Last update: 22-Dec-2013 4:10 am
Sunday, December 22, 2013
Trinidad & Tobago Guardian Online
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Energy firms welcome new tax incentives
Two energy companies are expecting positive cash flow in their operations next year as a result of revisions to capital allowances and tax credits for the oil and gas sector. Leni Gas and Oil plc (LGO) and Range Resources (RRL) issued statements in which they welcomed the measures announced by Finance Minister Larry Howai in his budget presentation last week.
In a release yesterday, LGO officials said the measures could “result in a positive cashflow impact of approximately US$1 million per annum over the next three years,” on one of its fields alone. The company said the new measures apply to “various forms of capital spend and provide incentives for companies, such as LGO, who are actively engaged in exploration and development projects.”
The revisions announced by Howai include a 100 per cent capital allowance for the first year of exploration between 2014 and 2017. From 2018 onwards, companies will receive a 50 per cent allowance in the first year, but will also receive a 30 per cent allowance in the second year and 20 per cent in the third. Investment tax credits will be carried forward.
LGO said production and exploration activities in T&T have been the company’s focus since 2011 and are expected to be a dominant part of its growth agenda, especially during the extensive redevelopment of the Goudron Field, where, subject to financing, some 30 new wells are planned in the next few years.
The acceleration of capital allowances proposed in the national 2013/2014 budget “is therefore anticipated to have an immediate positive impact on cash flow, although there is no marked reduction on overall tax take over the life of the project. Based solely on the company’s plan to carry out field infill drilling at Goudron over the next two years the changes would result in a positive cashflow impact of approximately US$1 million per annum over the next three years.”
LGO said well reactivations at Goudron have continued in the last month and all the beam pumps necessary to complete a programme of 19 additional reactivations by November have now been delivered to the company’s facilities in T&T. The company said recent poor weather had impacted on the regularity of electrical supply to the field but adjustments to operating practices and additional tree clearing have been carried out to minimise future impacts from bad weather.
“Plans to drill the first new infill wells at Goudron for more than 20 years are now well advanced and pending the anticipated receipt of approvals from the Environmental Management Agency, drilling is still hoped to commence in late 2013,” the company said, adding that “the completion of the loan financing which is ongoing,” is hoped to close with an initial drawdown in the next few weeks.
LGO also plans to engage in exploration within the Goudron Block in the next few years and to explore far more extensively in the Cedros Peninsular where the Company holds a significant number of private petroleum leases.
As the result of an agreement to cross assign further leases with Beach Oilfield Limited, changes to exploration capital allowances will make “a further more significant positive impact,” the company said. However, LGO said the scale of this positive impact depends on the amount and timing of drilling undertaken.
Neil Ritson, LGO’s chief executive officer, commented: “LGO welcomes the additional incentives proposed by the Ministry of Finance. These changes increase the tax shelter in early years and therefore reduce the cash flow requirements associated with a given programme; this is a welcome development that has positive economic benefits to LGO as it seeks to increase production from existing fields and explore for new resources in Trinidad.”
RRL said it expects a “significant positive impact” from new budget incentives. The company holds a 100 per cent interest in three licences in T&T, ideally positioning it to benefit from the incentives. “We welcome these further incentives proposed by the minister, which certainly encourage increased development and exploration activities for the upstream companies operating in Trinidad, and in turn further accelerate the production growth in Trinidad,” said executive director Peter Landau.
“Range will be poised to take full advantage of these incentives, as it looks to accelerate both its development and production activities on the existing reserves, along with its exciting intensive exploration programme both internally and in partnership with Niko Resources.”
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