The petroleum industry, which is Trinidad and Tobago’s largest and most important industry is governed principally by the Petroleum Act and Regulations. The Act and Regulations together establish a regulatory framework for the grant of Exploration and Production Licences (“E&P Licences”) and Production Sharing Contracts for the conduct of upstream exploration and production operations, including activity on land and in the submarine areas beneath the territorial waters and the continental shelf of Trinidad and Tobago. The primary regulator of the industry is the Minister of Energy and Energy Affairs (“the Minister”) who acts through the Ministry of Energy and Energy Affairs (“MOEEA”).
Under “the Minister’s” portfolio, are to enter into Service Contract arrangements. These types of agreements are built on the premise that the service company (Contractor/Oil Company) bears all of the cost of exploration. If the well is successful the Contractor recovers its costs from production and a fee per barrel of oil produced thereafter by the Contractor. Under these service contracts fall production sharing agreements.
Production sharing agreements are a common type of contract signed between a government and a resource extraction company (or group of companies) concerning how much of the resource (usually oil) extracted from the country each will receive. In production sharing agreements the country’s government awards the execution of exploration and production activities to an oil company. The oil company bears the mineral and financial risk of the initiative and explores, develops and ultimately produces the field as required. When successful, the company is permitted to use the money from produced oil to recover capital and operational expenditures, known as “cost oil”. The remaining money is known as “profit oil”, and is split between the government and the company.
The facts are since the 1980’s T&T’s crude oil production has been on a decline and that crude oil prices fetch higher tax revenue for our economy. Our current minister of energy has identified this and proceeded to initiate vigorous bid rounds. As a result, from 2011 to 2014, he has licensed more acreage than any other Minister of Energy in the history of T&T. He has signed eight production sharing contracts and six licenses. The new drilling programmes which this will initiate are definitely major ‘game changers’. While the general public statement that oil and gas will finish in 10 years, these new prospects that can see first oil by 2022 will certainly enhance our reserves and subsequently our hydrocarbon production for another generation.
Kudos to Mr. Kevin Ramnarine.
Dr. Paula Ramjohn