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Oil companies pleased with budget allowances
Trinity Exploration & Production plc in a tax announcement on the London Stock Exchange yesterday echoed what the Energy Chamber of T&T said in a release on Tuesday (September 10).
In its tax announcement headlined “T&T upstream sector to see increased investment due to positive changes in the fiscal regime,” Trinity said: “In recognising that the hydrocarbon province in Trinidad is mature, the Government of Trinidad & Tobago has introduced a progressive fiscal package to ensure that activity levels are increased and that the region remains internationally competitive (as detailed in the table attached). These changes will stimulate Trinity's cash flows and improve returns on future projects, and hereby allows further investments in exploration and development.”
Joel Monty Pemberton, chief executive officer of Trinity, said yesterday (September 13): “These progressive fiscal reforms endorse Trinity's strategy and philosophy of operating and investing in Trinidad. The increased return to the company will assist in driving project economics and delivering greater shareholder value through increased activity levels.”
Trinity is the largest independent exploration and production (E&P) company focused on T&T. Trinity operates assets onshore and offshore on both the West and East coasts. Trinity's portfolio includes current production, significant near-term production growth opportunities from low risk developments and multiple exploration prospects.
The company operates all of its licences and has 2P (proven plus probable) reserves of 36 million barrels (mmbbl) and is targeting 5,000 barrels of oil per day (bopd) production by the end of 2013. Trinity is listed on the Alternative Investment Market (AIM) of the London Stock Exchange under the ticker TRIN.LN.
Energy Chamber agrees with fiscal changes
The Energy Chamber of T&T, which represents most of the country's oil and gas companies, also praised the move by government. In its release on Tuesday, the chamber said: “The 2013-2014 national budget featured several measures aimed at increasing the competitiveness of the T&T upstream energy sector, improving VAT administration, tackling the fuel subsidy and widening participation in the local stock exchange.
The Energy Chamber welcomes many of the measures announced in the budget. Chiefly among these were the extension of fiscal incentives on mature field development, improved capital allowances for exploration, development and work overs as well as wear and tear allowances for gas compression facilities. While these measures are unlikely to receive much attention in public discussions of the national budget, they are absolutely essential to the future economic prosperity of Trinidad & Tobago.
The improved exploration and development capital allowances will ensure that a number of crucial oil and gas development projects, that previously did not give oil and gas companies the needed rates of return to sanction investment decisions, are now economic. This should enable the necessary massive injections of capital to be made available for the developments to go ahead.”
The energy chamber said the decision to allow the carry forward of the 20 per cent tax credit against the Supplemental Petroleum Tax for mature field development is “an encouraging move especially for small oil companies with lower overall tax bills.” The chamber said it is also hopeful that specific tax allowances on work overs and qualifying side tracks will also help maintain the levels of oil and gas production, especially from smaller independent lease and farm out operators.
Improved wear and tear allowances for compression facilities will also help stimulate investment in compression facilities which should in turn assist in the reliable delivery of gas to Point Fortin and Point Lisas.
“These fiscal changes are all aimed at increasing the country’s competitiveness and the Energy Chamber would like to reiterate that we face significant competition for investment from several oil and gas provinces regionally and internationally. The recent announcement of a significant reform process in Mexico means that there is likely to be yet another regional competitor of international oil company capital investment dollars.
Therefore, every attempt must be made to continue attracting new and sustaining existing investment through constant review of our fiscal and legal regime,” the statement said.
The chamber said this reform process must include the issue of restructuring the gas market and ensuring the right risk and reward equations along the gas value chain. “This issue has been a major topic of conversation between the industry and the government and there must be a continued dialogue on this issue. We anticipate Minister of Energy Kevin Ramnarine will elaborate on this in his budget address,” the release said.
The Energy Chamber said it welcomed the minister of finance’s acknowledgement of the local energy services sector as a potential source of job growth and foreign exchange revenue. “Promoting local content and supporting the growth of local energy services companies has always been one of our mandates. We believe however, that any export must be based on a strong services sector and relies on having the right local content policies in place,” the chamber said.
The Energy Chamber said it “was pleased to hear that the EXIM bank will be given equity injections to help finance extra-regional export and we are hopeful local energy services companies will also be included in this initiative. Similarly on the issue of VAT refunds, the Energy Chamber looks forward to energy services companies benefitting from the one billion dollar allocation to clear back logs.”
The Energy Chamber “applauded the decision to share wealth from the energy sector with individual and institutional investors with the National Gas Company’s recently acquired share of Phoenix Park Gas Processors Limited being listed on the local stock exchange.”
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