). according to their published annual reports, external indebtedness by petrotrin and ngc has grown tremendously. ngc ’ s external debt more than tripled between 2004 and 2006. of the approximately $ 9 billion increase in petrotrin ’ s debt over the period 2006 – 2009, almost all was financed on the external market. the often repeated rationale for the limited involvement of the domestic financial sector includes : ( i ) the large capital outlays and long lead times to production ; ( ii ) high risk and uncertainty associated with exploration investment ; ( iii ) potential for inherently variable resource revenue ; and ( iv ) the high interest rates and inefficiency of domestic capital markets. bis central bankers ’ speeches it is true that the domestic capital market is limited in terms of the financing requirements of the larger companies. for example, petrotrin went to the overseas market to raise us $ 750 million in 2007 and us $ 850 million in 2009 to finance the gasoline optimization project and the ultra - low sulphur diesel plant. the domestic financial system certainly could not supply those resources. ( but one is tempted to ask why a small portion could not have been raised here ). in terms of the capital market, the largest local currency, private sector issue in the domestic capital market was tt $ 1 billion in 2005 for tstt. in terms of foreign currency issues, the largest issue was us $ 130 million for the trans jamaica highway in 2004, followed by us $ 120 million for the government of barbados in 2009. the petrotrin transaction in 2009 clearly shows that the required capital could have been raised on the local market at a lower interest cost ( table iv ). however, the issue size was considerably larger than the customary values raised on the domestic market. apart from issue size, the multinational energy companies will not borrow on the domestic market because they can access financing at cheaper rates. according to the bp ’ s consolidated financial statements for 2009, the company ’ s interest cost for fixed rate debt for us dollar, euro and “ other currencies ” issues were 4 per cent, 4 per cent and 6 per cent, respectively. the rates were considerably lower for floating rate debt ( 1 per cent, 2 per cent and 3 per cent ). in this year, the prime rate in trinidad and tobago was 11. 9 per cent. capital issues were at rates ranging from 5. 25 to 8. 95 per cent. the pre - conditions for increasing domestic financing in the

ewart s williams : stimulating domestic capital in the energy sector address by mr ewart s williams, governor of the central bank of trinidad and tobago, at the trinidad and tobago energy conference, port - of - spain, 8 february 2011. * * * it ’ s a bit of a paradox but the facts are that the energy sector makes a major contribution to gdp, to the public finances and to exports, ( but scarcely any direct contribution to employment ) and depends very little on domestic financing. table i illustrates the contribution of the energy sector to the various economic aggregates. you should note too, that since the beginning of the last decade, the energy sector was the main engine of growth and has grown at an average rate of 10. 3 per cent per annum, outpacing the average growth of 3. 8 per cent for the non - energy sector. in terms of financing, table ii shows that the energy sector accounts for a mere 3 per cent of total banking system loans and virtually the entire bank exposure is to the “ service ” companies. the picture is even worse if we look at the capital market. with the exception of one small company listed on the second - tier market, none of the 32 listed companies on the firsttier of the stock exchange are in the energy sector. in addition, of the $ 17 billion of ( private ) securities floated on the domestic capital market in the last decade, none were for local energy sector companies. and here i am defining the energy sector in the broad sense, comprising : ( i ) upstream – largely multi - national firms specializing in exploration and the production ( mining ) of oil and gas ; ( ii ) the downstream petro - chemical sector ( also largely foreign owned ) ; and ( iii ) the energy services sector ( the smaller firms that provide support services ) – these are largely locally - owned, though there are three multi - nationals that also operate in this sector. the foreign - owned enterprises are financed almost exclusively from abroad through direct equity injections and intra - company loans. the table iii presents estimates of total foreign direct investment in the energy sector in the period ( 2001 – 2009 ). the significant inflows during the first half of the decade were on account of the considerable capital investments associated with the development of the lng industry. of course, petrotrin and ngc, the large local companies in the energy sector are state corporations who also finance their investment projects largely from international sources ( of course, in addition to retained earnings