Even as Finance Minister Colm Imbert boasts that Government negotiations with key energy partners has put T&T’s energy sector on a “more solid and sustainable footing,” stakeholders are not sure how it will execute plans for the industry amidst low petrochemical prices.
During yesterday’s presentation of the 2021 Budget, Imbert said T&T would continue to be in an attractive location for investment in the oil sector for years to come.
But given the global oversupply of oil and gas, former Energy Minister Carolyn Seepersad-Bachan believes the Government is holding onto hope by basing the budget on an oil price of US$45 per barrel and a gas price of US$3 per mcf.
Seepersad-Bachan, an engineer by profession, said given the low oil prices over the recent quarters, the Government should have used an oil price of US$40 per barrel of and a gas price of US$2, noting that the West Texas Intermediate oil price was US$39.95 per barrel while natural gas was US$2.71.
“Even if prices for oil and gas rebounds, you will get higher production of shale gas from the US as well, so it will not really affect the current prices. It is even why when OPEC had a reduction in production, the prices went back to where it was. I think the Government is hoping that prices will recover and they would adjust the budget upward at a later date,” Seepersad-Bachan said.
As a technocrat in the energy sector for decades, Seepersad-Bachan said apart from the increase of Supplemental Petroleum Tax (SPT) from $50 to $75, there was hardly anything new regarding the energy sector.
Imbert said yesterday that based on discussions, the threshold for the importation of the SPT for small onshore oil producers would increase to $75 per barrel for fiscal years, 2021 and 2022 in the first instance, up from the current $50 per barrel. He said the Government would review it at the end of the two years.
But with commodity prices so low, Seepersad-Bachan questioned the viability of operators to continue with this increase.
However, another former energy minister, Kevin Ramnarine, believes the industry will welcome changes in the SPT. He said the Government should have brought these changes four years ago when petroleum prices were higher.
“We also have to focus on increasing oil and gas production and the revision of the SPT can go a long way to helping with attracting investment with increased oil production,” Ramnarine said.
He added that the Government should divest Heritage Petroleum’s idle increase by leasing it to the private sector to help increase production.
Imbert also announced that the Government will remove fixed retail margins for all liquid petroleum products, allowing retailers and dealers to set their prices. The government targets January 2021 to implement this liberalisation change.
Seepersad-Bachan said at the current petroleum prices, there was almost no subsidy for the Government to pay. However, if oil and gas prices rise, it will create uncertainty.
By liberalising dealers, she said diesel prices can increase and if it does citizens can expect an increase in the cost of living as commercial prices and transportation will raise. However, she said it could be an incentive for businesses to convert their vehicles to CNG.
But Seepersad-Bachan said Imbert’s presentation leaves questions as to whether the National Petroleum Marketing Company will sell its gas stations and who inherits the liability of those stations regarding the environment. She also asked what the Ministry of Energy and Energy Industries will implement to ensure dealers do not monopolise the market and impose predatory prices on motorists.
Ramnarine believes Imbert should go a step further and allow for multiple private sector companies to import fuel.
Currently, only State-owned Paria Fuel Trading Company imports fuel for the domestic market.
“If you have more importers, you will have more competition. When there are more choices, the beneficiary is the consumer. We need more details as to how it will work,” Ramnarine said.
Defending the Government’s position to restructure Petrotrin in 2018, Imbert yesterday said the new entity, Heritage Petroleum Company Ltd (Heritage), posted a $1.4 billion profit, contributing $820 million in taxes, levies, rent, royalties and licenses. Imbert said this profitability continued into the first six months of the 2020 financial year.
As the government engages Patriotic Energies and Technologies Co Ltd (Patriotic) on the sale of the Guaracara Refining Company, formerly Petrotrin’s Pointe-a-Pierre Refinery, Imbert reminded that the deadline was October 31.
“If an agreement cannot be reached on a viable or practical contractual agreement by that time, after giving Patriotic all opportunities to finalise the terms of the agreement, the process will be brought to an end, and the Government will consider other options for the sale of the refinery,” Imbert said.
In a brief statement on this yesterday, Oilfields Workers’ Trade Union chief education officer Ozzi Warwick reiterated the union’s position that it was ready.
“We are ready and we are of the firm view that there is no other option that is in the interest of Trinidad & Tobago other than the acquisition of the refinery to Patriotic,” Warwick said.