Trinidad and Tobago is revising its fiscal regime for oil and gas production in a bid to stem a long decline in output.
The government has 27 different types of production licenses and these will be updated and consolidated in the first quarter of 2017, finance minister and acting energy minister Colm Imbert said. "Our oil and gas fiscal regime has been with us for many years."
The government is especially focused on tackling a deepening shortage of natural gas that has suppressed the country's output of LNG and petrochemicals.
The energy sector has been lobbying the government to update its tax regime to make Trinidad more competitive.
"We will to change the way in which our oil and gas fiscal regime works so that we would achieve two objectives - motivate investor companies to get involved in exploration and development, while we maximize our return from the petroleum sector," Imbert said.
Among the modifications is a change in the applicability of a windfall tax on oil production that takes effect when prices exceed $50/bl.
"We are going to address the way in which the supplemental tax kicks in to make it profit-based tax rather than revenue-based, and this should encourage companies to engage in greater exploration and production," Imbert said.
Changes will also be made to production-sharing contracts that allow production to be split between the government and the company, after the company has recovered its expenses.
"We are discussing the new oil and gas fiscal regime with all the players, so they can bring fields into production, and the changes will be unveiled in the first quarter of 2017," Imbert said.
Trinidad's gas production has been falling for the past three years, leading to supply rationing.
Gas production averaged 3.32bn ft³/d in January-November 2016, 13.3pc less than a year earlier.
Crude production has also been falling, averaging 71,071 b/d in January-October 2016, down by 10.6pc year on year, according to the latest energy ministry data.
"The energy industry in Trinidad and Tobago needs clarity about future taxation," Trinidad's energy chamber said in October last year. "The government and the energy industry do not have the luxury of time if it aims to ensure a sustainable future."
The group represents oil, gas and petrochemical companies.
In an unusually blunt statement in September 2016, BP subsidiary bpTT chief executive Norman Christie called for tax changes to "incentivize upstream investments." bpTT is the country's biggest gas producer.
Reaction to the government's plans has been muted so far.
"We are waiting to see what the government is proposing," one company executive told Argus today. "It is good that the government has finally realized that it needs to address the negative state of the energy sector."
