MAJOR oil and gas companies paid US$7.4 billion to the government of Trinidad and Tobago between 2015 and 2022, according to the Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) report published last month.
The budget presentations during this period have consistently emphasised the critical role of the energy sector in generating foreign exchange (forex) earnings.
The energy sector, which includes oil, natural gas, and petrochemicals, has historically accounted for about 80% of Trinidad and Tobago’s export revenues. While these payments significantly contribute to government revenue, a portion is paid in foreign currency.
Between 2015 and 2017, the global decline in oil prices led to reduced revenues from the energy sector. The government acknowledged the need for diversification to mitigate dependency on energy exports. This prompted initiatives to encourage investment in non-energy sectors such as tourism, agriculture, and manufacturing, aiming to create a more resilient economy and reduce vulnerability to fluctuating energy prices.
The government launched Vision 2030 in 2016 as part of its long-term plan to transition towards a more diversified economy. It emphasised the development of sectors such as manufacturing, tourism, agriculture, and information technology to reduce dependence on oil and gas revenues. The vision aimed to create sustainable economic growth, generate new employment opportunities, and improve the country’s overall economic resilience in the face of global energy market fluctuations.
However, two years later, oil and gas prices stabilised, resulting in a moderate recovery of forex earnings. Initiatives were also introduced to enhance production efficiency and attract foreign investment in the energy sector.
These efforts aimed to bolster the country’s energy production while ensuring that Trinidad and Tobago remained competitive in the global market.
Between 2021 and 2022, as the world recovered from Covid-19-related delays, global energy demand surged, bolstering T&T’s forex reserves.
In late 2023, T&T renegotiated contracts related to its flagship project, Atlantic LNG, leading to increased government revenue from liquefied natural gas (LNG) exports.
The new terms allowed LNG cargoes to be sold at 15% to 55% above the Henry Hub benchmark, ensuring greater returns compared to previous agreements. This revamp allowed T&T to maximise returns from its natural gas resources at a time when global LNG demand remains strong.
In addition to this, the government also launched an auction for deepwater oil and gas exploration to ensure sustained energy output. Projects like Shell’s Manatee and BP’s Cypre are anticipated to enhance gas supply by 2028, further strengthening forex earnings.
In the meantime, the TTEITI reported that bpTT had a substantial spike in payments in 2015 and 2022, contributing to a total surpassing US$2.5 billion that year, while subsequent years saw a decline in its contribution.
“Shell displays sharp increases in 2019 and 2022, significantly impacting the total for that year, which again exceeds US$1.5 billion. Other companies, such as EOG Resources and the National Gas Company (NGC), made relatively consistent but smaller contributions, totalling US$1.3 billion and US$1.5 billion, respectively. BHP/Woodside’s payments range from US$4.2 million to US$154 million over the period,” the report stated.
The TTEITI stated that the total payments trend highlights a fluctuating pattern driven by significant surges in specific years, heavily influenced by BP and Shell’s contributions.
“Over the eight-year period reviewed, 2022 and in some cases 2015, coincided with the highest USD payments received for the companies. This is attributed to higher commodity prices in 2022 despite lower production levels, compared to 2015, which saw increased production but lower prices,” it highlighted.
It explained that energy companies contribute to T&T’s forex availability because T&T has an integrated gas value chain with upstream companies exploring for and producing oil and gas, midstream companies processing, transporting and marketing gas, and downstream companies using gas as a fuel and feedstock for petrochemical production.
“Midstream and downstream companies currently do not remit their taxes in USD. In the budget, the Minister of Finance signalled an intent to amend existing legislation to mandate these companies to pay their tax obligations in US dollars. Based on data from the Gas Master Plan, between 2009-2014, these midstream and downstream companies contributed US$31.2 billion in corporation taxes. By ensuring these companies pay in US dollars, the government will be adding to the forex pool,” the TTEITI stated.