Courtesy the Geological Society
Governments typically license acreage (can be land, marine or both) to operators (BP, ExxonMobil, Shell, etc). The operators explore for oil and gas, and if successful, these fields may be developed, and hydrocarbons produced.
Governments set up a petroleum fiscal regime to regulate how these companies are taxed, how their contracts are managed and so on.
These fiscal regimes are designed to capture a “fair” share of economic rent, which is essentially the difference between the revenues from oil and gas and the costs to extract it, inclusive of an acceptable return on the investment. What “fair” means is most hotly negotiated by governments and companies.
Figure 1 illustrates how the government attains economic rent from petroleum operations. From the government’s perspective, the contractor-take is considered as a cost. Therefore, the government-take or economic rent is the gross revenues minus the total cost, which includes exploration costs, development costs, operating costs and the contractor-take.
TT’s petroleum industry has been in existence for well over a century, so it is understandable that TT’s petroleum fiscal regime has undergone numerous changes to adapt to the volatile nature of the industry. Our fiscal regime consists of two types of arrangements: concessionary – exploration and production (E&P) licences and contractual – production sharing contracts (PSCs).
The Petroleum Act and Petroleum Regulations, Chap 62:01, govern the industry in TT and provide the regulatory framework for the granting of these contracts. It explicitly states that the government is responsible for granting E&P licences and PSCs to petroleum companies interested in exploring for and producing the country’s resources over a specified time in a contracted area via a procedure of competitive bidding.
[caption id="attachment_949658" align="alignnone" width="1024"] Figure 3: Summary of what contributes to govt revenue for E&P and PSCs -[/caption]
Presently, the Ministry of Energy and Energy Industries (MEEI) is undergoing two separate competitive bid rounds for onshore acreage and offshore deep-water blocks. The deep-water competitive bid round 2021 contains 17 deep-water blocks and companies are invited to submit their bids before the deadline on June 2, 2022. Meanwhile, the 2021 onshore competitive bid round is yet to be launched following the invitation by the MEEI for companies to nominate eligible acreage from 11 blocks. This ended on November 5, 2021. Further information on these bid rounds can be found in the MEEI’s website. (https://www.energy.gov.tt/)
The following section explains how the government earns revenues from E&P licences and PSCs.
TT E&P licences
In TT, E&P licences were the first type of contract to be granted to operators to exclusively explore for and produce hydrocarbons in a specified area. Initially, the term of the E&P licence is six years and can be extended to 25 years if there is a commercial discovery. In TT, E&
