Trinidad and Tobago has moved to strengthen its energy industry amid a recent increase in gas production, with officials outlining plans to restructure the national oil company and reform existing energy agreements to improve efficiency and financial sustainability.
In late February Petrotrin, which produces around 60% of T&T’s crude oil, announced it had established a transitional team to oversee the company while the board of directors outlines a plan to revamp activities.
The board will consult industry stakeholders on how to improve operational capacity and efficiency, and comes on the back of a government-commissioned report, submitted in June, which recommended the restructuring of the corporation to reduce operating costs.
Addressing Parliament on March 13, Franklin Khan, the minister of energy and energy industries, said the plans would likely be finalised within six months, noting that there were a number of options available.
One proposal involves separating Petrotrin into different business units, with one focusing on refining and marketing, and another on human resources and health activities. Other proposals suggest dividing the company along upstream and downstream lines, as well as re-evaluating existing management structures.
The restructuring plans come on the back of a fall in global oil prices and a subsequent drop in production, which has contributed to Petrotrin recording annual losses of around TT$800m ($120.1m) in recent years.
This has led to the company being unable to contribute to state revenue; Petrotrin owed the government TT$2bn ($300.1m) in unpaid taxes and royalties as of the end of 2017, according to official data, with this figure set to grow by TT$70m ($10.5m) per month in 2018.
In addition, the company has an $850m bond payment due in August 2019 and requires a further $300m to complete an ultra-low-sulphur diesel plant, due to be brought on-line by 2020, highlighting the need to improve its financial sustainability.
While the company will undergo restructuring to address its financial situation, Khan said the government was not considering a partial or full privatisation in the near term.
The developments will be closely monitored by labour organisations representing Petrotrin’s workers, however. While the Oilfield Workers’ Trade Union, one of the largest organisations representing energy sector workers, supports restructuring of the company, it has raised objections to privatisation or other measures that result in significant job losses.
In addition to restructuring Petrotrin, the government is undertaking other structural measures to improve the efficiency and financial sustainability of the energy industry.
T&T’s energy revenues have fallen from peaks of TT$28bn ($4.2bn) in 2008 to TT$1bn ($150.3m) last year, subsequently placing pressure on government coffers, with the sector’s contribution to GDP dropping from 41.4% in 2012 to 18.8% in 2016, according to data from the Central Bank of T&T.
Officials have moved to adopt the recommendations of the Gas Master Plan, published by consultancy firm Poten & Partners in 2015, which has called for an alteration of T&T’s existing agreements with liquefied natural gas (LNG) producers.
The report estimated that between 2010 and 2014 the country lost $6bn in revenues annually due to the inconsistency between low net-back returns and high global LNG prices, with transfer pricing practices of private firms cited as the major reason behind the discrepancy. The government estimates that it continues to lose around $1.5bn per year under current prices and existing agreements.
Khan told the “Our Oil, Our Gas, Our Future” conference in mid-March that the ministry was looking to “review terms of the marketing arrangements” with LNG producers, while Prime Minister Keith Rowley told the conference the government would seek to renegotiate contracts with private sector players across the broader energy sector, given the dip in production and earnings in recent years.
Another way the government is attempting to rebalance the energy sector’s finances is through taxation. The 2018 budget saw the introduction of a 12.5% royalty on gas, oil and condensate revenues, which is expected to see government royalties increase from last year’s levels of TT$1bn ($150.3m) to TT$3bn ($450.9m) in 2018.
The push to reform the sector comes amid increased energy production in key areas.
In January gas production totalled 3.9bn cu feet per day (cfpd), the highest monthly output since March 2015, and significantly higher than the monthly averages of 3.3bn cfpd and 3.4bn cfpd recorded throughout 2016 and 2017, respectively.
The recent spike in activity follows the commencement of production from BP T&T’s Juniper gas development in August, with the site expected to add 590m cfpd to capacity.
The take from new fields, along with the potential to tap imports from other sources, should rejuvenate the downstream segment and further boost revenue streams.
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×In the aftermath of the Covid-19 pandemic and on the back of high global energy prices, Trinidad & Tobago is set to grow over 50% faster than the global average for 2022.
La production marocaine de phosphates et de produits dérivés, comme les engrais, devrait connaître une hausse considérable. En effet, l’Office Chérifien des Phosphates (OCP), qui détient le...
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
