Trinidad and Tobago announced changes to its production-sharing contracts, reverting to one similar to its 1995 model.
In the process, it increased rewards for exploration and production companies participating in its 2010 bid round, particularly those interested in deepwater drilling.
The twin-island nation's Energy Minister Carolyn Seepersad-Bachan told Parliament the government agreed to reduce the petroleum profits tax to 35% for blocks in water deeper than 400 m. This, she said, compares with the taxation in other competing jurisdictions such as Ghana and the Gulf of Mexico and will bring government take in line with other deepwater jurisdictions.
Seepersad-Bachan pointed out that while technical analysis suggests there are fields in the deep water with potential resources on the order of 1.8 billion bbl of oil or 6.7 tcf of gas, deepwater drilling incurs exploration and production costs that are sometimes 3-5 times the cost of exploration in shallow water.
She said an example was the Gulf of Mexico where wells cost an average of $90 million and lifting costs average $9-10/bbl.
She said the government's analysis indicates that, given the high cost structure for exploration and development in average to deep water, companies at the current tax rates will not be able to achieve the rate of return commensurate with the exploration risks for blocks in this environment.
"Based on statistics provided by noted tax consultants, Wood Mackenzie Ltd., Trinidad and Tobago under the current fiscal regime has a government take of 83% compared to other jurisdictions such as Angola, Indonesia, and Brazil [that] have a government take of approximately 71%," the energy minister told Parliament.
With respect to the new PSC it was decided there will be open and biddable profit share matrices, a flexible work program, a ring fencing of expenditures, 20% carried participation applied to shallow acreage only, higher cost recovery provision, fixed financial obligations, and fair market value computation in line with the provisions of the Petroleum Taxes Act.
She said there is strong interest in deepwater blocks off Trinidad and companies, in response to a request for nominations, expressed interest in 24 deepwater blocks.
Based on the revised fiscal regime, it is anticipated this will translate to PSCs on July 30, 2011, when an announcement is expected on the winners of the deepwater blocks.
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