Her­itage Pe­tro­le­um paid the Gov­ern­ment $833 mil­lion in roy­al­ties, levies, li­cens­es and tax­es last year, Fi­nance Min­is­ter Colm Im­bert says.

Im­bert made the state­ment yes­ter­day as he de­fend­ed Gov­ern­ment’s treat­ment of Her­itage Pe­tro­le­um. He said the cur­rent sit­u­a­tion with Her­itage was “a com­plete turn­around from the sit­u­a­tion with Petrotrin in pre­vi­ous years, where Petrotrin owed the Gov­ern­ment bil­lions of dol­lars in un­paid roy­al­ties and tax­es.”

Im­bert is­sued a re­lease which he said was aimed at cor­rect­ing what he la­belled as “mis­in­for­ma­tion” in yes­ter­day’s ed­i­to­r­i­al.

“In that ed­i­to­r­i­al, the Guardian ac­cused the Gov­ern­ment of favour­ing Her­itage Pe­tro­le­um Lim­it­ed over pri­vate com­pa­nies by waiv­ing the im­po­si­tion of oil tax­es for the com­pa­ny, specif­i­cal­ly sup­ple­men­tal pe­tro­le­um tax, “ Im­bert said.

“The ed­i­to­r­i­al al­so er­ro­neous­ly sug­gest­ed that be­cause Her­itage Pe­tro­le­um Lim­it­ed was not re­quired to pay sup­ple­men­tal pe­tro­le­um tax in fis­cal 2020, this may have pre­vent­ed the au­di­tors from ques­tion­ing whether Her­itage Pe­tro­le­um Lim­it­ed was a go­ing con­cern.”

Im­bert said this was “sim­ply un­true and mis­lead­ing in the ex­treme.”

Her­itage Pe­tro­le­um Lim­it­ed is a sub­sidiary of Trinidad Pe­tro­le­um Hold­ings Lim­it­ed, which is a whol­ly-owned state en­ter­prise and was cre­at­ed in 2018 when the for­mer Petrotrin was re­struc­tured.

“As part of the re­struc­tur­ing of Petrotrin and the re­fi­nanc­ing of the US$850 mil­lion Petrotrin bond that was tak­en over by Trinidad Pe­tro­le­um and due for pay­ment in Au­gust 2019, the Gov­ern­ment gave an un­der­tak­ing to make eq­ui­ty in­vest­ments in Her­itage Pe­tro­le­um to fi­nance the ex­plo­ration and pro­duc­tion of oil, in sums equal to the amount of sup­ple­men­tal pe­tro­le­um tax that would be due and payable over the pe­ri­od Ju­ly 2019 to June 2021,” Im­bert said.

“As any oil pro­duc­er will know, in­vest­ment in ex­plo­ration and pro­duc­tion, specif­i­cal­ly the drilling of new wells, the workover of ex­ist­ing wells and the main­te­nance and up­grade of age­ing in­fra­struc­ture, such as pipelines, pumps, tanks and ma­chin­ery is crit­i­cal to the main­te­nance of oil pro­duc­tion vol­umes.”

Im­bert said it is no se­cret that be­cause of its fi­nan­cial dif­fi­cul­ties, Petrotrin was un­able to make the re­quired in­vest­ment in ex­plo­ration and pro­duc­tion, which led to a re­duc­tion in oil pro­duc­tion.

“As the own­er of Her­itage Pe­tro­le­um, there­fore, the Gov­ern­ment is en­ti­tled to make any in­vest­ment in this im­por­tant state-owned com­pa­ny that is ap­pro­pri­ate and nec­es­sary,” he said.

“It is al­so ba­sic busi­ness com­mon sense for the Gov­ern­ment to en­sure that the na­tion­al oil com­pa­ny has suf­fi­cient cash flow to main­tain its oil pro­duc­tion vol­umes.”

Yes­ter­day’s ed­i­to­r­i­al to which Min­is­ter Im­bert refers looked at the KP­MG ex­am­i­na­tion of Her­itage Pe­tro­le­um’s fi­nan­cial state­ment, which looks at whether Her­itage would have been con­sid­ered a go­ing con­cern had the Min­istry of Fi­nance not de­cid­ed to forego Sup­ple­men­tal Pe­tro­le­um Tax as is the law.

From the KP­MG re­port, it is clear that the na­ture of the oil busi­ness is such that small changes can have a sig­nif­i­cant im­pact on the cash flow of Her­itage and on de­ter­min­ing if the com­pa­ny is a go­ing con­cern.

It must be not­ed that while Her­itage is not in and of it­self heav­i­ly lever­aged, it is part of the Trinidad Pe­tro­le­um Hold­ings (TPH) group which owes bond­hold­ers US$850 mil­lion plus in­ter­est.

It is Her­itage’s cash flow that is be­ing re­lied up­on to pay that debt. There­fore, if Her­itage is to pay the debt, deal with com­mod­i­ty volatil­i­ty and mod­er­ate com­mod­i­ty prices, then one can see how the as­sur­ance that it will re­tain its earn­ing from wind­fall prices would al­low the com­pa­ny to be more vi­able in the medi­um term, ce­teris paribus.

The ed­i­to­r­i­al points this out and looks at three is­sues, the ef­fec­tive­ness of the SPT (wind­fall tax), the fair­ness of it and if Her­itage is be­ing favoured in­stead of free en­ter­prise.

The ed­i­to­r­i­al does not deal with nor de­ny Her­itage made a prof­it, nor that it paid oth­er tax­es, not that it is in a bet­ter fi­nan­cial po­si­tion than the for­mer Petrotrin.