FINANCE Minister Colm Imbert is optimistic that changes to the supplemental petroleum tax (SPT) is the one move that could encourage new investment in the energy sector.
Imbert expressed this optimism when he presented the 2022/2023 budget in the House of Representatives on Monday.
Energy Minister Stuart Young shared Imbert’s optimism.
Former energy minister Kevin Ramnarine and UWI economist Dr Vaalmiki Arjoon, however, said optimism about improvements in the energy sector could be balanced with the necessary caution that goes with the volatile nature of the global energy industry.
Imbert said a careful analysis of TT’s competitiveness as an oil province for investment was done.
On the basis of that analysis, Imbert said, “I propose to enhance the current SPT concession for small onshore oil producers and introduce in 2023 a tiered system of SPT at lower rates for shallow-water marine operators, as opposed to the current fixed rates of SPT of 18 per cent, 25 per cent and 33 per cent that kick in as soon as the price of oil crosses US$50 per barrel.”
Imbert outlined how this system would work
“Firstly, the production limit for small producers of oil on land to benefit from the previously increased threshold price of US$75 per barrel for oil before SPT is applicable will be increased to 4,000 barrels a day.”
In relation to new oil wells in shallow-water marine areas, whether in existing fields or new fields, Imbert outlined SPT rates for them.
These measures will require amendments to the Petroleum Taxes Act Chap 62:01 and will take effect on January 1, 2023.
Imbert said, “We believe that these reduced rates of SPT for new oil production in the marine areas will allow companies to access the required financing to increase their drilling and get approval for new exploration and production programmes, thus increasing the production of much needed oil.”
The methodology for determining what will be defined as a “new” well will be discussed with oil companies before the new SPT rates are implemented in January.
Imbert also said Government is “looking at adjustment of other oil and gas taxes and other innovative fiscal incentives to encourage new investment in the sector.”
He added, “We will advise on these and other adjustments to the energy tax regime in due course after consultation with the oil and gas companies.”
As he reflected on the economic challenges TT faced over the last two years during the covid19 pandemic and new challenges posed by ongoing events such as Russia’s invasion of Ukraine in February, Imbert underscored the continued importance of the energy sector to the economy.
"As an oil and gas-based economy our fortunes have been impacted by the external shocks which have hit the world economy in recent years.”
Imbert said while this has been happening, as evidenced by the fact that the non-oil sector now contributes over 50 per cent of TT’s GDP (Gross Domestic Product), the energy sector remains key to future economic stability and growth.
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