Exxon is making a big return to Trinidad and Tobago. What does this mean for the country’s forex crisis?

Oil and gas company ExxonMobil has signed a new deal with the Government of Trinidad and Tobago to look for oil and gas in the deep waters off the island’s coast.

Exxon could invest as much as US$21.7 billion if it finds major oil or gas reserves. According to the company, exploration will begin with surveys and test drilling more than 6,500 feet below the ocean’s surface. 

Geophysical studies are expected to start within the next six months, followed by drilling.

Now, there’s a lot riding on this exploration. The stakes are high!

Oil exports make up more than 40% of government revenue, and about 80% of foreign currency earnings for Trinidad and Tobago. 

But as economist Marla Dukharan explained on Taking Stock, Trinidad is a mature oil producer and that creates issues.

As the oil and gas revenue fades, it puts pressure on the country’s foreign exchange. TikTok is filled with videos of Trinis complaining that they can’t get USD.

The hope is that Exxon’s investment can help turn that around. If large oil or gas discoveries are made, it would bring in new revenue and much-needed forex. That could ease the crunch and give the economy a boost.

Still, it won’t happen overnight. Exploration projects can take years before producing oil or gas, even for a “mature” provider like Trinidad. These explorations are in different areas and are much deeper.

That’s why some economists think that the country should also focus on building other industries.

But the Exxon deal is a positive sign and could signal a chance in fortune for Trinidad.

And that’s the bottom line.