San Fernando, Trinidad; Thursday 12th November 2009: The STCIC is pleased to announce the release of its latest Energy Services Sector Survey (ESSS) for the 3rd quarter of 2009. The ESSS maps the performance and optimism of our energy service sector members, providing data on their business confidence and on some of the phenomena which impact on their operations and business prospects.
The results of the recent survey reflect the continuation of a trend. For 2009, the energy sector has suffered as a result of declining commodity prices, a concomitant slow down in upstream and downstream activity and a tightening of international credit for major energy sector projects.
In the survey, 65 percent of respondents reported a drop in their overall profitability for the quarter compared with 40 per cent for the second quarter of 2009.
45 percent of respondents also stated that the value of their business was down, 45 percent stated value remained the same while only 10 per cent saw an upswing. For the quarter, 50 percent of respondents reported a decrease in their volume of business, 35 percent reported business volumes remained the same while only 15 percent saw an increase. (See Graph: Value and Volume of Business Reported in Q3 2009)
Seventy percent of companies are expecting a decline in the value of their business in the current quarter and sixty percent a decline in the volume of business over the same timeframe. (See Graph: Value and Volume of Business expected in next three months)
The ESSS findings do not come as a surprise to the STCIC.
While some energy commodity prices have started to trend upwards, activity in the sector has not followed the price increases.
Upstream energy service companies are coping with a slow-down in offshore drilling and rig operations.
Rig activity is one indicator of economic buoyancy in the energy sector and there is less than half the number of rigs operating compared to 2008, with further declines expected. Anticipated cost-cutting in the mid and downstream sectors could also lead to companies servicing the downstream being less active in the coming months. Several downstream projects have been delayed or cancelled. (See Graph: Rig Activity 2007 - 2009)
The STCIC believes we must also keep a sharp focus on developments around the region. In recent months, large gas finds in Venezuela, Peru and Brazil have lead to concerns about whether foreign direct investment earmarked for Trinidad and Tobago will end up in other Latin American countries. Foreign direct investment into the sector is one key component which helps stimulate activity.
Currently any measure to stimulate activity in the energy sector will be welcome. The recently released Review of the Economy 2009 has confirmed the extremely deep declines in the energy services sub-sector of the economy, with the sector predicted to record an astounding decline of 59% over 2009.
While the Energy Services sub-sector only contributes about 2% of the overall energy revenue it remains a very important element of the overall energy sector for two major reasons. Firstly it is the largest employer in the energy sector, accounting for over one third of total energy sector jobs.
Secondly, the sector includes a large number (around 200 - 300) of small to medium-sized Trinidad & Tobago owned and operated companies.
As always, the STCIC remains committed to speaking out on issues affecting our membership and their survival. However, it is only through constant dialogue and partnership among Government, business and labour can we sustain the sector.
