Valuation Request

Market Conditions Update – November 2016

Market Conditions

 

Following an overall decline of  0.6 per cent in 2015, the Central Bank of Trinidad and Tobago has stated that GDP is estimated to have fallen by 6.7 per cent (year-on-year) in the first half of 2016, led by a contraction in the energy sector (10.8 per cent).  There is some uncertainty regarding the quantum of the decline which was addressed earlier by us and can be found at http://gafarrell.com/how-much-has-the-local-economy-declined-in-2016/.

 

The contraction in the energy sector was due to falls in both prices and production.  Not only have oil and gas prices fallen dramatically over the last year, but oil production has also declined steadily since late 2006 while natural gas production peaked in late 2009.  The decline has been attributed to three main factors: mature acreage, increased emphasis on safety and infrastructural upgrade.  The decline has also resulted in a 20% decrease in foreign exchange inflow from the energy sector.

 

This current environment of slowing economic activity has also led to:

On the bright side, there are several new energy projects such as the recently commissioned Angostura Phase 3 project by BHP Billiton, bpTT’s Juniper Project and EOG Resources’ Sercan Development.  It is anticipated that these should add a fair amount of natural gas to the local production horizon by early 2017. In addition, OPEC is currently attempting to agree to a decrease in oil output.

 

It would therefore seem that until such time that there is a recovery in energy prices and local production, the economy, and by extension the real estate market, could be in for a rough period.

 

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