Finance Minister Colm Imbert does not believe there will be an impact on foreign direct investment (FDI) by energy multinationals as a result of the new 12.5 per cent royalty to be enforced from December 1, on all oil, natural gas and condensate produced locally.
He told this to reporters on Tuesday at the Hyatt Regency, Port of Spain following the TT Chamber of Industry and Commerce’s annual post-Budget forum.In his feature address at the forum, Imbert said he had discussions with energy companies, “for a long time,” and since the announcement of the 12.5 per cent royalty in the budget presentation on Monday, some of the reactions have been, “interesting.” Imbert was adamant that the royalty was necessary and something that was implemented in other energy-based economies.
“We have to be practical,” he said. “What is the point of a $5 billion investment if $4.9 billion goes back out? There is just no point continuing like this because it is our oil and gas and we hope this royalty is the best of both worlds where Government will get a guaranteed revenue stream and it will not be overly burdensome on companies.”
In a brief statement on Tuesday afternoon, bpTT, the multinational with the biggest local presence, acknowledged it had been in discussions with Government but required more clarity on the details of the measure and its potential impact before commenting further.
“We look forward to continuing discussions with the Ministry of Finance and will continue to work with Government with the expectation that changes to the fiscal regime will preserve the competitiveness of the local energy sector and provide the stability and predictability required to underpin long-term investments,” bpTT said
Former energy minister Kevin Ramnarine called the new proposed fiscal regime, “one of the most damaging ever,” for the energy sector and one that would shatter confidence major multinationals have in the local economy. “What the Minister has done is attack (these multinationals) and I think it will send a powerfully negative message to their head offices,” Ramnarine said.
In the budget presentation, Imbert said energy companies have not been paying taxes because they were claiming write-offs for capital expenditure due to increased exploration activities. He said the country would continue to see no tax revenue for the next seven years if something was not done.
To this, Ramnarine said, the Minister got it “absolutely wrong” and this new fiscal regime could possibly drive away investment. The incentives these companies were claiming, introduced in 2013-2014, would expire at the end of this year, Ramnarine said, so companies would not be able to claim them in the way the minister suggested. He noted that while the minister, in the earlier part of the budget statement, praised the rebound in the energy sector, it was these incentives that spurred them in the first place.
“These companies didn’t just come here because they liked Trinidad, they came because of the incentives. They always had the facility to claim 100 per cent of capital expenditure; all we (the former government) did was change the sequencing to allow them do it faster,” Ramnarine said.