In the wake of a series of recent positive developments in the Trinidad & Tobago energy sector, the Energy Chamber of Trinidad and Tobago (ECTT) is keenly awaiting the upcoming national budget set to be announced on Monday, October 2, 2023. The primary focus of the chamber, as revealed in an Op-Ed by Dr. Thackwray “Dax” Driver, its CEO, is to witness transformative changes in the country’s oil and gas taxation system.
Recent achievements in the sector include the Dragon gas field agreement between Trinidad & Tobago and Venezuela, the NGC – Shell Manatee field offtake contract for domestic gas, and the commitment from Hydrogen de France for investing in hydrogen production in Trinidad. The sector’s positive trajectory is also underscored by bpTT and Shell executives engaging in discussions around long-term gas supply, decarbonisation strategies, and transitioning to a low-carbon future.
However, Driver highlighted that despite the promising progress, there’s an acute need for augmented investments, expedited exploration, increased development drilling, and facility upgrades to revitalise gas production to levels seen a decade ago.
“Our eyes are now firmly on the national budget,” stated Driver in his op-ed. The pressing need revolves around adjustments to the oil and gas taxation, especially the Supplemental Petroleum Tax (SPT). In the previous budget, a change in the SPT was initiated and well-received by the industry. This year, the chamber anticipates further alterations, especially after the Prime Minister, Dr. Keith Rowley, hinted at possible amendments during a post-Cabinet retreat press conference.
Designed originally as a windfall tax, the SPT’s US$50 per barrel rate is no longer reflective of contemporary oil price dynamics. Driver noted, “We need to find a system where the revised SPT terms can be applied not just to oil from new wells, but also to all new incremental production from investments in existing wells.”
Proposed mechanisms to achieve this include introducing a variable royalty rate, acknowledging that smaller fields with limited production don’t operate on the same economic principles as larger ones. Additionally, he related that changes to the profit tax structure can play a role in incentivising investments.
While fiscal reform is the centerpiece of the chamber’s focus, Driver also emphasized the significance of other policy measures. These encompass the electricity rate review, the introduction of a feed-in tariff policy, public sector reforms, and fostering new sectors like the hydrogen economy.
“But a national budget is first and foremost about the government’s plans for taxation and spending,” he wrote. “Our main focus next week will be fiscal reform.”