Home' Trinidad and Tobago Guardian : February 25th 2016 Contents FEBRUARY 25 • 2016 www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
T&T has an oil and gas economy.
It has been this way since we
began producing oil over 100
So how much revenue does the country
actually earn from hydrocarbons?
Furthermore, we have repeatedly heard
that we are more of a gas economy.
How much more is it?
Estimated energy sector revenue is 40
per cent of GDP (2009 - 2013). Also, it is
commonly quoted that approximately 80
per cent of foreign exchange comes from
oil and gas exports.
How come we don t know exactly how
much money our energy industry makes?
One main reason is the availability of up-
to-date information. Upstream companies
are liable for a myriad of payments including
Royalty, Petroleum Levy, Unemployment
Levy, Green Fund Levy, Supplemental Petro-
leum Tax (SPT), Petroleum Profits Tax (PPT)
and several others. These are subject to
write-offs as a result of different government
incentives. Some taxes are paid quarterly
and others annually so timing is also an
Payments are also made to three state
institutions: the Ministry of Energy, the
Inland Revenue Department and the Invest-
ment Division at the Ministry of Finance.
This occurs because there are two types of
contracts that companies like bpTT, BG or
Petrotrin have with the Government: Pro-
duction Sharing Contracts (PSC) and Explo-
ration and Production Licences (E&P). Each
type has different taxation regimes and
requirements as to which minister is to be
paid. Under PSCs these payments are sup-
posed to be audited by the Ministry of Ener-
gy. Under E&P, this should be done by the
Inland Revenue Division. If these are actually
done, how efficiently and how soon after
payments are made are different questions
Some companies may be involved in both
E&P and PSCs, which means taxes are split
and paid to the relevant agencies. Petrotrin,
the largest oil producer, is even more com-
plex, as it has core operations onshore and
offshore. It has three types of sub-contracts
on land and is a partner in most PSCs and
NGC, the second biggest contributor to
energy revenues (after bptt) is a partner in
upstream contracts, has stake in two Atlantic
trains and is the majority owner of PPGPL
(Phoenix Park Gas Processors Ltd), among
many other activities. Hence, its contribution
is also quite complicated as it exists at all
parts of the value chain.
This exposition is simply to paint a picture
of how administratively arduous a task it is
to receive and verify tax payments. On top
of that, typical bureaucracy means these
divisions may have little communication so
putting together their information is another
Only recently, we have the EITI (Extractive
Industries Transparency Institute) publishing
excellent annual reports reconciling how
our petro-dollars are earned. Even so, the
latest report was published in September
2015 and is for fiscal 2013, which is still lag-
ging two years behind.
Therefore, even as global oil prices have
tumbled over the last 18 months, we have
limited information on how that has affected
our tax earnings, save for unverifiable
excerpts of political speeches and parlia-
mentary discussion. This leaves us with the
task of estimating or guesstimating our
What about the proportion of revenue
from gas as opposed to oil? One further
constraint in reporting this is that companies
pay most of the taxes on profits. If you are
producing both oil and gas, profit does not
indicate how much each has contributed.
In 2015, the Energy Chamber CEO Dax Driv-
er used EITI data and some sound assump-
tions to roughly show that gas contributes
two-thirds of the energy pie, with oil taking
the remaining one-third.
In his 2016 budget speech, the Minister
of Finance projected that $5.449 billion would come
from oil and gas this fiscal year. This is a far cry from
fiscal 2013, when T&T s government collected $TT
21.4 billion or even fiscal 2015 when $TT 13 billion
was received. So what has accounted for this drop?
Certainly the major factors are the falls in average
WTI oil price from $93/bbl (2013) to the budgeted
price of $45/bbl (2016) and drop in Henry Hub gas
from $4.40/mmbtu (2013) to $2.75/mmbtu (2016
If we look at what specific taxes have dropped,
the most glaring will be SPT, which has fallen to zero
for 2016. This is leveraged only on oil and becomes
zero below $50/bbl. In 2013, SPT totalled $TT 3.3
billion. Royalty, PSC Profit Share, Petroleum Profits
Tax and Corporation Tax form the bulk of the addi-
tional revenue. All of these are substantially reduced
with lower prices.
Lower revenues is further compounded by lower
oil and condensate production: 81,000 bbl/d in 2014
to 75,000 bbl/d in mid-2015, and lower gas produc-
tion: 4.1 bcf/d in 2014 to 3.8 bcf/d in mid-2015.
These figures are not expected to rise in 2016.
The last major contribution to lower revenues
would be write-offs for capital expenditure. This
means that companies doing certain type of activities
can deduct the cost of these activities from their
gross income and so reduce their taxable income.
Some examples are: all deepwater exploration (140
per cent), all other exploration costs (100 per cent),
drilling dry holes (100 per cent), deep land drilling
(140 per cent) and heavy oil drilling (150 per cent).
Now, while these are incentives for companies, it has
never been clear how much they actually write-off
and what period this occurs. For example, work done
in 2015 may not be written off until 2016 and can
therefore substantially reduce our tax earnings.
The current budget is pegged at WTI $45/bbl and
for the first time, a mixed natural gas price of Henry
Hub $2.75/mmbtu and Indonesia $8/mmbtu. Now
that we are seeing even lower oil and gas prices post-
budget, we can project our petroleum revenues based
on WTI $30/bbl, Henry Hub at $2 and Indonesia at
$5/mmbtu. Please note that it is not clear how this
mixed gas pricing will work and this is just an esti-
If we assume fiscal 2013 can be considered rep-
resentative of calendar 2013, and using the latest
Ministry of Energy s publications (last updated August
2015), and averages for WTI crude and Henry Hub
gas (upon which our budget is based), the following
can be estimated as shown in Table 1.
Therefore, we can roughly calculate that our energy
revenues have fallen by over 75 per cent (over $TT
16 billion) in the last three years. If commodity prices
keep falling, we will be earning under $TT 4 billion
from oil and gas in 2016. Juxtaposed to a budget of
over $TT 60 billion, this is quite worrying.
Javed Razack is a graduate of UWI in Petroleum
Geoscience and completed an MSc at the Uni-
versity of Aberdeen, Scotland, in Oil and Gas Enter-
prise Management in 2015 on a Chevening schol-
...and why is it such a secret?
How much money does T&T
actually earn from energy?
Calendar Year Average Gas
Average WTI T&T Gas
Price ($/mmbtu) Oil Price($/bbl) Production (bcf/d) Production (bbl/d) Revenue ($TT Billion)
2016 (budgeted) 2.75
2016 (alternative) 2.00
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