In the last eight years (Sept-2015 to 2023), the country’s energy sector has experienced a frightening level of contraction as evinced by drastic reductions of:
1. 63% in drilling activity.
2. 32% in natural gas production.
3. 37% in LNG production.
4. 28% in oil production.
Numerous stakeholders have expressed serious concerns with these declines, particularly of oil production. This oil production decline is premised on a marked slowdown in oil drilling activity which was made worse by the closure of Petrotrin in 2018.
In the last budget this government, after years of inertia, made some changes to the SPT regime. However, these changes have not stopped the decline in oil production, nor have they caused excitement by the investing community.
In the first six months of 2023, oil production declined to an average of 55,970 barrels per day compared to 59,111 in the same period in 2022. In addition, the changes proposed by the government in the 2022/2023 budget, to apply reduced rates of SPT for “new oil wells in shallow water marine areas” have proven difficult to administer.
This decline in oil production is a part of a wider decline in the energy sector under the PNM since 2015 and has manifested in the scaling down or departure of energy services companies including Schlumberger, Baker Hughes and Halliburton among others. These companies are departing Trinidad and Tobago because of a lack of upstream drilling activity.
The former UNC led Government (2010 to Sept 2015) on advice of then Minister of Energy Kevin Ramnarine passed into law several changes to the fiscal regime for oil production including amendments to the Supplemental Petroleum Tax (SPT). These changes included inter alia:
1. The harmonization of SPT rates for marine areas to 33% where hitherto two rates existed.
2. The introduction of a special SPT rate of 25%, for new marine field development in shallow water.
3. The introduction of a Sustainability Incentive which provides for a 20% discount on SPT rates and is applicable to mature marine oil fields or small marine oil fields.
These changes were part of a wider thrust by the UNC led government aimed at reforming the fiscal regime for the energy sector and was done in consultation with a range of stakeholders.
In the upcoming budget, to stimulate drilling and by extension oil production, further changes must be made to the Petroleum Taxes Act Chap 75:04 section 9(1) to increase the sustainability incentive for SPT from a discount of 20% applied to the SPT rate for mature marine oil fields and small marine oil fields to a discount of between 30% and 35%.
This would leave companies with more cash for reinvestment in operations which would cause increases in jobs, new drilling, new demand for energy services and ultimately new oil production. I urge the government to act immediately.
Kamla Persad-Bissessar, SC, MP
Leader of the Opposition
29th September 2023