Imbert: More incentives coming for oil producers

OIL firms will get more incentives to explore for crude oil, said Finance Minister Colm Imbert, piloting the Finance (Number 2) Bill 2022, passed in the Senate on Tuesday.

The bill, to enact incentives announced in the national budget, was previously passed in the House of Representatives last Friday (December 9).

Imbert spelt out a raft of initiatives to encourage oil producers variously in deep marine, shallow marine, land, new, mature and small acreages.

He said the energy sector recently provided 30 percent of TT’s GDP, amid an increasing need to sustain the sector and let it grow.

Imbert recalled the Government in the past deciding to incentivise small onshore oil producers, by saying for them Supplemental Petroleum Tax (SPT) will kick only when the world oil price reaches US$75 per barrel, up from an existing threshold of US$50.

To stimulate more exploration and oil production, Imbert said, an investment tax credit will be raised from a current 25 per cent up to 30 per cent.

This tax credit is for expenditure on development in mature oil fields - marine or land - or the acquisition of machinery and plant for use in enhanced oil recovery projects, said notes to the bill, explaining how the bill amends the Petroleum Taxes Act.

He said the bill “reduces the petroleum profits tax (PPT) in relation to operations in deep water from 35 per cent to 30 per cent.”

Imbert said hitherto when the world oil-price is below US$50, oil firms in TT were taxed by a PPT regime, but when the price exceeds US$50, the SPT regime kicks in.

Under the bill, he again said, oil companies will only pay the SPT when the global oil price reaches US$75 per barrel, as opposed to the current threshold of US$50.

Moreso, the bill says small onshore producer oil companies need only pay SPT when their daily production level reaches to 4,000 barrels, up from a current threshold of 2,000 barrels. Imbert said this move will facilitate many small producers whose production is typically 3,000-plus barrels per day.

He said the bill deletes an existing sunset clause, so as to allow the SPT to now persist, albeit at a higher threshold of US$75.

Imbert said many small producers had complained that at US$50 when the SPT kicked in, their tax burden went up significantly.

He vowed to reduce the SPT burden downwards for new fields in shallow waters. He said the new table for SPT would be: zero per cent tax when the world oil price was below US$50 per barrel, 15 per cent for oil at US$50-70, 20 per cent for oil at US$70-90, “20 per cent plus a percentage of the amount” for US$90-200, and 42 per cent for over US$200.

Saying SPT rates were set on a sliding scale, he said, “It goes up as the price goes up.”

Imbert said the base rate of SPT for new field development will fall under the bill from 25 to 20 per cent.

He said the bill introduces a new SPT rate for a new well in an existing field in shallow marine areas.

“We are also introducing a new regime for SPT for a new well in an existing field in shallow marine areas. A new well is a well that did not exist before January 1, 2023.

“An existing field is a field that produced oil before January 1, 2023, So you have a field with a series of wells in it producing oil - that’s an existing field. If you go and drill a well inside that, that becomes a new well in an existing field and it will benefit from the same SPT revised rates that I just mentioned.”

To curb cheating, he said new wells in existing fields must be certified by the Minister of Energy (Stuart Young.)

“We are trying to stimulate production. We are reducing taxes to motivate oil producers to drill new wells, whether in existing fields or in new fields. That’s the whole point of all this.

“There’s no magic, there’s no mystery, there’s no sting in the tail. Factual. New well in existing field or new well in new field. No magic.”