Trinidad and Tobago needs direct foreign investment for its economic and social development. The economy of Trinidad and Tobago is – and will remain for the foreseeable future – an oil, gas and petrochemical-based economy. This means that we need very high levels of capital investment into our economy, each and every year. Oil and gas reservoirs have a natural decline rate and in order to simply maintain a national plateau of production we require billions of US dollars of investment every year. Given the current shortfalls in gas production, there is a particular need to attract investment into upstream gas production. 

Investments in upstream oil and gas production are risky, as there is always a possibility that an oil or gas well may not find the hydrocarbons anticipated and the well may not perform as planned, even when it comes into production. The domestic private sector and the Trinidad and Tobago state do not have the capital available to make these risky investments. We therefore need direct foreign investment to flow into our economy, and national policies and attitudes must be aligned to attract that investment. 

In the lead up to the mid-year budget review, there was a lot of discussion about the precipitous decline in taxation from the oil and gas sector. In the discussion on oil and gas tax, there was a lot of emphasis placed on the fiscal reforms that were introduced in September 2014, with the objective of attracting much-needed new investment into upstream gas production. There has been a number of statements made that these changes were a major cause of the decline in revenue. 

This is not the case. The very significant decline in government revenue came about because the precipitous drop in prices and lower levels of production coincided with a period of higher levels of investments. This would have been the case even if the 2014 reforms had not been introduced, assuming investments had gone ahead. 

It is also important to note that these fiscal incentives only applied to companies operating under the exploration and production license regime. For producers operating under production sharing contracts, the changes to the fiscal regime have no impact. These companies continue to provide the government with their share of production, in accordance with the contract conditions. 

Unfortunately, there have been a number of commentators who have jumped on the news about the decline in energy sector taxation and have used this as a reason to bash the energy sector in general and multinational corporations in particular. Coming on the back of the news about job losses, there has been a lot of anti-multinational rhetoric in the media and in conversations amongst the general population over recent weeks. 

 

This anti-multinational rhetoric is dangerous and needs to stop. The oil and gas industry needs high levels of capital investment and is technically challenging, especially as you move into deeper waters or drill into deeper reservoirs. There are not many companies in the world who have the financial and technical capacity to operate safely in these challenging environments. We are fortunate to have some of those companies already operating here in Trinidad and Tobago and we should be doing what we can to make sure that they remain. We should be proud that Trinidad and Tobago is important to these companies and that they want to invest their capital here – and even more importantly, that they employ many thousands of our citizens.