Home' Trinidad and Tobago Guardian : August 22nd 2013 Contents AUGUST 2013 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
Parex Resources Inc, a Canadian company focused on oil
exploration and production in Colombia and T&T, during the
August 14 release of its financial and operating results for the
three months ended June 30, (2Q 2013), said it plans to defer
drilling in T&T to 2014.
The company has reallocated the US$20 million budgeted
for T&T to Colombia.
The company said in the release: "For the second half of
2013, Parex plans to drill approximately five exploration
prospects and 15 appraisal/development wells, all in Colombia.
We anticipate Trinidad drilling activities to be deferred to
2014 and have re-allocated US$20 million
budgeted capital to Colombia."
Asked to explain, Parex country manager
Brian Lynam, said in an e-mail: "We have
deferred drilling to 2014 in order to arrange for an appropriate
rig to drill the central range block deep prospect (approximately
12,000 feet) whose location could not be confirmed until we
processed and interpreted the seismic recently shot. The
US$20 million shifted to Colombia consisted of approximately
US$5 million from Cory Moruga (drilling capital) and US$15
million from the Central Range block (a combination of seismic
and drilling capital)."
Parex operates two blocks in T&T: the Central Range Block,
which measures 105,739 acres and the Moruga Block, which
measures 6,237 acres. Parex has a 50 per cent working interest
in the Central Range and an 83.8 per cent working interest
in Moruga. The company is still in the small capital expenditure
(capex) stage with its T&T blocks, and currently only has
production out of Colombia.
During the six months ended June 30, 2013, the company
incurred US$125.1 million in capex, compared to US$151.9
million in the same period of 2012. During Q2 2013, the com-
pany drilled ten gross (6.75 net) wells, compared to 14 gross
(9.8 net) wells in the comparative period.
Geophysical costs were US$6.4 million and mainly relate
to 3D seismic acquired on Blocks LLA-34 and LLA-32 in
Total drilling and completion costs during the quarter
totalled US$47.8 million of which the majority related to
drilling, completion and capitalised workover costs in Colombia.
In the second quarter of 2013, the company s Colombian
operations utilised two drilling rigs and one service rig plus
equipment utilised on non-operated blocks.
Spending on well equipment and facilities was US$8.5
million primarily all focused on Colombia s Las Maracas and
Tua fields. Property acquisition costs were US$12.5 million
in the quarter; a result of Parex increasing its (Colombian)
Cabrestero working interest from 50 per cent to 100 per cent
through acquiring its partner s working
interest for a cash consideration of US$12.5
T&T capital expenditures in the second
quarter of 2013 were primarily in respect of 2D seismic acqui-
sition on the Central Range block s deep prospect, the company
Telling its shareholders about obligations, commitments
and guarantees, Parex said in the release: "In T&T, under the
initial exploration phase of the Central Range block production
sharing contracts (PSCs), the joint ventures remaining work
commitment to earn in the blocks, is to drill an exploration
well to 12,000 feet and acquire additional 2D seismic. The
obligations to earn the blocks under the PSCs are to perform
the exploration work commitments, irrespective of actual
The company said it has entered into contracts for drilling
rigs in Colombia and T&T.
Parex s overall net income in 2Q 2013 fell 63 per cent to
US$7.632 million from US$20.92 million in the same period
last year (2Q 2012). Compared to the first quarter (1Q 2013),
Parex net income fell 31 per cent from US$11.136 million. In
T&T, Parex registered a net loss of US$240,000 in Q2 2013.
This is lower than the same period last year when it posted
a net loss of US$1.9 million. In Colombia, Parex posted a
US$11.95 million profit at the end of 2Q 2013, down from
US$18.272 million in 2Q 2012.
Parex defers T&T drilling,
redirects US$20m to Colombia
A leading economist has called on Finance Minister Larry Howai
to reduce the amount of subsidies the Government is paying
including the fuel subsidy.
Chief economist at Republic Bank, Dr Ronald Ramkissoon,
warns that the minister must first put in place measures to assist
the most vulnerable in society.
Ramkissoon told the Business Guardian the country had to
look at the issue of subsidies in the context of its ability to mask
the uncompetitiveness of the economy, adding that subsidies
have been shown globally to encourage criminal activity.
"Studies have shown time and again that subsidies encourage
arbitrage where one buys something at a subsidised price and
then sells it across the border at a higher price. We have seen
this happen in the Caribbean. In addition, an economy is com-
petitive when it is paying for its goods and services close to what
the international price is."
Howai is expected to deliver the 2014 budget on September 9.
The Government has alleged T&T could be losing as much as
$1 billion annually due to the illegal trade in diesel fuel when the
product is bought at a subsidised price and resold in the Caribbean
at close to international prices.
Dr Anselm London, former finance secretary in the Tobago
House of Assembly, agreed with Ramkissoon that the subsidies
have to be removed because, in his view, "they benefit people
who often don t need it and make the economy uncompetitive."
In an interview in Scarborough, London told the Business
Guardian that subsidies were essentially a transfer to individuals
and businesses for goods and services at below market value. He
and Ramkisson argued the Minister of Finance will have to deter-
mine if this is the best use of the country s resources.
London raised the issue of continued transfers in the context
of Government running of large deficits. The two suggested that
a more efficient transportation system, possibly a rapid rail and
a proper bus system, may be better options to the fuel subsidy.
"I support a rapid rail system because even if you buy the argu-
ment that it will cost $1 billion annually to maintain and operate
it, it is still less than the $3 billion to $4 billiion fuel subsidy."
Ramkissoon said the Government also has to consider and
encourage the use of compressed natural gas.
"Sometimes people have to get incentives and disincentives to
do things and if I get a cheaper, cleaner fuel, I will do what is in
my interest and switch. I will not care about the subsidy. I will care
about what is in my interest."
The Energy Chamber has called for the Government to remove
the fuel subsidy on a phased basis, but organisations like the Down-
town Owners and Merchants Association have objected to the sug-
gestion, saying it will lead to increases in prices of goods and services
across the spectrum, due to higher transportation costs.
London and Ramkissoon also called on Howai to reinstate some
version of the property tax. They say while the Government has
to deal with the issue of subsidies and competitiveness in the
economy, it cannot ignore the fact that it is not collecting all the
revenues is should be from the economy.
"When you remove the subsidy it may appear as a tax in an
effort to create additional revenue for the Government. But such
a measure cannot be supported if the Government continues to
refuse to collect the property tax," London said.
Ramkissoon said the Government must also return to the
Revenue Authority. The authority, which was first proposed by
the Patrick Manning administration, was opposed by the United
National Congress and the Congress of the People.
Ramkissoon said the Minister of Finance in his last budget
indicated a team was looking at tax collection as well as Customs
collections and he expects Howai to say something concrete about
it in his budget presentation.
London said it was clear from the output in the economy that
the Government s revenue collection was not where it should be
and suggested there was fraud taking place. He said the amount
of taxes collected on everything from VAT to corporation taxes
were not at the level they should be.
Economist to Finance Minister:
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