Energy consultant Anthony Paul believes there should be a set formula for determining the price of oil and natural gas for the national budget. Paul said the time has come for us as a country to know what the benchmarks are that are being used to determine the price of the two most important commodities in the country.
"The last government used a five-year average for a while then they changed the formula, this Government uses a different formula. I think what we need is for a set series of principles to be used in determining the price. I believe that the responsibility is that of the economists or civil society to go to the government with the expertise and say to them this is, in our view, the best model and let us see if we as a country can come to a consensus on how we determine the fight, so that we are not on an annual basis arguing about the price of oil or gas."
In his 2011/2012 budget presentation, Finance Minister Winston Dookeran told Parliament that for fiscal 2012 budget calculation was based on an oil price of US$75 per barrel and a gas price of US$2.75 per mmbtu. He said the price was based on the best intelligence available to the Government and that the administration felt it would hold. Dookeran said it was the same formula used to determine the oil and gas price in 2010 and 2011 when the government's oil price was proven to be conservative and its gas price on target. However, the Opposition People's National Movement has been severely critical of the budget price, calling it ambitious. Opposition Leader Dr Keith Rowley questioned the Government's projection of oil and gas revenues, saying TT's oil is "heavy crude," which typically earns 15-20 per cent less than the US$75 per barrel West Texas Intermediary (WTI) price on which the budget was predicated. He added that the world liquefied natural gas (LNG) market may also be softening.
T&T sells a basket of crude because of the variation in the quality of the crude produced. Crude oil produced in the Trinmar area and parts of southwest Trinidad tends to be heavier than that being produced by BHP Billiton off the northeast coast and that crude is heavier than the associated liquids of condensate produced as an associate to natural gas production. On average, though, a basket of T&T crude fetches about US$6 less than the going West Texas Intermediate price. The Energy Chamber's Thackwray Driver disagreed. He said the circumstances change so rapidly in the world energy market that it will be impossible for any formula to hold sway over a period of time. Driver and Paul agree that Energy Minister Kevin Ramnarine's explanation of how the Government came up with the price was acceptable and that it is within the realm of reality that the prices will hold.
Paul said: "I heard the minister's explanation and there is a good chance that it will come to fruition, but my point is that we have to understand that the oil and gas do not belong to the Government and there must be a transparent approach to the determining of oil and gas prices." Paul was concerned that while the price may hold, it is set to the upper limit and means that the Government will not have any left over to transfer to the Heritage and Stabalisation Fund (HSF). He said: "The HSF was set up for future generations and while the Minister of Finance may have been trying to reduce the size of the budget deficit, one has to ask if it must be at the expense of the HSF." The Government announced that the HSF had now grown to US$4.1 billion.