Jordan Neal and Kyrell Thomas led a number of athletes who scored multiple wins at the annual Magic Mist Central Zonal Games held last Tuesday at the Hasely Crawford Stadium in Port-of-Spain.
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BP in T&T for the long run
Oil company bpTT has not been robbing the government of money by using transfer pricing to avoid paying correct taxes on LNG exports.
So says outgoing president Norman Christie who, in his exit interview with Business and Money, admitted that the country has not earned as much money from LNG but maintained it was not a result of transfer pricing.
In its simplest form, transfer pricing refers to the rules and methods for pricing transactions between enterprises under common ownership or control. An oil and gas company may have a trading company that’s part of its group and may agree to sell LNG from Point Fortin to its trading arm for a particular price. That trading arm may resell the same LNG at a higher price and the government only gets taxes based on the lower price. This results in the company’s profits increasing and a loss of taxes to the state.
The Rowley administration claims transfer pricing has resulted in billions of dollars of losses to the State.
However, Christie said the matter is misunderstood. He explained that in Train 1 there can be no transfer pricing because all of the companies that buy LNG have no relationship with the owners of the train or bpTT, the sole provider of gas to the Train 1 plant.
In Trains 2 and 3, close to 90 per cent of the LNG going to parties with no relationship to the shareholders. The only difference is Train 4 which was set up as a processing facility, and the matter is very complicated.
Christie said the government will earn more money from Train 1 when the contracts are renegotiated.
He explained that 20 years ago the Train 1 contract was negotiated tying T&T to LNG prices at the Henry Hub in the United States. With the shale gas revolution prices became depressed and T&T’s earnings from Train 1 plummeted.
“That is mainly because of the contractual arrangements that were made 20 years ago. As time has moved on, some of those contracts have exposure to Henry Hub which, at the time, was the preferred market.
Henry Hub is now not as favoured a market. Had we known 20 years ago what we know now, we would not have set ourselves up for the exposure,” Christie said.
“When Atlantic was initially constructed you needed 20-year contracts because you could not get short-term finance. Train 1 needed secured supply contracts and off take contracts because the length of the loans were also long
“We now have trains that have been heavily depreciated, not burdened by debt and in a market that is far more liquid. You can now do shorter-term contracts.“
Asked if he could guarantee more revenue to the state after the Train 1 negotiations Christie said: “Yes it will be better. The markets have changed. It is no longer buyer’s market, so the structure we are proposing will lead to greater net back to the country. I can say without reservation that the country will benefit.”
Christie expects there will be need for fixed contracts and room for spot sales of LNG.
Asked if in the negotiation bpTT would want the contract extended beyond five years bearing in mind, it was only willing to provide the NGC with a five-year gas agreement, Christie said: “I am not talking terms here but what I will say is that we will use the same logic with Atlantic that we used with the NGC. We will not get ahead of ourselves in terms of the developments that we currently have.”
Commenting on the NGC contract, he said: “We have done a term of a contract consistent with the resources that we currently have and then we will asses as we continue, so you can have extensions as we find more but you don’t want to get ahead of yourself and contract what you don’t have.”
Christie said he was proud of the team he built with 95 per cent of bpTT’s staff being locals and representing more than 75 per cent of the leadership team.
Reminded that under his watch 10 per cent of the staff was sent home, Christie admitted that was a difficult decision.
“We did what was necessary to ensure that we had a stronger organisation,” he explained.
He said the bpTT is committed to being in T&T for the long run and was shooting seismic last year as they continue to look for opportunities in the Columbus Basin.
“We have strong confidence in the Columbus Basin and then we look at other options,” he said. “We have our sights set on deep water as well but I don’t want to undermine what we have in our heartland which is significant.”
At the end of the month will leave T&T for London to head the office of BP Plc’s global CEO. He will be replaced by the first female CEO of a major oil and gas company in this country.
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