairman of the Energy Chamber of Trinidad and Tobago, addressed the relationship between local content and sustainability indicating that the optimisation of both was important for the longevity of industry growth and the diversification of exports.
The relationship between local content and sustainability is also becoming more recognised globally as investors increasingly make decisions based on ESG ratings.
Local content programs can provide a foundation for ESG and sustainability initiatives within the private sector as they already touch on the social, economic, and environmental aspects of conducting business within the county. Therefore, aligning local content strategies with sustainability targets deliver on greater gains, economically through development of local industry and SMEs and international competitiveness, socially, through development of a skilled labour force, educational and training programs, and environmentally, through protected use of country resources, with clear ‘value-add’ and value retention within the country.
At its core, the objective behind T&T’s Local Content Policy is strongly entrenched in the sustainability of the energy resources sector, as evidenced in former Prime Minister Patrick Manning’s foreword of the policy framework, stating that “sustainability has to be at the heart of policymaking for the petroleum sector - a nonlabour-intensive industry, dependent on finite resources. The expansion of recoverable reserves, the efficient and careful management of production and the minimization of environmental impacts are principal considerations from the Government's perspective for the sustainable development of the country”. This policy has developed over the years to drive a world-renowned energy sector, with locally trained specialists being sought after globally, or serving on advisory panels in several developing markets.
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An opportunity to further exemplify the connection between local content and sustainability is in the NewGen Energy Project, which according to its Chairman Philip Julien, will upon completion, be the largest carbon-free “clean hydrogen-producing facility of its kind, using a combination of solar and energy efficiency-sourced power” to meet 20% of the hydrogen requirement for the Point Lisas ammonia plant.
Trinidad and Tobago has the building blocks and framework to ensure sustainable development through the local content policy. With the recent attention being redirected on local content and local participation, one can hope that the original intent of the framework will continue to deliver results 20 years on.
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