Last update: 11-Dec-2013 4:05 am
Wednesday, December 11, 2013
Trinidad & Tobago Guardian Online
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Petrotrin explains overriding royalty
Officials of state-owned Petrotrin say the decision to to modify overriding royalty with Leni Gas and Oil and Range Resources Ltd was based on sound commercial considerations and in the interest of boosting production of indigenous crude. In a statement in response to a story in the August 25 issue of the Sunday Guardian, the company explained that overriding royalty is a contractual obligation between Petrotrin and its alliance partners via commercial arrangements and should not be confused with royalties paid to the state.
“Royalties are paid to the State for oil and gas produced from blocks governed by exploration and production licences and regulated by the Petroleum Act. Overriding royalties are paid to Petrotrin,” the company said.
“Since royalties paid to the State are non-negotiable and fixed in accordance with the Petroleum Act and regulations thereunder, the assertion that Petrotrin reduced the royalty for Leni Gas and Oil is clearly wrong and misleading. The public may well get the impression that Petrotrin is acting irresponsibly and outside of the law, which is simply not the case.
“Overriding royalty is, in effect, a percentage charge on production revenues, and is an important aspect of the commercial contractual arrangements between Petrotrin and its alliance partners. Under such contractual arrangements, Petrotrin is paid an overriding royalty for each barrel of oil produced by its alliance partners. This is over and above the royalty paid to the State on oil produced.
“The system of overriding royalty has been in effect since 1988 when Petrotrin first implemented its lease operatorship programme and has since been deployed for several of Petrotrin’s contracted commercial arrangements, including its lease operatorship programme, its farmout agreements and in its incremental production service contracts.”
According to Petrotrin, the expected benefits of these changes are increased revenues to the company from overriding royalty; increased crude supply to the Pointe-a-Pierre Refinery; and additional royalties and taxes to the state through the increased crude oil production.
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