Trinity Exploration & Production plc, the independent E&P company focused on Trinidad and Tobago, is pleased to note the Government of Trinidad and Tobago's (the "GORTT's") stated intention to stimulate higher levels of activity and investment in the energy sector as set out in the 2021 Budget Statement delivered last week.
Encouragingly, the statement (Budget-Statement-2021-1.pdf (finance.gov.tt) included a proposal to issue new VAT Bonds in the new fiscal year, numerous statements highlighting the need for, and intent to, facilitate further reform of the taxation regime, and the launch of three new bidding rounds designed to stimulate exploration and production activity. Extracts from the statement are set out below:
· For some time now, we have been advised that we should review our energy taxation regime to remain competitive, especially because of recent significant oil finds in neighbouring countries
· The Ministry of Finance will very shortly conduct a comprehensive review of our oil and gas taxation regime to ensure that Trinidad and Tobago remains an internationally competitive hydrocarbon province
· We intend to review the appropriateness in today's environment of our three main petroleum taxes, namely Petroleum Profits Tax (also known as Corporation Tax in this Sector), Supplemental Petroleum Tax ("SPT") and Royalty, both onshore and offshore, in the deep water and shallow water, and for large and small producers
· If investors believe that the balance between risk and reward is unfavourable, i.e. that the taxation regime is skewed in favour of the Government, not "fair" or not economically feasible, or that the Government may capriciously reverse incentives and eliminate tax concessions, they will simply not participate
· We shall also examine the relevance of the existing suite of fiscal incentives, licensing regimes and production sharing contracts, in terms of providing sufficient motivation for oil and gas companies to bid for blocks and engage in exploration and production
· Simply put, oil or gas in the ground is of little practical use to anyone. It must be produced and sold profitably, and the profits derived from its sale shared equitably, to have any intrinsic value
Trinity is a well-established and highly experienced operator in Trinidad focused on optimising the returns from its current operations while pursuing growth opportunities alongside both local and international partners. The GORTT's recognition of the need to improve the competitiveness of the tax regime, considering it in an international context, should enhance the attractiveness of a range of potential development opportunities available to Trinity, offering improved incentives to invest to increase reserves and production.
The current oil industry environment remains positive for Trinity - not only in regards to oil price trends but also with the growing focus on sustainability and transition fuels.
Jeremy Bridglalsingh, Chief Executive Officer, commented: "The Government's focus on stimulating the sector could provide significant opportunities for Trinity. The SPT changes that were implemented at the beginning of this year have already positively impacted our cashflow, thereby increasing our investment capacity. We will continue to champion tax reform and believe that we are well placed to bid for any attractive new blocks that become available."