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Wednesday, July 16, 2025

Energy Chamber calls for fiscal reform

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1498 days ago
20210608
Pumping jacks

Pumping jacks

pe­ter.christo­pher@guardian.co.tt

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.


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