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Knowledge Intensive Business Services in the Oil and Gas
Sector in Trinidad and Tobago
Preeya Mohan
Eric Strobl
Patrick Watson
The Sir Arthur Lewis Institute of Social and Economic Studies, University of the
West Indies, St. Augustine
Conference on the Economy
October 13th-14th 2016
1
Introduction
• Trinidad and Tobago (T&T) has a first-class oil and gas and petrochemical industry and is over 100 years old.
• Growth led by oil and gas:
– 45% of GDP, 48% of government revenue and 80% of exports, but only 3% of employment (CBTT 2015).
• Not been able to develop viable clusters outside of oil and gas.
• Fall in international oil and gas prices and local production.
• GDP growth averaged -0.53% in the past 5 years (WDI 2015).
2
KIBS Firms
• Oil and gas sector can be a real driver of growth and development.
• Knowledge Intensive Business Services (KIBS) firms:
– Vertically integrated value chains have been redesigned and new production paths created through the use of Information and Communications Technology (ICT) and outsourcing and subcontracting.
• Developed natural resource rich countries (Finland, Norway Canada and Australia) show that natural resources can lead to sustainable growth and development and KIBS firms play an important role (Aslesen and Isaksen 2010, Engen 2009 and Noreng 2005).
• International oil and gas services market is large and growing- US$100 billion (Standard and Poor’s 2013).
3
KIBS Firms Cont’d
• Serve the demands of other firms- provide scientific and technological knowledge and professional services.
• Most innovative within the services sector and comparable to high-tech manufacturing (Nählinder 2002).
• Knowledge creating entities help with knowledge transfer, innovation, productivity and diversification (Castellacci 2008, Castaldi 2009 and Hertog and Bilderbeek 1998).
• Globally the share of knowledge intensive services to total output increasing (Stehrer et al. 2012) and KIBS firms are a main engine for future growth (Gotsch et al. 2011).
4
Objective
• To study the emergence and evolution of KIBS firms in the oil and gas sector in Trinidad and Tobago:
– Knowledge transfer
– Innovation and productivity
– Industry barriers
5
Data and Methodology
• Primary data:
– Questionnaire with key industry stakeholders.
• Secondary data:
– Energy Chamber of T&T, firm website, Ministry of Energy and Energy Affairs, Central Bank of T&T, government reports and policy documents.
• Firm case studies.
6
T&T KIBS Firms
• T&T’s oil and gas services sector growing:
– Contribution to GDP increased from 4% to 5% from 2001 to 2012 (CBTT 2013).
– Direct capital investment increased from $US 59 million (2001) to $US 171 million (2012) (CBTT 2012).
– Employs 33.33% of oil and gas workers (Energy Chamber of T&T 2009).
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T&T KIBS Firms Cont’d
• T&T has approximately 300-400 KIBS firms.
• 20-30 local KIBS firms operate and export various services:
– Regionally: Barbados, Jamaica, Suriname, Guyana, Cuba, Aruba, Venezuela, Columbia, Belize and Brazil.
– Internationally: Canada, US, Ghana, Indonesia, Bahrain, Dubai, Vietnam and Uganda.
8
Knowledge Transfer
9
%
0
20
40
60
80
100
Wit
hin
fi
rm/e
nte
rpri
se g
rou
p
Clie
nts
Sup
plie
rs
Co
nsu
ltan
ts/p
riva
te
R&
D in
stit
ute
s
Co
mp
etit
ors
Oth
er
mar
ket
Un
ive
rsit
y
Go
vern
me
nt
Jou
rnal
s
Co
nfe
ren
ces
Ind
ust
ry a
sso
ciat
ion
s
Internal Market Public sector Other external
All respondents Product Process
Innovation Co-operation
10
55
48
43
27
21
13
20
66
30
51
32
26
15
23
74
29
58
37
29
16
24
0 20 40 60 80 100
Clients
Government
Suppliers
Consultants/private R&D institutes
Enterprise group
Competitors
University
Process Product All respondents
%
Innovation
11
84 68
0
20
40
60
80
100
New/improved product
New/improved process
38
46
57
0 20 40 60 80 100
New/improved method of manufacturing
New/improved logistics, marketing, delivery or …
New/improved supporting activities
%
38 36 36
32
13 11
0
5
10
15
20
25
30
35
40
Inn
ova
tio
n s
trat
egy
Stru
ctu
re fo
r in
no
vati
on
Ino
vati
on
de
par
tme
nt
Inn
ova
tio
n le
ade
r
Inn
ova
tio
n b
ud
get
Pat
en
ts/t
rad
em
ark/
ind
ust
rial
de
sign
/co
pyr
igh
t
% %
1. Product and Process
2. Process
3. Innovative Activity
Industry Barriers
1. Asymmetric information failures
2. Lack of collaboration between oil and gas service firms and universities and government research institutions
3. Lack of specific industry skills
4. Limited access to finance
5. Defaults by international contractors
6. International competition/ineffective local content policy
7. Falling oil and gas prices and local production
12
Going Forward 1. Coordinated national innovation policy and program
2. Coordination of actors and information sharing
3. Increasing the supply of knowledge and technology development
4. Financial support for R&D and innovation
5. Technology transfer and adaptation
6. Human capital development
7. Enhancing export capabilities
13
