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Regional News>Trinidad to overhaul its oil tax regimeLinda Hutchinson-Jafar - Business Writter |
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Trinidad and Tobago is considering an overhaul of the tax and incentives schemes for its energy sector, hoping to fashion a regime that will drive investment in exploration and production, which analysts say have lagged in recent years.
The review was announced by energy minister Conrad Enill in a speech in Port-of-Spain in which he reiterated a swath of sector initiatives - including plans for a new oil refinery and the auctioning of off-shore exploration blocks - that have long been on the agenda.
The refinery is a US$3-4 billion project that was first announced in 2005.
Wednesday Business understands, however, that its construction is unlikely before the next two years.
Petrotrin is in the process of clearing the project site in preparation for the development, but the process involving relocations and demolitions won't be completed until December 2009.
Analysts have been warning of the need for new investment in energy, particularly in up-stream projects, if Trinidad is to continue to generate the income to deliver the double-digit growth and heavy investment in social and physical infrastructure of recent years.
Twin Obstacle
But the government has faced a twin obstacle in encouraging firms to fork out the requisite cash: a decline in reserves, and the argument by energy executives that they needed better incentives.
Enill, a former junior finance minister, underlined these concerns which he said the Patrick Manning administration hoped to address with the review of the taxation and incentive policies, on which independent consultants and government officials have already begun to work.
Among the issues been looked at are:
- The fiscal incentives for deep water exploration;
- The supplemental petroleum taxes to small petroleum operators;
- Incentives for marginal or small fields, drilling activities, enhanced oil recovery and heavy oil;
- The structure of production-sharing contracts; and
- The taxation and fiscal regimes for downstream projects.
"The aim of this exercise is to ensure that the taxation legislation continues to be relevant to the changing energy sector needs and contributes in a positive manner to its sustained growth and development," said Enill, a former junior finance minister.
Trinidad and Tobago produces about 150,000 barrels of oil a day, but the strength of its energy sector is gas, which has powered its development into the industrial powerhouse of Caricom.
Keen To Find Reserves
However, the country is keen to find new reserves in the face of an audit 14 months ago which showed its proved, possible and probable or 3P reserves at an estimated 30 trillion cubic feet, a nine per cent drop from two years earlier.
Those findings spurred the government into action — with some success, explained Enill.
"You will recall following the release of the results of the last audit, concerns were raised in some quarters about the adequacy of our gas reserves," he said.
"At that time, we pointed out that the results was an indication that government should review its policy on the fiscal regime."
On Target
Added Enill: "We have acted and to date we are on target. The recent discovery in the North Coast Marine Area and the East Coast Marine Area in the current exploration programme is testimony to the success of our policy."
Those discoveries in fields separately controlled by Canadian Superior and PetroCanada are estimated to yield two trillion cubic feet of natural gas, with several more wells to still be sunk.
"The prospects for the year ahead are, therefore, encouraging," Enill said.
The energy ministry, which has also commissioned a new audit of the country's natural gas reserves, plans this year to offer five gas blocks in shallow marine acreage off the east and north coasts.
"Our evaluation indicates that the blocks are likely to be gas prone and offers great potential for enhancing our gas reserves," Enill told energy leaders at a Port of Spain confab.
Blocks in the deep Atlantic, which had poor responses two years ago, are to be put to auction again next year.
Exploitation Deal
With regard to the ownership of natural gas reserves along the Trinidad and Tobago/Venezuela maritime border, the countries seem to be moving closer towards an agreement for the exploitation of the resources.
Technical teams are working on an arrangement centered on the Loran/Manatee field which has an estimated 10 trillion cubic feet of gas.
Up to now it has been broadly agreed that 75 per cent of the natural gas in the field belongs to Venezuela, with the remainder going to Trinidad and Tobago.
business@gleanerjm.com