If Trinidad and Tobago is going to continue to attract the massive amounts of direct foreign investment it requires to maintain its world-class natural gas industry, the country needs to ensure that there is clarity on both short and long-term energy policy. To attract investment, the country needs to reduce uncertainty and help investors mitigate risk.
In his recent budget statement, the Minister of Finance, the Honourable Colm Imbert, reported that discussions were ongoing with the upstream oil and gas companies on new fiscal terms. Nevertheless, the Minister announced that an across-the-board 12.5 per cent royalty was being introduced on all producers. This announcement has created a lot of uncertainty in the industry as companies are not sure how this will impact the overall economics of existing and new projects in the absence of a final position on the new fiscal terms.
Most oil production already attracts royalties of between 10 and 12.5 per cent, while there are different rates applied to different gas production licenses, ranging from 0 to 15 per cent. Companies operating under production sharing contracts, where the fiscal terms are set for the life of the contract, will not be impacted by any new royalty or other changes to the tax regime. The impact of the new royalty will therefore be mainly felt by gas producers operating under exploration and production licenses, namely BP Trinidad and Tobago (bpTT) and EOG Resources.
Minister Imbert stated that the government’s policy on the gas sector would be guided by the 2015 gas master plan report developed by Poten and Partners, an international consultancy. However, in many areas, the report does not give single, clear policy directions, but rather presents a series of options that the government should consider. The Poten report itself recommends that the government ‘should establish a clear energy policy which contains specific objectives in regard to future gas sector development and operational activity for the next decade’.
The Energy Chamber of Trinidad and Tobago urges the government to quickly advance the development of this overall energy policy as a matter of urgency. The policy should include the role of renewable energy sources in the overall energy mix and place Trinidad and Tobago’s energy sector in an overall regional context, given the abundance of new hydrocarbon and renewable energy sources in neighbouring countries. Investors need clarity if they are to commit the huge amounts of capital needed to continue our world-class energy sector. We need to provide that clarity as soon as possible.