The oil price for the fiscal year 2016, so far, has averaged more than US$6 a barrel; more than the revised budget presented by Finance Minister Colm Imbert, this according to Energy Minister Nicole Olivierre.
In a telephone interview with the Business Guardian on Tuesday, the minister said the average oil price for the fiscal year "averaged just under US$42 a barrel" which is above the US$35 a barrel Imbert announced in April in his mid-year review.
Asked if that meant the Government's revenues should be in a better position than anticipated, the Energy Minister said: "I don't want to get into the finances because that is not my portfolio but, with the improved prices, I would say there would have been marginal increases in revenues coming from the sector."
In revising the oil and gas price downwards, Minister Imbert told Parliament on April 8 that to be safe, fiscal operations during the second half of the fiscal year would have been based on an oil price of US$35 per barrel and a gas price of $2 per mmbtu.
He explained: "This would imply another sizable shortfall in energy tax receipts, compared with the budget projections."
Imbert told the Parliament that government's revenue shortfall was primarily in tax receipts from energy companies, reflecting a sharp decline in projected income from oil and gas companies in the first six months of this fiscal year of over $2 billion. And this was even after the revenue projections from the energy sector were cut drastically in preparing the original 2016 budget, which was presented on October 5, 2015.
Imbert said: "This House will recall that the 2016 budget was based on an oil price of US$45 per barrel for WTI crude, a level that was considered fairly conservative even by international experts, since at the time the WTI price was averaging US$46 per barrel, with a projection that it would average US$53 per barrel in 2016.
"The gas price assumed in the Budget was US$2.75 per mmbtu, Henry Hub, at a time when the market price was US$2.66 per mmbtu. As it turned out, due to the hardline position taken by OPEC, where Saudi Arabia and other OPEC countries, in their ongoing battle for market share with shale oil and gas producers in the USA, chose not to cut production in the face of a global oversupply of oil.
"Accordingly, notwithstanding the predictions of international energy experts, such as the highly respected US EIA, the average oil price for the first six months of fiscal 2016 was US$37 per barrel while the average gas price was US$2 per mmbtu. By way of comparison, in the previous fiscal year 2014/2015, the corresponding oil and gas prices were US$61 per barrel for WTI and US$3.35 per mmbtu for Henry Hub, respectively."
With the 2017 budget expected to be read next month, economist and lecturer at the University of the West Indies Dr Roger Hosein believes it should be based on an oil price of US$35 a barrel and a natural gas price of US$2 per mmbtu.
Dr Hosein painted a grim picture of the state of government finances and said the conservative oil and gas prices would ensure the Government is less reliant on the energy sector and that it manages the country on the new realities of its economic situation.
"I think it should be based on an oil price of US$35 and a gas price of US$2. The oil price of US$35 reflects forecasts of the multilateral lending institutions, which averages, in the case of the International Monetary Fund, at US$41 for the next year. The price of US$35 would also start the process of the state becoming more accustomed to being dependent on its non-energy sector revenues. This is critical as we navigate decreasing production levels from a mature petroleum industry and as we try to halt the momentum of years of wasteful expenditure on general fronts. It also has tremendous psychological advantages that are in a new normal."
In a wide-ranging interview, the Energy Minister acknowledged that revenues from the energy sector was as much a reflection of the global prices of oil and gas as with the level of production.
The Energy Minister told the Business Guardian that she expects a slight improvement in natural gas production with coming onstream of bpTT's trinidad onshore compression (TROC) project which would add an additional 200mmscf/d and also the joint venture between bpTT and EOG Resources that would make available an additional 275 mmscf/d.
"Those two projects will bring some additional gas and of course Juniper is progressing well. All the wells have been drilled out. I believe in the middle of October we will see the sail out of the top side and so we expect in 2017 that will add more than half a billion standard cubic feet of gas but its expected in the fourth quarter of 2017 and therefore is not going to be factored into the 2017 budget."
With respect to additional gas from the cross-border fields shared with Venezuela, the minister said the commercial and technical teams in Port-of-Spain and Caracas are working hard to bring it to fruition but there are a lot of variables that have to be worked through.
Olivierre told the Business Guardian: "If we are to look at Dragon and the Loran/Manatee fields you would see there are so many options and variables we have to consider. So, for example, is it access to Dragon alone or other fields. That will then determine the size and type of pipeline and what we use the gas for. Do we use it for LNG or for downstream? Where does the pipeline start? So, there are a lot of things to work through and so we are working on them."
On the issue of crude production, the Minister of Energy said it continues to be a formidable problem and it requires additional drilling, greater innovation and more use of recovery techniques.
While not wanting to commit on whether Petrotrin would provide additional acreage to lease operators or farmouts, the minister said there may be changes in the way contracts are administered by Petrotrin that could encourage additional drilling and more production from the lease operators/farmouts.
With respect to the supplemental petroleum tax, the minister said that a team from the IMF was in T&T and a review of the country's competitiveness was examined and it could lead to adjustments but not major changes in the fiscal regime.
The budget is expected to be presented at the beginning of October.