Glob­al en­er­gy com­mod­i­ty prices are his­tor­i­cal­ly volatile, dri­ven by every­thing from geopo­lit­i­cal con­flicts, fluc­tu­at­ing weath­er pat­terns to glob­al sup­ply-de­mand im­bal­ances. For T&T, close­ly mon­i­tor­ing these prices is of strate­gic im­por­tance. En­er­gy com­mod­i­ty prices sig­nif­i­cant­ly in­flu­ence the coun­try’s bud­get­ed rev­enue, so­cial ex­pen­di­ture, de­posits to the Her­itage and Sta­bil­i­sa­tion Fund as well as in­vest­ments in in­fra­struc­ture. In the lat­est bud­get, the Gov­ern­ment pegged bud­get rev­enue to an oil price of $73.25 per bar­rel and a gas price of US $4.25 per mil­lion British ther­mal unit.

In this ar­ti­cle, the Trinidad and To­ba­go Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive (TTEITI) will re­view the re­quire­ments of the Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive (EITI) Stan­dard, with re­spect to rev­enue man­age­ment, an­a­lyze his­toric and cur­rent com­mod­i­ty price pro­jec­tions with bud­get­ed price as­sump­tions and of­fer some in­sights on fu­ture pro­jec­tions and mar­ket out­looks for fis­cal 2026 and be­yond.

T&T, as an EITI im­ple­ment­ing coun­try, un­der the EITI Stan­dard 2023, is re­quired to con­sid­er rev­enue fore­casts and rev­enue man­age­ment.

Specif­i­cal­ly, EITI Stan­dard re­quire­ment 5.3 notes that “im­ple­ment­ing coun­tries are ex­pect­ed to dis­close any fore­casts re­lat­ed to fu­ture rev­enues from the ex­trac­tive sec­tor, in­clud­ing the un­der­ly­ing as­sump­tions re­lat­ed to pro­ject­ed pro­duc­tion lev­els, pro­ject­ed project costs and pro­ject­ed com­mod­i­ty prices, where they ex­ist”.

Giv­en this con­text, sev­er­al ques­tions arise on how our pro­jec­tions are de­vel­oped, their fea­si­bil­i­ty and his­tor­i­cal per­for­mance ver­sus ac­tu­al prices. Pre­vi­ous bud­get state­ments in­di­cat­ed that na­tion­al bud­get oil price as­sump­tions were set us­ing pro­jec­tions from in­ter­na­tion­al agen­cies, in­clud­ing the World Bank, IMF, cred­it rat­ing agen­cies, the US EIA, and MEEI da­ta.

Sim­i­lar­ly, in a re­cent post-bud­get fo­rum, the cur­rent Min­is­ter of Fi­nance, Dav­en­dranath Tan­coo not­ed that the oil price was based on a “bas­ket of prices” cal­cu­lat­ed by the Min­istry of En­er­gy and En­er­gy In­dus­tries (MEEI).

In the case of gas, for many years, the bud­get state­ment men­tioned the “Hen­ry Hub” US price as the bench­mark for nat­ur­al gas prices even as there was a sig­nif­i­cant shift in the des­ti­na­tion mar­kets for Trinidad LNG from the US to the Eu­ro­pean and Far East mar­ket. In the 2025 bud­get pre­sen­ta­tion, some clar­i­ty was giv­en about the ba­sis for the gas price fore­cast. It is now un­der­stood that the price fore­cast for nat­ur­al gas prices is cal­cu­lat­ed us­ing an av­er­age of Eu­ro­pean, Hen­ry Hub and the Asian Mar­ket.

For oil, the “bas­ket of crudes,” bench­mark price weights as­signed to dif­fer­ent crudes with­in the bas­ket re­main undis­closed. In the case of both oil and gas, and un­der dif­fer­ent ad­min­is­tra­tions, the process for fore­cast­ing crit­i­cal com­mod­i­ty prices falls short of the ex­pec­ta­tions for trans­paren­cy re­quired by the EITI Stan­dard

It is im­por­tant to dis­tin­guish be­tween oil and gas price dy­nam­ics. There are many dif­fer­ent grades of oil, based on the chem­i­cal pro­file, and bench­mark prices pro­vide a ref­er­ence point for glob­al trans­ac­tions. Pop­u­lar oil bench­mark crudes prices are UK Brent and West Texas In­ter­me­di­ate. In con­trast there is no sin­gle glob­al price of gas. In some in­stances, oil and gas prices are in­dexed and gas al­so has bench­mark prices based on dif­fer­ent re­gion­al mar­ket price points.

For the bud­get, the gas price as­sump­tion is based on well­head net­back prices, which is the gas price at a des­ti­na­tion mi­nus pipeline, re­gasi­fi­ca­tion, ship­ping and liq­ue­fac­tion costs. For this analy­sis, an av­er­age of Eu­ro­pean (NBP), North Amer­i­can (Hen­ry Hub) and Asian (JKM) bench­mark gas prices are used as the ac­tu­al av­er­age gas price. For oil, an av­er­age of West Texas In­ter­me­di­ate (WTI) and Brent crude bench­mark prices are used as the ac­tu­al av­er­age oil price. “Ac­tu­al prices” are not to be con­fused with the re­al­ized price T&T ac­tu­al­ly earned for its oil and gas, but rather an av­er­age of the bench­mark prices list­ed.

For oil, be­tween 2015 and 2025, the ac­tu­al oil prices sur­passed the bud­get­ed oil prices for five of the 10 years (2017, 2018, 2019, 2021 and 2022) (see chart 1). Ear­li­er this year, Her­itage’s CEO not­ed that the com­pa­ny’s Mo­lo heavy crude fetched prices over the Brent crude bench­mark price due to less avail­abil­i­ty of Mex­i­can and Venezue­lan crude and Opec plus out­put cut­backs. This un­der­scores how sup­ply-de­mand im­bal­ances can im­pact the price we earn for our oil and gas.

Be­tween 2015 and 2025, the ac­tu­al av­er­age gas price sur­passed the bud­get­ed gas price in every sin­gle year (see chart 2). Be­tween 2015 and 2025, JKM, NBP and Hen­ry Hub gas prices av­er­aged US$11.80, US$11 and US$3 per mmb­tu re­spec­tive­ly, show­ing the vari­ance in prices in dif­fer­ent mar­kets. This dis­tinc­tion is im­por­tant be­cause LNG car­goes from T&T are sold to these dif­fer­ent mar­kets.

And, there is lit­tle in­for­ma­tion in the pub­lic do­main about the fi­nal price re­ceived for our LNG de­spite con­cerns over trans­fer pric­ing. In fact, the is­sues of fair mar­ket val­ue, trans­fer pric­ing and tax avoid­ance have been ma­jor talk­ing points in the T&T en­er­gy sec­tor for sev­er­al years. Stud­ies con­duct­ed by Poten and Part­ners (the Gas Mas­ter Plan 2014-2024) and more re­cent­ly Unit­ed Na­tions ECLAC claim that the coun­try los­es over US$1.4 bil­lion an­nu­al­ly due to these prac­tices. In the bud­get, Gov­ern­ment pledged to adopt leg­is­la­tion to tack­le this prac­tice.

Giv­en the avail­able in­for­ma­tion, it may ap­pear that pre­vi­ous Gov­ern­ment price pro­jec­tions are con­ser­v­a­tive, but there still re­mains a lack of clar­i­ty about the as­sump­tions and the fore­casts. This al­so has ram­i­fi­ca­tions for our in­ter­gen­er­a­tional sav­ing.

Un­der the HSF leg­is­la­tion, de­posits are made to the fund if oil and gas rev­enues for that quar­ter ex­ceed bud­get­ed rev­enues by more than 10 per cent. There­fore, the price as­sump­tions are crit­i­cal. Be­tween the decade, 2015-2024, there were with­drawals from the fund in five of the 10 years and de­posits in on­ly two of the 10 years as­sessed. Be­tween 2007 and 2014, there were no with­drawals and six de­posits dur­ing that eight year pe­ri­od.

Mar­ket Out­look and Fu­ture Pro­jec­tions

The lat­est US EIA short term en­er­gy out­look an­tic­i­pates down­ward pres­sure on oil prices due to a rise in glob­al in­ven­to­ries. The out­look fore­casts that Brent crude prices will fall to an av­er­age of US$62 per bar­rel (b) in the fourth quar­ter of 2025 and US$52/b in 2026 and West Texas In­ter­me­di­ate (WTI) crude oil prices are ex­pect­ed to av­er­age about US$48.33 per bar­rel in 2026, mark­ing a slight de­cline from the ex­pect­ed av­er­age in 2025. The US EIA al­so shows the Hen­ry Hub nat­ur­al gas spot price is fore­cast­ed to rise to US$4.10/MMB­tu in Jan­u­ary 2026. Oth­er pro­jec­tions from the World Bank out­look fore­casts a Eu­rope Nat­ur­al Gas price of US$10.8 per mmb­tu and a Japan LNG price of US$11.5 per mmb­tu.

Sev­er­al fac­tors in­flu­ence these pro­jec­tions in­clud­ing high­er US nat­ur­al gas pro­duc­tion and stor­age, on­go­ing trade ne­go­ti­a­tions and fall­out over US tar­iffs, con­tin­ued Rus­sia and Ukraine ten­sions, in­creased OPEC pro­duc­tion and Chi­na ac­cu­mu­lat­ing sig­nif­i­cant oil in­ven­to­ries. With these dif­fer­ent vari­ables at play, pre­dict­ing en­er­gy com­mod­i­ty prices is not straight­for­ward. Price tra­jec­to­ries are char­ac­ter­ized by peaks and val­leys.

In the short to long term, sup­ply and de­mand dy­nam­ics will be flu­id as macro­eco­nom­ic out­looks de­cline or im­prove, de­mand for elec­tric ve­hi­cles grow, not to men­tion con­tin­u­ing geopo­lit­i­cal flash­points or busier hur­ri­cane sea­sons. T&T is a price tak­er with lit­tle con­trol over fluc­tu­at­ing prices. We must con­tin­ue to an­a­lyze chang­ing price trends with an ea­gle eye, pro­mote greater trans­paren­cy on rev­enue pro­jec­tions while con­tin­u­ing to im­prove the ease at which we de­vel­op our re­sources and at­tract in­vest­ment.

Chart 1-Bud­get­ed Oil Prices Vs Ac­tu­al Oil Prices

Chart 1, Chart el­e­ment

Chart 2- Bud­get­ed Gas Prices vs Ac­tu­al Gas Prices

Chart 6, Chart el­e­ment