Royalty tax hike in Trinidad and Tobago to most affect BPTT

The Trinidad and Tobago government has announced an across-the-board 12.5% royalty tax on the production of crude oil, condensate, and natural gas in a move that is expected to affect mainly BP Trinidad & Tobago LLC (BPTT).

The Caribbean twin-island nation’s Finance Minister Colm Imbert announced the measure as part of the country’s 2017-18 national budget, arguing that with low oil prices, the government was not receiving enough in tax revenues from the majors operating in Trinidad and Tobago.

“We consider it untenable that our hydrocarbon resources are being extracted to this extent with little or any benefit to the country,” Imbert said. Multinational firms extract about 3 bcfd of gas in Trinidad and Tobago, he added.

The tax will not impact Royal Dutch Shell PLC, EOG Resources Inc. or BHP Billiton because these companies operate in Trinidad and Tobago under production-sharing contracts in which the government takes a share of the oil or gas in return for settling the taxes owed by the companies.

BPTT, however, operates under exploration and production contracts that are a holdover from the 1960s when its predecessor in Trinidad and Tobago, Amoco, operated the prolific Columbus basin.

Up until 2015, BPTT paid just 1.5% royalty, which was later renegotiated to 10%. Now the new measure will see a further increase in royalty payments.

In a statement, BPTT said, “Over the past few weeks, BPTT has been in discussions with the Ministry of Finance on proposals for tax reform. Before we can comment on the measures announced in the budget, we will first need much more clarity on the details of these measures and their impact.”

The tax increase takes effect on Dec. 1.