Budget leaves gas explorers hanging
TG
Economist Dr Ronald Ramkissoon
PORT SPAIN
Trinidad & Tobago Guardian
Petroleumworldtt.com
09 16 09
T&T’s energy sector has been left hanging after the 2009/2010 national budget presentation, according to local economist Dr Ronald Ramkissoon. He explained that failure to outline new fiscal incentives to encourage exploration and development activities would make it difficult to maintain the competitiveness of the sector in the future. “What will be the effect of the new fiscal regime on all of these incentives? In other words, the energy sector in this document (the budget statement) remains hanging. It remains hanging because unless we find the right balance we will not get production of oil and gas going.”
Ramkissoon was delivering a presentation on energy issues at the 2009/2010 post-Budget breakfast meeting and panel discussion, which was hosted by the T&T Chamber of Industry and Commerce at its headquarters in West Moorings earlier in the week. He explained that discussions about possible gas reserves in T&T’s deepwaters would not reverse the country’s reserve of the commodity until new reserves were discovered and proven. “In the short term, exploration and the kinds of activities that take place to generate economic activity—that is positive—however, we cannot speak about when we find new gas and when we find new oil. “Until then it would not reverse the reserves position in oil and in gas.”
Supplemental Petroleum Tax
According to Ramkissoon, proposals to introduce a single-regime Supplemental Petroleum Tax (SPT) to govern all licences and sub-licences would be met with mixed reaction. “There are various views about whether the (SPT) proposals laid out in the budget were beneficial to all. There are some who will feel that it is, in fact, useful (while) others (would say) no (it is not useful) and there are discussions taking place.” It was indicated in the budget that the SPT would be computed on a field-to-field basis. It was anticipated that reduced oil prices and low production levels for each field would attract little or no SPT, which was supposed to create an incentive for development of small fields and the extension of mature fields.
Ramkissoon expressed disappointed that production sharing contracts (PSCs) appeared to be unsuccessful. He adopted a wait-and-see approach to the Government’s review of the regime. “There is need for details (about the PSC review) and we will not forget that previous attempts at getting production and exploration going have not been successful or as successful as the country would like and therefore we want to see what is likely to happen.” Among the objectives the Government has identified for the review of its PSCs included the encouragement of exploration and production activity in the deepwater areas of T&T, attractive multi-well exploration programmes and the development of small fields.
Ramkissoon welcomed initiatives to deepen the industrialisation process in T&T from the diversification of the gas-based downstream industries. He agreed that it would increase returns along the energy value chain. “Downstream industries and the benefits of that in terms of the value added is well-established that the further downstream you go is the further value you are likely to add in terms of jobs training foreign exchange and so on.” Among the gas-based downstream industries that the Government was pursuing was the further development of the metals and plastics industries.
Renewables
The Government would be formulating a Green Paper intended to foster renewable energy development, educate the national community and promote widespread recognition and acceptance of the opportunities for renewable energy development. Ramkissoon suggested that the Government make its renewable energy plans more lucrative following lowered fuel prices. “Again, very new initiative in terms of that initial draft paper that was submitted and a key concern the world, not only T&T would have to address, is how do we encourage the country to take renewable energy seriously when the price of energy is low.
“In other words, the incentive as in the case of the United States and their programme is the issue of taking a position regardless of where the price of energy is so that you move ahead with the development of that but, unfortunately, it has always posed a challenge because in investors would argue if prices are so low then why would I want to (invest in alternative forms of energy).” It was proposed that the subsidy on gas would be able to be reduced following an increase in the number of service stations that offered compressed natural gas (CNG). According to Ramkissoon, it was an issue of delivery and implementation. “The issue is where, as usual, when do we get it going. When do we get it going? How fast do we get it going?
“Are we likely to see investments in terms of the use, I am sure the public will go for it once some of these tweaking problems like the cost of the kits are addressed as the budget has said.” Ramkissoon emphasied that the energy sector now was at what he described as “a familiar cross roads and hence the economy of T&T at this time.”
He said that the energy sector had a bearing on the economy and the budget in two major concepts, which included output and prices as one of these areas. “Output and prices determine a host of things in this economy, very importantly revenues, expenditures and all that goes with the high growth rates that we have had, but we must not lose sight and we have never really lost sight that this economy has to depend on other engines of growth. I think it is even more important now. If now is not the time then I do not know when it is going to be.”
Story by Kimberly Mackhan from
Trinidad & Tobago Business Guardian
Trinidad & Tobago Express
September 10th 2009
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