Published:
Thursday, October 1, 2015
Chief executive officer of the Energy Chamber, Thackwray Driver said he does not expect the first gas to come from the Loran/Manatee field before 2020.
Over the next few weeks, a sizeable number of appointments to state boards will have continue to be made by the new administration. More than 1,000 positions are needed to be filled. These appointments to state boards require individuals with the right credentials and there is a very small pool of qualified candidates.
One of the questions that has arisen during the appointment process has been the issue associated with independence. This has been caused principally by the appointment of a former independent senator as chairman of the boards to oversee the operations of the Caribbean New Media Group (CNMG) and the Government Information Services Ltd (GISL).
Many commentators, political analysts, politicians, and citizens have weighed in on the appropriateness of appointing sitting or former independent senators to these state organisations.
The differences of opinion may be explained by partisanship and personal persuasions of each of the speakers, but the comments expose different levels of understanding regarding the role of independence on the board.
For example, Kamla Persad Bissessar, Leader of the Opposition, in her appointment speech on September 21 said: “Public displays of apparent independence should not be used as a mask for political activism.”
Dr Winford James, political analyst, commenting to the media on September 22 stated that “Drayton now appears to be politically tainted and her past contributions as an independent senator would now be scrutinised” and Vasant Bharath, Opposition Senator on September 20 stated that Drayton was an “excellent choice. Helen Drayton is a woman of great integrity and she has a significant amount of competence and she comes from a background where she understands communications and she understands people”.
This article discusses the nature of independence on the board and addresses many of the issues currently being raised and addresses many of the issues raised.
What is independence?
To answer this question we must first look at what the law says. In T&T, all company directors are required to act honestly and, in good faith, in the best interest of the company and ahead of other interests as codified in the Companies Act Chapter 81:01.
This is the cumulative effect of sections 99 (1)(2) which provide that every director and officer of a company shall in exercising his powers and discharging his duties, act honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
In considering what is in the best interest of the company, directors are required to consider both the shareholders and the employees but these are not exhaustive considerations.
The Companies Acts of Barbados and Jamaica use almost exactly the same terminology in sections 95(1) and 174(1) respectively. This duty, called the “Duty of Care”, assumes that all directors should be independently minded and they would not be influenced in their decision making by other individuals or parties.
These statutory obligations, therefore, subsume all personal views and agendas to a common objective of looking after the company’s best interest. In discharging these obligations, directors are not statutorily required to be or think independently although it is expected that in making board decisions they ought not be influenced by considerations other than those that are in the companies best interest.
This may be regarded as independence of judgment which means that directors, in making board decisions, must act personally an not as an agent or representative of any person, group or organisation notwithstanding how and by whom they were nominated, elected, or selected. The exception to this general principle is where the appointment is made pursuant to an act of parliament which expressly identifies and provides for the appointment of directors as representatives of certain groups or associations.
Independence is considered in more detail in the T&T Corporate Governance Code (TTCGC) 2013 (see Box 1).
This important code applies to all organisations within T&T “with a public accountability” and the provisions in the code apply to all of the 59 organisations in T&T that the Government currently holds shares (59 is the number stated in the State Enterprises’ Investment Programme 2015, other ways of counting result in higher numbers, up to 110 enterprises in which the state holds shares; in a different article we will examine these differences together with regional and international comparisons, and also address corporate governance provisions to be applied to the governing bodies of the more than 110 Statutory Boards and other bodies in T&T).
For state boards directors should be motivated by a desire to provide an important service to the public at large.
Many directors of state bodies that have decided to focus upon good governance have found it useful to use the seven international governance principles known as the Nolan Principles. These international principles were developed in the 1990’s in a report published in the UK by the Committee of Standards in Public Life that was chaired by Lord Michael Nolan (see Box 2).
In small island states there are fewer degrees of separation between individuals compared to the larger developed countries within the Organisation for Economic Cooperation and Development (OECD). In island states maintaining good relationships matter a great deal and good relationships are underscored by professional dealings since reputations are easily lost.
Accordingly, a state-appointed director will be well served if he or she is guided inter alia by the law (the Companies Act), a professional standard (through membership in a professional corporate governance body such as CCGI and the Nolan Principles) and a code (the T&T Corporate Governance Code).
Questions members of state boards should ask:
Does our board:
• Undertake an assessment of the independence of the board each year?
• Publish in the annual report which non-executive directors are considered to be independent?
• Act solely in terms of the best interest of the company?
Do I and the other board members:
• Avoid any financial or other obligation to outside individuals or organisations that might seek to influence us in the performance of our official duties?
• Make choices on merit when making public appointments or governing the process for awarding contracts?
• Hold ourselves accountable to the public for decisions and actions and submit ourselves to whatever scrutiny is appropriate?
• Remain as open as possible about all our decisions and actions we take and give reasons for our decisions?
• Declare any private interests relating to our public duties
• Take steps to avoid any conflicts arising in a way that protects the public interest?
The Caribbean Corporate Governance Institute (CCGI), which is a not-for-profit Foundation, has a mandate to create effective organisations and efficient markets through board directors that can be trusted (based on their training, continuous development and professional values that they formally commit to as professional members), and the research, publication, and monitoring of corporate governance best practice standards appropriate for the Caribbean.
As part of CCGI’s programme aimed at public directorships, the CCGI aims to support government ministers, permanent secretaries, CEOs, corporate secretaries, directors and other officers of public bodies in improving governance in the public sector within T&T.
The CCGI is a regional, independent, non-profit, professional membership organisation registered with the Accreditation Council of T&T. CCGI is the award body that provides the certificate and diploma in corporate governance and the chartered director qualification throughout the Caribbean.
The CCGI welcomes membership applications and participation in its courses and events throughout the region. +1 (868) 221-8707 www.caribbeangovernance.org In an interview with the Business Guardian, Driver said that the decision was good news for the country but that it will take some time for first gas to reach Point Fortin. He explained: “I expect that any development will be in the medium-term (5 years) as there are still many commercial agreements that will have to be negotiated, including gas sales contracts and specific field development agreements. The intended purchase of BG by Shell means that there will probably be a new entity entering into the discussions for the first time in 2016. “
Last week, the BG exclusively reported that the Venezuela government has agreed to send some of its portion of the natural gas in the Loran/Manatee cross-border field to T&T to be processed as Liquefied Natural Gas (LNG).
Multiple sources in both Caracas and T&T confirmed that the South American country has decided that it made sense to have the gas liquefied in Point Fortin and last Tuesday a delegation from the Bolivarian Republic led by its new Minister of Oil Eulogio Del Pino met with Prime Minister Keith Rowley and a technical team to provide further impetus to the development.
Dr Driver said the additional gas will ensure that the country has the natural gas to extend the life of the downstream petrochemical sector.
“Obviously it is excellent news for Trinidad & Tobago that the Venezuelan government has indicated its agreement that gas could be exported from Venezuela to Trinidad. This is a major shift in their historical policy and offers an excellent opportunity for Trinidad & Tobago to extend the life of our petrochemical and LNG industries.”
In the first five months of 2015 natural gas production averaged 200 million cubic feet a day less than in 2014. For the period January to June 2015, natural gas production stood at 3.8 billion cubic feet per day (bcf/d). In the period period last year, it stood at just over 4 bcf/d.
A further examination of the lower production statistics indicate that the fall in production has been mainly due to lower output from bpTT. In fact, bpTT’s production moved from 2.18 bcf/d in January 2015 to 1.85 bcf/d by June this yea, a decline of 18 per cent. In 2014, bpTT averaged natural gas production was 2.165 bcf/d.
To put it in perspective the loss of 200 million cubic feet of natural gas per day is almost all the gas needed to power the entire country on a daily basis. It is also enough to service an ammonia or a methanol plant.
The fall in natural gas production has had a ripple effect on the sector because a reduction in the production does not just mean less money for the government at the wellhead, it also means lower production of other gas-based products.
For the first five month of 2015, LNG production was down by 178 mmcf/d averaging 2 bcf/d down from 2.178 bcf/d in 2014, a decline of 9 per cent. This is a major decision that is likely to lead to either the construction of a new LNG facility in Point Fortin or the redirection of gas from LNG to domestic use. Sources indicate that there is a shortage of between 400 to 600 million cubic feet of natural gas per day and once production is flowing from the Loran/Manatee field that gap will no longer exist.
The Business Guardian has been informed that while no decision has been taken on this issue, the Government is favouring the redirection of the natural gas rather than the further expansion of Atlantic LNG. This, the BG was told, would ensure that the high cost of building a new plant and the length of time it will take for the construction is reduced.
Dr Driver said the decision on whether there should be a new LNG train built or if the gas should go to the existing train was one for the respective Governments, the companies - PDVSA, Chevron, BG and Shell (assuming the purchase goes ahead) – and potential customers in T&T. He said: “I think it is too early to make any firm comment at this time.”
According to the CEO of the LNG Chamber, the news also means opportunities for local service companies to do more work on both sides of the border.
As he explained: “It is certainly positive news and does open up the possibilities for further investment in the energy sector, including for energy service companies and contractors based in Trinidad & Tobago who could provide services to a new development in the Plataforma Deltana region.”
Negotiations between Venezuela and Trinidad and Tobago have continued for the last 12 years starting in 2003 with the signing of a memorandum followed by five years of technical studies of several reservoirs to determine if they crossed and to what extent they crossed the border.
A framework treaty was then signed and a unit operator selected. The operator is now working on a development plan and after then approvals will have to be sought and the financing determined.
Business Guardian