Home' Trinidad and Tobago Guardian : August 13th 2015 Contents economic activity at least for the next 18 months and
many other economies are becoming more efficient
in the consumption of fuel."
"Further, crude oil prices are quoted in US dollars.
In this regard, the strength of the US dollar vis a vis
other currencies matters. If the US dollar appreciates
relative to other currencies, then the price for a barrel
of oil in these other currencies increase, and this can
dampen market demand. Even though the actual US
dollar price of oil remains the same."
He added that in the recent past, the US dollar
has been strengthening and this would have adversely
affected demand by some economies which have pur-
chase crude oil with US dollars.
"Another consideration is that US unemployment
rate is around five per cent and this is close to full
employment. Having brought unemployment to at,
or near, full employment levels, the Feds have
announced a prospective marginal increase in interest
rates, in the US. This will promote short-term capital
flows into the US, further strengthening the US dollar
and, in doing so, increasing the cost of oil in other
There is need for the Government to cut spending,
"All of this means, as things stand, the price of oil
is depressed and the medium-term price for the next
18 to 24 months is not likely to cross US$75 per barrel.
In this context, the government of T&T has cut its
baseline budgeted oil price to US$45 per barrel as well
as the price it expects for gas. The T&T economy is
in a new normal, growth rates will not likely resume
to that of the period of golden growth, 1996-2008,
but will likely revert to what it was in the period,
1993 to 1995."
T&T Extractive Industries Transparency
tax to trend downwards
The EITI said the declining oil prices would have
ramifications for the revenues earned from the gov-
ernment and the private sector and their employment
"Government depends on the extractive sector for
a significant portion of its revenue. In some cases,
specific revenue streams, such as supplemental petro-
leum tax (SPT), are tied to the price of oil so the lower
the price of oil the lower the amount of revenue earned
by the State."
Regarding companies, the EITI stated that in its
reports for 2010-2011 and 2011-2012 companies paid
the State in total $4.1 billion and $2.3 billion in sup-
plemental petroleum tax.
"This year, average oil prices are significantly less
than 2011 and 2012 prices so the revenue received for
SPT could trend downwards, especially since this
payment is due/paid on a quarterly basis. It is important
to note that oil accounts for approximately 38 per
cent of our upstream revenue and gas for the remaining
62 per cent.
"For gas revenue, using benchmark prices like (the
US) Henry Hub could be misleading for a country
like T&T which exports the bulk of its LNG to des-
tinations other than the US such as Argentina, Brazil
and Japan where prices are significantly higher. Some
LNG sales are also tied to long-term supply contracts,
or the spot market, therefore determining what per-
centage of our LNG cargoes are tied to fixed price
contracts or current prices is not immediately clear."
The EITI said even though there have been
announced job cuts internationally, it is difficult to
determine whether there would be more job cuts here.
"Whether or not there will be further job cuts is
uncertain but, for upstream companies, low prices
could force a review of expenditure that can impact
everything from exploration drilling, analysis of seismic
surveys to hiring and retention of workers. If prices
remain depressed in the short or medium-term,
expenditure recalibration by companies can be expect-
ed and decisions taken on any mitigating steps. If
price declines are long-term, companies may need
additional fiscal incentives as encouragement to devel-
op new fields."
If there are further declines in the price of oil, the
EITI would not have monitoring nor audits to do if
revenues decline because, "our task is to independently
verify the payments made by extractive companies
in the oil and gas sectors to Government and to con-
firm if these payments match government receipts.
"If the two figures do not match, as has been done
in the past, the EITI report will highlight the dis-
crepancy and provide explanations to the public on
why there is a difference in payments and receipts.
Price declines will not impact our work but the EITI
report for the particular fiscal year would show the
country has earned less from the oil and gas sector
with details of the contributions of the various com-
The EITI said: "The report provides previously
unavailable credible data to citizens and it is important
for national dialogue if more citizens took an interest
in the reported findings.
"The report is an excellent research resource doc-
ument for university think-tanks and government
planners and can be used for national budgeting exer-
cises. It provides data to facilitate the review of fiscal
regimes to determine whether incentives offered in
a certain year boosted revenue. It also records trends
in dividend payments by State energy enterprises or
social expenditure by extractive companies."
AUGUST 13 • 2015 www.guardian.co.tt BUSINESS GUARDIAN
NEWS | BG7
higher that the budgeted prices. If
prices are falling and below the bud-
geted figures, it is unlikely there will
be any transfers to the fund.
Asked whether the he expected any
transfer from the fund, he said no,
because "it's politically unacceptable."
The fluctuating price of oil is likely
to affect T&T's energy sector, he said.
"T&T's production at 80,000bpd
(barrels per day) is small so the effect
is thereby decreased. It will also delay
any new exploration as the price has
remained depressed and decreases the
revenue potential of any new well. On
the other side, it does make life better
for Petrotrin since the price of imported
oil is now down it creases the refinery
He predicted that more cuts are com-
ing as energy giants brace for further
decline in revenues.
"All the major oil companies have
announced reduced exploration activ-
ities and declines in investment expen-
ditures by an average of 20 per cent.
Shell Exxon, ENI, BP have all
announced cuts in their exploration
expenditures. There have also been
consolidations as typified by Shell's
purchase of BG and the consolidation
of Halliburton and Baker Hughes. In
general, staff cuts have been announced
Browne suggested there should be a
re-think of budgeted expenditure in
"The government's budgeted expen-
diture plans cannot be maintained. To
keep up appearances, it has required
dividends from NGC, the NGL IPO and
the repayment of proceeds from Clico
($4.5 billion) which ought to have been
used to pay down the borrowings used
to finance the Clico intervention, but
are being used to fund recurrent expen-
diture. This is not a good situation and
will get worse between 2015 and 2017
as the market is likely to be depressed
for two to three years. New supply is
coming into the international markets
in oil and gas; that makes for a difficult
situation no matter who wins the elec-
tion on September 7."
Roger Hosein, economist:
Govt must cut
Hosein said he is not surprised by
the "depressed" oil prices since the sup-
ply of oil is high in the global market.
In emailed responses Tuesday, he
said: "From a supply perspective, Saudi
Arabia has been producing significant
amounts of crude oil. In June 2015, Saudi
Arabia recorded its highest level ever of
crude oil. In the same time period,
OPEC countries also kept production
fairly constant so mounting production
by the USA, Saudi Arabia and other
countries (especially Russia, Brazil,
Canada and Iraq) has seen global supply
"By Q2 2015, global production had
climbed to 95.70 million barrels per day.
In the same time period global con-
sumption stood at 93.6 million barrels
per day. In the market there is an excess
of around 2.1 million barrels of oil per
In the medium-term, Hosein pre-
dicted that the surplus in the global
market is likely to continue, "as China
and Europe seem set for slower-paced
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