The Energy Chamber’s Task Force has called for changes to Trinidad and Tobago fiscal regime as a means of attracting foreign investment.
Peter Inglefield, Chair of the Energy Chamber’s Task Force on Fiscal Reform made the call for changes to Trinidad & Tobago’s fiscal regime during day one of the Energy Conference on Monday.
He stressed the change was necessary especially in the context of the global energy transition.
In a release from the chamber, they explained that the Chamber’s Task Force which comprising senior representatives of major operating companies and experienced and knowledgeable industry professional advisers, had met regularly for the past six months to review the fiscal regime and to make recommendations for changes.
The Task Force has advocated for the adoption of a fiscal regime that “recognises that we are a mature oil and gas province and that most future reserves will be in smaller and more challenging reservoirs.”
As such the task force stated,” A country with less attractive geological prospects needs to have more attractive fiscal terms if it is to attract scarce upstream investment dollars, especially in an environment when global capital markets are increasingly concerned about the long-term future of the hydrocarbon industry. “
They add that the new fiscal regime should be responsive to the specific economics of specific fields or exploration prospects if energy companies are going to allocate capital for upstream exploration or development activities.
They opined that “Top-line taxes, such as Supplemental Petroleum Tax (SPT), and royalties can be especially difficult for the economics of potential investments or exploration programmes, as these taxes must be paid irrespective of profitability.
Investors also need assurances that the fiscal regime will be stable over the life of a project and that there are not anomalies in the regime that add specific additional risks. “
The Task Force has recommended change to the SPT given the inconsistency surrounding it’s implementation over the past few years due to changes in the market.
They suggested it be set to US$75 for all crude oil producers and that the SPT should be calculated against the incremental income, not all the revenue.
As for gas producers, the Task Force said, the “current flat rate of royalty at 12.5 percent for all fields makes it difficult to economically produce from small, marginal or technically challenging fields.
This, therefore, acts as a disincentive for exploration activity, as investors risk having a non-commercial project even if they find gas.”
They recommended instead of a flat rate royalty, there should be a variable royalty rate that takes into account field size and complexity and hence encourages investment.
The task force also questioned the current capital allowance rules.
The current rules allow the write down for tangible and intangible capital expenditure on a straight line over five years.
They recommend an accelerated write down should be allowed over a three-year period or by the re-introduction of an Initial Allowance to enhance project economics for new exploration and development projects.