At the Trinidad and Tobago Energy Conference in January 2016, Touchstone CEO, Paul Baay called for government to take a look at the tax structure for the oil sector. He provided the netback figures for Touchstone and illustrated that the company earns less money with an oil price of $50-$60 per barrel than they do at $49.99 or $60.01. He calls this a disincentive for companies to move back into the field as prices begin to increase during this “recovery zone”. To deal with this and to encourage capital investment, he says that fiscal reforms to supplemental petroleum tax (SPT) and petroleum profit tax (PPT) would be necessary, especially for onshore producers. 

Baay, looking at projected oil prices by various analysts including accounting and finance firms, averaged out the projected price of oil and suggests that they will be looking at a price of oil to be around $50 for the next five years. He says that no one really knows how things will go but the difference in thought and methodologies for price forecasts all begin to come together at the end of the year which makes things a bit more optimistic than it was a year ago. 

He says that the international capital will go where ever there’s most stability, where there’s the most competitive projects or countries that have the most opportunities. He begs the question of how we encourage things going forward. For Trinidad and Tobago, he says when you look at the government take from an onshore producer today, you can see how that dramatically goes up as prices move into $50-$60 per barrel range (recovery zone) but you can see that these onshore projects do not produce the same returns on capital as similar projects in other jurisdictions. Baay says that Touchstone’s view is that you have to do something that works for the country but also do something to encourage the inflow of capital. 

He recommends that the SPT should kick in at a lower level, and increase at a graduated basis, based on price, rather than one big jump as it is right now. He suggests gradually increasing the SPT percentage as the price increases, so that it only gets back up to 18% when it reaches $90. Baay also said that there are many provisions in the current PPT regime. He urges government to be consistent because there’s a misconception that the larger capital projects (e.g. offshore, deepwater) are riskier and that they have a higher return when compared to onshore. According to Baay, this is not the case and says that “we’re all chasing the same capital around the world and we’re all selling the same product. To penalise one over the other doesn’t make sense.”