Govt
unveils new energy contracts
Trinidad
Express
Ministry
of Finance Conrad Enill
By Curtis
Williams
The Trinidad Guardian
Port
Spain
Petroleumworldtt.com
10 29 06
The
Government expects to significantly increase its
revenues from oil and gas companies following the
completion of a new model production sharing contract.
Minister
in the Ministry of Finance Conrad Enill said this
week one of the major changes was a requirement
that companies pay some of their taxes directly
to the Ministry of Finance.
The
new PSCs were presented to those companies which
paid for information packages on the new round of
bidding for the nearshore and the Atlantic deep
blocks.
Companies
will pay petroleum profits tax, withholding taxes,
unemployment levy and the green fund levy to the
ministry.
This
is different from what occurred in the past where
the Government was responsible for paying all of
the taxes from its share of the profit oil.
In
the past if a discovery was made part of the production
from the field would be used for cost recovery that
was called cost oil.
The
new PSC would reduce companies’ margins but
Enill said he did not think it would make T&T
uncompetitive for much needed exploration dollars.
The
rest was profit oil from which there was a split,
with the Government getting part and the companies
getting the rest.
All
the taxes were paid from the Government’s
share of the profit oil.
Enill
said: “As far as I am aware the percentage
of profit oil going to the Government would not
change. What would happen is that the Government
would not now be responsible for the payment of
the taxes but it would instead be shared.”
As
part of the new arrangements the Government has
decided that it will put a new formula in place
for crude prices above US$40 a barrel.
While
in the past there was a formula where the Government’s
take was higher whenever the price went past US$40,
this time a formula has been put in place which
also takes into account increased production.
This
means the country’s take would increase with
higher prices as well as higher production.
The
new PSC reads: “The formula will be applied
at petroleum price levels above the existing price
band of US$40 per barrel of oil and US$4 per thousand
cubic feet of natural gas.”
“With
the new realities we had to change that and these
new PSCs are designed to deal with prices above
US$40 a barrel.”
Companies
will continue to be responsible for the cost of
abandoning wells and environmental restoration but
they will now have to place money into an escrow
account.
Enill
said the Government was trying to ensure the resources
to rehabilitate the environment and abandonment
of wells are available.
“What
we are trying to ensure is that the funds are available
but will be written off at the time the abandonment
is being done,” said Enill.
The
new model PSC will allow the separate consolidation
of the profit and loss in respect of operations
for land/shallow marine areas and for the deepwater
areas respectively. The Exploration and Production
Licence regime would continue as is, that is consolidated
separately and existing PSC would remain ring-fenced.
A
reopener clause has been included in the new PSC.
This would allow the Government to reopen negotiations
with oil and gas companies even after a deal is
signed.
“To
preserve the sanctity of the contract, a limit on
the period for re-opening a contract is applied.
A specific formula, based on the contract profit
ratio, will be used to determine whether or not
a contract could be reopened,” a government
stated.
There
is also to be a charge or an assignment fee is to
be incurred by the operator in the event of the
transfer and/or the reassignment of control of a
PSC.
The
Trinidad Guardian
Thursday 26th October 2006
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