Al­isa De­o­nanan,

Pol­i­cy An­a­lyst,

TTEITI Sec­re­tari­at

The per­sis­tent chal­lenge of for­eign ex­change (forex) avail­abil­i­ty con­tin­ues to im­pact the do­mes­tic econ­o­my, due to high de­mand and de­clin­ing sup­ply. Cen­tral to this is­sue is the role of oil and gas com­pa­nies which con­tribute sig­nif­i­cant­ly to forex in­flows through their tax and roy­al­ty pay­ments.

The up­stream en­er­gy sec­tor’s tax pay­ments in US dol­lars but­tress­es Gov­ern­ment forex re­serves de­spite de­clin­ing nat­ur­al gas and crude oil pro­duc­tion af­fect­ing over­all Gov­ern­ment rev­enue and ex­ac­er­bat­ing eco­nom­ic con­straints.

As a price tak­er, this high­lights the coun­try’s vul­ner­a­bil­i­ties. Fluc­tu­at­ing oil and gas prices, de­ter­mined by ex­ter­nal play­ers and fac­tors, lead to con­strained rev­enue streams amid con­tin­ued de­mands of a di­ver­si­fied mar­ket for US-dol­lar trans­ac­tions. It is im­por­tant to re­flect on where we are.

The de­mand for for­eign ex­change in the mar­ket, re­vealed in the sales of for­eign ex­change by au­tho­rised deal­ers to the pub­lic, amount­ed to US$6.23 bil­lion in 2023 sig­nalling a 15.58 per cent de­cline from US$7.368 bil­lion in 2015 (see chart 1).

On the sup­ply side, pur­chas­es of for­eign ex­change from the pub­lic by au­tho­rised deal­ers to­taled US$4.61 bil­lion. The net sales gap amount­ed to US$1.614 bil­lion dur­ing this pe­ri­od. To sta­bilise the mar­ket, the Cen­tral Bank in­ter­vened by sell­ing US$ 1.342 bil­lion to au­tho­rised deal­ers.

Ad­di­tion­al­ly, net of­fi­cial re­serves have steadi­ly de­clined since 2015, de­creas­ing from US$9.93 bil­lion to US$5.66 bil­lion as of Sep­tem­ber 2024 (see chart 2).

Over­all, the re­duc­tion in forex made avail­able to the pub­lic has been un­able to sat­is­fy de­mands fu­el­ing grow­ing frus­tra­tion among busi­ness­es and in­di­vid­u­als and prompt­ing in­creased calls for gov­ern­ment in­ter­ven­tion to ad­dress the short­fall.

The Trinidad and To­ba­go Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive (TTEITI) of­fers a trans­par­ent lens through which the for­eign ex­change dy­nam­ics can be bet­ter un­der­stood. The TTEITI’s au­di­tor in­de­pen­dent­ly ver­i­fies what the coun­try earns from the ex­trac­tive sec­tor by rec­on­cil­ing com­pa­ny pay­ments against Gov­ern­ment rev­enue re­ceipts.

As part of the rec­on­cil­i­a­tion process, pay­ments re­port­ed by oil and gas com­pa­nies to TTEITI are analysed to in­di­cate the pro­por­tion paid in USD com­pared to the amount paid in TTD. For ex­am­ple, da­ta from past TTEITI re­ports have shown that in­ter­na­tion­al oil and gas com­pa­nies col­lec­tive­ly paid hun­dreds of mil­lions of US dol­lars an­nu­al­ly to the gov­ern­ment.

These com­pa­nies re­mit a host of tax­es, roy­al­ties, and oth­er statu­to­ry pay­ments. These con­tri­bu­tions are vi­tal to bol­ster­ing the coun­try’s for­eign re­serves and fa­cil­i­tat­ing im­ports, debt ser­vic­ing and oth­er es­sen­tial trans­ac­tions.

Be­tween 2015 and 2022, the ma­jor oil and gas com­pa­nies paid US$7.4 bil­lion to Gov­ern­ment. Chart 3 il­lus­trates US-dol­lar pay­ments by these EITI re­port­ing com­pa­nies—bpTT, Shell, EOG Re­sources, BHP Bil­li­ton/Wood­side En­er­gy and Na­tion­al Gas Com­pa­ny OF T&T (NGC)—be­tween 2015 and 2022, along with the to­tal an­nu­al pay­ments across all en­ti­ties.

BpTT had a sub­stan­tial spike in pay­ments in 2015 and 2022, con­tribut­ing to a to­tal sur­pass­ing US$2.5 bil­lion that year, while sub­se­quent years see a de­cline in its con­tri­bu­tion. Shell dis­plays sharp in­creas­es in 2019 and 2022, sig­nif­i­cant­ly im­pact­ing the to­tal for that year, which again ex­ceeds US$1.5 bil­lion.

Oth­er com­pa­nies, such as EOG and NGC, main­tain rel­a­tive­ly con­sis­tent but small­er con­tri­bu­tions across the years, with a to­tal of US$1.3 bil­lion and US$1.5 bil­lion re­spec­tive­ly. BHP/Wood­side’s pay­ments range from US$4.2 mil­lion to US$154 mil­lion over the pe­ri­od.

The to­tal pay­ments trend high­lights a fluc­tu­at­ing pat­tern dri­ven by sig­nif­i­cant surges in spe­cif­ic years, heav­i­ly in­flu­enced by BP and Shell’s con­tri­bu­tions.

Over the eight-year pe­ri­od re­viewed, 2022 and in some cas­es 2015, co­in­cid­ed with the high­est US-dol­lar pay­ments re­ceived for the com­pa­nies. This is at­trib­uted to high­er com­mod­i­ty prices in 2022 de­spite low­er pro­duc­tion lev­els, com­pared to 2015, which saw in­creased pro­duc­tion but low­er prices.

Ad­dress­ing the forex is­sue re­quires a well-de­fined strat­e­gy to op­ti­mise the sec­tor’s USD in­flows.

T&T has an in­te­grat­ed gas val­ue chain with up­stream com­pa­nies ex­plor­ing for and pro­duc­ing oil and gas, mid­stream com­pa­nies pro­cess­ing, trans­port­ing and mar­ket­ing gas and down­stream com­pa­nies us­ing gas as a fu­el and feed­stock for petro­chem­i­cal pro­duc­tion.

Mid­stream and down­stream com­pa­nies cur­rent­ly do not re­mit their tax­es in US dol­lars. In the bud­get, the Min­is­ter of Fi­nance sig­nalled an in­tent to amend ex­ist­ing leg­is­la­tion to man­date these com­pa­nies to pay their tax oblig­a­tions in US dol­lars.

Based on da­ta from the Gas Mas­ter Plan, be­tween 2009 -2014, these mid­stream and down­stream com­pa­nies con­tributed $31.2 bil­lion in cor­po­ra­tion tax­es. By en­sur­ing these com­pa­nies pay in US, the Gov­ern­ment will be adding to the forex pool.

The TTEITI will con­tin­ue to mon­i­tor pay­ments in US dol­lars by oil and gas com­pa­nies. More­over, lever­ag­ing the EITI frame­work to im­prove da­ta ac­cu­ra­cy in terms of pay­ments and en­cour­ag­ing time­ly re­port­ing by ex­trac­tive com­pa­nies can al­so help strength­en fis­cal ac­count­abil­i­ty. En­hanc­ing trans­paren­cy through ad­her­ence to EITI stan­dards and pub­lish­ing de­tailed da­ta on pay­ment cur­ren­cies re­mains es­sen­tial for in­formed pol­i­cy­mak­ing. Ad­di­tion­al­ly, di­ver­si­fy­ing the forex base by fos­ter­ing ex­port-ori­ent­ed growth in sec­tors such as man­u­fac­tur­ing and agri­cul­ture can help re­duce de­pen­dence on the ex­trac­tive in­dus­tries for for­eign ex­change (see box).

Con­clu­sion

The forex chal­lenges fac­ing Trinidad and To­ba­go un­der­score the crit­i­cal role of the ex­trac­tive in­dus­tries in sus­tain­ing the na­tion’s for­eign ex­change re­serves and over­all eco­nom­ic sta­bil­i­ty.

While the com­pa­nies high­light­ed above have made sub­stan­tial USD con­tri­bu­tions through tax­es and roy­al­ties, fluc­tu­at­ing pay­ments over the years high­light the vul­ner­a­bil­i­ties as­so­ci­at­ed with re­liance on ex­ter­nal mar­kets and com­mod­i­ty price cy­cles. To ad­dress these chal­lenges, a mul­ti-pronged strat­e­gy is re­quired—one that strength­ens trans­paren­cy through con­tin­ued EITI com­pli­ance, en­cour­ages mid­stream and down­stream com­pa­nies to re­mit pay­ments in US dol­lars and im­proves fis­cal ac­count­abil­i­ty. By adopt­ing these mea­sures and di­ver­si­fy­ing in­to oth­er sec­tors, T&T can bol­ster its forex in­flows, mit­i­gate eco­nom­ic vul­ner­a­bil­i­ties, and sup­port long-term sus­tain­able de­vel­op­ment.

Box- Di­ver­si­fy­ing the forex base by fos­ter­ing ex­port-ori­ent­ed growth in sec­tors

In Oc­to­ber 2024, a US$35 mil­lion loan was se­cured to en­hance the Ex­port Im­port Bank of Trinidad and To­ba­go’s (EX­IM­BANK’s) ca­pac­i­ty to pro­vide fi­nan­cial ser­vices. This ini­tia­tive aims to help small busi­ness­es ac­cess for­eign ex­change for es­sen­tial needs, sup­port SMEs and emerg­ing sec­tors, and strength­en their com­pet­i­tive­ness in lo­cal, re­gion­al, and in­ter­na­tion­al mar­kets. By equip­ping these busi­ness­es with the re­sources to grow and com­pete in ex­port mar­kets, the ini­tia­tive helps in­crease for­eign ex­change in­flows from a di­ver­si­fied port­fo­lio of in­dus­tries. Ad­di­tion­al­ly, this tar­get­ed sup­port can stim­u­late in­no­va­tion, in­crease ex­port vol­umes, and fos­ter eco­nom­ic re­silience, strength­en­ing the over­all forex ecosys­tem in T&T.