Sher­win Long and Al­isa De­o­nanan

The re­cent­ly ap­proved na­tion­al bud­get re­in­forces the im­por­tant in­ter­sec­tion be­tween en­er­gy prices, do­mes­tic en­er­gy com­mod­i­ty pro­duc­tion and their im­pact on Gov­ern­ment’s rev­enue and abil­i­ty to spend on so­cial ser­vices for cit­i­zens. Sev­er­al fac­tors will af­fect how much the coun­try earns from our en­er­gy re­sources. These fac­tors range from the bear­ing geopol­i­tics or sup­ply-de­mand im­bal­ances have on prices or even the steps the coun­try takes to boost our own oil and gas pro­duc­tion and in­cor­po­rate re­new­ables in­to our pow­er gen­er­a­tion mix. Amidst these in­ter­nal and ex­ter­nal fac­tors, the Trinidad and To­ba­go (TTEITI) thinks it is im­por­tant to pro­vide the na­tion­al com­mu­ni­ty with an up to date snap­shot on the trends in up­stream en­er­gy tax rev­enue. The fol­low­ing da­ta out­lines en­er­gy com­mod­i­ty price trends, roy­al­ty col­lec­tions, T&T’s earn­ings from pro­duc­tion shar­ing con­tracts as well as our sub­sidy li­a­bil­i­ty. How­ev­er, it is im­por­tant to note that these pro­vi­sion­al fig­ures have not been au­dit­ed by the TTEITI au­di­tor/ad­min­is­tra­tor.

En­er­gy price trends

En­er­gy prices in­flu­ence every­thing from bud­gets to glob­al mar­ket dy­nam­ics. Un­der­stand­ing the trends in en­er­gy prices is cru­cial for stake­hold­ers across var­i­ous sec­tors, in­clud­ing con­sumers, busi­ness­es, and pol­i­cy­mak­ers.

The West Texas In­ter­me­di­ate (WTI) prices (see chart 1) from 2015 to 2024 re­veals a sig­nif­i­cant de­gree of volatil­i­ty. Over the pe­ri­od, prices in­creased in four out of the 10 years—no­tably in 2017, 2018, 2021, and 2022—while ex­pe­ri­enc­ing de­clines in five years (2016, 2019, 2020, 2023, and 2024), high­light­ing an in­con­sis­tent mar­ket en­vi­ron­ment.

The most dra­mat­ic price in­creas­es oc­curred be­tween 2020 and 2021, where the price surged from US$39.68 per bar­rel to US$68.17 per bar­rel, a stag­ger­ing rise of 71.8 per cent as a re­sult of ris­ing COVID-19 vac­ci­na­tion rates, the eas­ing of pan­dem­ic-re­lat­ed re­stric­tions, and a re­cov­er­ing econ­o­my, which caused glob­al pe­tro­le­um de­mand to out­pace sup­ply.

Con­verse­ly, the steep­est de­cline was ob­served from 2022 to 2023, when the price dropped from US$101.68 per bar­rel to US$76.53 per bar­rel due to eco­nom­ic slow­down, in­creased pro­duc­tion, in­crease in Chi­na’s COVID-19 re­stric­tions and mar­ket volatil­i­ty, to name a few. Par­tic­u­lar­ly, the grad­ual in­crease of oil pro­duc­tion by OPEC+ af­ter pan­dem­ic-re­lat­ed cuts, com­bined with high­er out­put from US shale pro­duc­ers, led to an over­sup­ply that pushed prices down.

Sim­i­lar­ly, over the last decade, nat­ur­al gas mar­kets have ex­pe­ri­enced con­sid­er­able fluc­tu­a­tions dri­ven by a com­bi­na­tion of re­gion­al sup­ply-de­mand dy­nam­ics and glob­al geopo­lit­i­cal events.

The pe­ri­od from 2015 to 2024 has seen con­sid­er­able price volatil­i­ty across ma­jor bench­marks, in­clud­ing Hen­ry Hub (US), LNG JKM (Asia), and NBP (EU) nat­ur­al gas, re­flect­ing the vary­ing lev­els of de­pen­den­cy on do­mes­tic pro­duc­tion ver­sus im­ports in dif­fer­ent re­gions.

While US gas prices have re­mained rel­a­tive­ly sta­ble, Eu­rope and Asia have faced sharp price in­creas­es, par­tic­u­lar­ly dur­ing times of en­er­gy crises and sup­ply dis­rup­tions. From 2015 to 2020, nat­ur­al gas prices re­mained rel­a­tive­ly sta­ble across all three bench­marks. How­ev­er, LNG JKM and NBP prices were con­sis­tent­ly high­er than Hen­ry Hub prices, large­ly be­cause of high­er de­mand for LNG in Asia and Eu­rope’s re­liance on gas im­ports, as op­posed to the rel­a­tive­ly abun­dant do­mes­tic sup­ply in the US. LNG de­mand in Asia re­mained strong due to in­dus­tri­al growth and en­er­gy needs, par­tic­u­lar­ly in Japan and Ko­rea, where nat­ur­al gas is es­sen­tial for elec­tric­i­ty gen­er­a­tion. Eu­rope’s prices were sim­i­lar­ly el­e­vat­ed due to its de­pen­den­cy on pipeline gas from Rus­sia and oth­er sup­pli­ers.

Be­tween 2021 and 2022, nat­ur­al gas prices spiked across all ma­jor bench­marks, with EU and LNG JKM prices reach­ing un­prece­dent­ed lev­els. The surge was dri­ven by the glob­al en­er­gy cri­sis, large­ly caused by the war in Ukraine, which se­vere­ly dis­rupt­ed Eu­ro­pean gas sup­plies. Eu­rope’s re­liance on Russ­ian gas and sub­se­quent sanc­tions led to a scram­ble for al­ter­na­tive LNG sources, in­ten­si­fy­ing com­pe­ti­tion with Asia and dri­ving prices up. Eu­ro­pean prices hit near­ly US$40 per MMB­tu, while JKM ex­ceed­ed US$30 per MMB­tu. In con­trast, US Hen­ry Hub prices re­mained more sta­ble, re­flect­ing the US’s do­mes­tic pro­duc­tion strength. This pe­ri­od high­lights Eu­rope’s and Asia’s vul­ner­a­bil­i­ty to glob­al gas price shocks dur­ing pe­ri­od times of geopo­lit­i­cal in­sta­bil­i­ty.

With re­spect to petro­chem­i­cal prices, Caribbean am­mo­nia prices were sta­ble at around US$150 to US$280 per met­ric ton from 2017 to 2020 but surged to about US$1,100 per met­ric tonne in 2022 be­fore de­clin­ing and sta­bil­is­ing near pre-2020 lev­els by 2024.

In con­trast, Rot­ter­dam methanol prices start­ed at ap­prox­i­mate­ly US$334 per met­ric tonne in 2017, re­mained sta­ble un­til 2020, and peaked at around US$556 per met­ric tonne in 2022. Af­ter 2022, methanol prices grad­u­al­ly de­creased but stayed above pre-2020 lev­els. Both com­modi­ties ex­pe­ri­enced sig­nif­i­cant price spikes in 2022, due to mar­ket dis­rup­tions. No­tably, am­mo­nia ex­hibits greater volatil­i­ty than methanol, par­tic­u­lar­ly dur­ing the price spike, re­flect­ing the im­pact of glob­al mar­ket con­di­tions on the chem­i­cal and en­er­gy sec­tors. Fac­tors such as fluc­tu­a­tions in nat­ur­al gas prices—an es­sen­tial in­put for the pro­duc­tion of both am­mo­nia and methanol—and geopo­lit­i­cal events sig­nif­i­cant­ly in­flu­ence these trends.

Chart 1: WTI Oil Prices 2015-2024

Chart 2: Com­par­i­son of Gas Prices 2015-2024

Chart 3: Com­par­i­son of Am­mo­nia and Methanol Prices 2017-2024

Roy­al­ty Pay­ments

Open Oil, an ex­trac­tive sec­tor NGO, de­scribes roy­al­ties as “a per­cent­age share of pro­duc­tion, or the val­ue of the pro­duc­tion which goes to the Gov­ern­ment re­gard­less of the rate of pro­duc­tion or costs to the op­er­a­tor”. This pay­ment is made by pe­tro­le­um com­pa­nies di­rect­ly to the Min­istry of En­er­gy and En­er­gy In­dus­tries in ex­change for the right to ex­plore and pro­duce from T&T’s oil and gas acreage. Sim­ply put, if a par­tic­u­lar oil well pro­duces 100 bar­rels per day in May and oil prices av­er­age US$50 per bar­rel for that par­tic­u­lar month, the cash flow would be US$5,000 per day. If the Gov­ern­ment agreed to a 12.5 per cent roy­al­ty rate then it would re­ceive $625 per day.

From fis­cal year 2011 to Sep­tem­ber 2024, the gov­ern­ment col­lect­ed a to­tal of TT$28.8 bil­lion in roy­al­ties, with a sig­nif­i­cant in­crease fol­low­ing the 2017 roy­al­ty rate ad­just­ment to 12.5 per cent. Roy­al­ties de­clined by 20.92 per cent, from TT$3.8 bil­lion in 2022 to ap­prox­i­mate­ly TT$3 bil­lion in 2023. For fis­cal year 2024, roy­al­ties de­clined by 33 per cent com­pared to 2023 as the gov­ern­ment has re­ceived TT$2 bil­lion in roy­al­ties. The two largest con­trib­u­tors be­ing bpTT and Her­itage, pay­ing ap­prox­i­mate­ly TT$1 bil­lion and TT$712 mil­lion, re­spec­tive­ly.

Chart 4: Roy­al­ty Pay­ments 2011-2024

Gov­ern­ment’s Share of Prof­it from PSCs Al­so De­clines

From 2014 to 2024, the gov­ern­ment col­lect­ed TT$43.4 bil­lion in PSC prof­it shares and paid TT$29 bil­lion in tax­es from these prof­its on be­half of PSC part­ners to the Board of In­land Rev­enue (BIR). Be­tween FY2022 and FY2023, PSC prof­it shares de­clined by 12.5 per cent, from TT$9.6 bil­lion in 2022 to TT$8.4 bil­lion in 2023. As of Sep­tem­ber 2024, the prof­it share stands at TT$3.9 bil­lion, with Shell and NGC be­ing the largest con­trib­u­tors, pay­ing TT$1.9 bil­lion and TT$770 mil­lion, re­spec­tive­ly, so far for 2024. This rep­re­sents a 50 per cent year-on-year de­cline.

In PSCs the min­is­ter al­so re­ceives a share of pro­duc­tion and the re­port al­so dis­closed the vol­ume of this share and the val­ue earned from the sale of the state’s Share. For 2021 and 2022, the val­ue of the state’s share was US$452,586,787 and US$1,260,176,659, a 78 per cent in­crease. This was earned from sales of 761,478 bar­rels of oil and 124,775 mm­scf of gas in 2021 and 1,585,266 bar­rels of oil and 163,742 mm­scf of gas in 2022.

For 2019 and 2020, the val­ue of the state’s share was US$299,980,678 and US$238,548,090, a 20 per cent de­cline. This was earned from sales of 679,782 bar­rels of oil and 99,410 mm­scf of gas in 2019 and 553,190 bar­rels of oil and 72,360 mm­scf of gas in 2020. In 2018 the Gov­ern­ment earned US$315,938,511 from sales of 732,119 bar­rels of oil and 91,168 mm­scf of gas.

Chart 5: PSC Share of Prof­it 2014-2024

Fu­el Sub­sidy

Da­ta on sub­sidy claims, levy pay­ments, and gov­ern­ment li­a­bil­i­ty re­veals key trends in the gov­ern­ment’s fi­nan­cial oblig­a­tions re­lat­ed to fu­el sub­si­dies. Ac­cord­ing to da­ta from the Min­istry of En­er­gy, the fu­el sub­sidy has cost the coun­try ap­prox­i­mate­ly TT$23 bil­lion over the pe­ri­od 2011 to Au­gust 2024. The gov­ern­ment’s li­a­bil­i­ty peaked in 2013 at near­ly TT$3.8 bil­lion and reached a low of TT$85 mil­lion in 2020. How­ev­er, the pe­ri­od of re­lief was short-lived, as glob­al en­er­gy prices re­bound­ed in 2021 and 2022, dri­ven by post-pan­dem­ic re­cov­ery and the Rus­sia-Ukraine war, which led to a resur­gence in sub­sidy claims and gov­ern­ment li­a­bil­i­ties.

In 2022, claims surged back to TT$2.5 bil­lion, and the gov­ern­ment’s li­a­bil­i­ty jumped to TT$2.1 bil­lion. Though claims be­gan to de­cline again in 2023 and 2024, the gov­ern­ment’s fi­nan­cial re­spon­si­bil­i­ty re­mains sig­nif­i­cant, with li­a­bil­i­ties still at TT$820 mil­lion in 2023 and TT$585 mil­lion as of Au­gust 2024. This on­go­ing fis­cal bur­den un­der­scores the chal­lenges of man­ag­ing fu­el sub­si­dies, es­pe­cial­ly dur­ing pe­ri­ods of volatile glob­al en­er­gy prices, and high­lights the need for con­tin­ued re­forms to re­duce the gov­ern­ment’s ex­po­sure to these costs.

Con­clu­sion

Any de­cline in en­er­gy sec­tor rev­enue will have a ma­te­r­i­al im­pact on ex­pen­di­ture re­lat­ed to im­prov­ing our lives whether in pro­vid­ing so­cial ser­vices, ush­er­ing in dig­i­tal trans­for­ma­tion or re­duc­ing traf­fic. These roy­al­ty and tax pay­ments do not op­er­ate in a vac­u­um and have a ma­te­r­i­al im­pact on the life of cit­i­zens. Keep­ing track of what we earn is not sim­ply a nu­mer­i­cal ex­er­cise for it speaks to how we trans­form the coun­try amidst glob­al rip­ples.

T&T’s own en­er­gy sec­tor is un­der­go­ing changes with a deep­wa­ter bid round sched­uled be­fore year’s end, the de­vel­op­ment of the Caribbean’s largest so­lar project to be com­plet­ed by 2025 and At­lantic’s re­struc­tur­ing ex­er­cise com­plet­ed.

The da­ta pro­vid­ed by the TTEITI can help in­form le­gal and fis­cal re­forms, pro­vide in­de­pen­dent­ly ver­i­fied re­search for an­a­lysts, pol­i­cy­mak­ers and com­men­ta­tors. Most im­por­tant­ly, it em­pow­ers cit­i­zens with in­for­ma­tion to strength­en their de­mands for sus­tain­able spend­ing of the earn­ings from the en­er­gy sec­tor, the back­bone of the na­tion­al econ­o­my.

Sher­win Long is the head of the Trinidad and To­ba­go Ex­trac­tive In­dus­tries Trans­paren­cy Ini­tia­tive sec­re­tari­at and Al­isa De­o­nanan is pol­i­cy an­a­lyst and the TTEITI sec­re­tari­at