Trinidad and Tobago Upstream Fiscal and Regulatory Report – Investors to Pay Royalty under New Model PSA

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In November 2018, Trinidad and Tobago launched a shallow water bid round offering six blocks under an updated PSA framework, which includes a 12.5% royalty on gross production, payable by investors. The round is scheduled to close in May 2019 and has been reported to have already received significant interest. Further fiscal reforms including amendments to the Supplemental Petroleum Tax are under consideration, however appear to be of lower priority than gas sector reforms. In addition to fiscal reforms, the government has closed the national oil company Petrotrin, and has replaced the management of its exploration and production assets with newly formed Heritage Petroleum Company.

“Trinidad and Tobago Upstream Fiscal and Regulatory Report – Investors to Pay Royalty under New Model PSA”, presents the essential information relating to the terms which govern investment into Trinidad and Tobago’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Trinidad and Tobago’s upstream oil and gas investment climate.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Trinidad and Tobago

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Trinidad and Tobago

Reasons to Buy

Understand the complex regulations and contractual requirements applicable to Trinidad and Tobago’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 3

1.2. List of Figures 3

2. Regime Overview 4

3. State Take Assessment 7

4. Key Fiscal Terms – Royalty/Tax 8

4.1. Royalties, Bonuses and Fees 8

4.1.1. Bonuses 8

4.1.2. Rental Fees 8

4.1.3. Royalties 9

4.1.4. Green Levy Fund 9

4.1.5. Petroleum Impost 9

4.1.6. Petroleum Production Levy 9

4.1.7. Scholarship 10

4.1.8. Training and Research and Development Contributions 10

4.1.9. Supplemental Petroleum Tax 10

4.1.10. Abandonment Fund 13

4.2. Direct Taxation 13

4.2.1. Petroleum Profits Tax 13

4.2.2. Unemployment Levy 14

4.2.3. Deductions and Depreciation 14

4.2.4. Uplift 14

4.2.5. Branch Remittance Tax 14

4.2.6. Property Tax 14

4.3. Indirect Taxation 15

4.3.1. Value Added Tax 15

4.3.2. Custom Duties 15

4.4. State Participation 15

4.4.1. Carried Interest 15

4.4.2. National Oil Company Overriding Royalty 15

5. Key Fiscal Terms – Production Sharing Agreements 16

5.1. Royalties, Bonuses and Fees 16

5.1.1. Bonuses 16

5.1.2. Rental Fees 16

5.1.3. Royalties 17

5.1.4. Petroleum Impost, Petroleum Production Levy and Green Fund Levy 17

5.1.5. Scholarship 17

5.1.6. Training Contribution 17

5.1.7. Research and Development Contribution 18

5.1.8. Administrative Charge 18

5.1.9. Abandonment Fund 19

5.2. Cost Recovery 19

5.2.1. Limit on Recovery 19

5.2.2. Recoverable Costs 20

5.3. Profit Sharing 20

5.4. Direct Taxation 23

5.4.1. Petroleum Profits Tax, Unemployment Levy, & Supplemental Petroleum Tax 23

5.4.2. Branch Remittance Tax 23

5.4.3. Assignment/Transfer Tax 23

5.5. Indirect Taxation 23

5.6. State Participation 23

6. Regulation and Licensing 24

6.1. Legal Framework 24

6.1.1. Governing Law 24

6.1.2. Contract Type 24

6.1.3. Title to Hydrocarbons 24

6.2. Institutional Framework 25

6.2.1. Licensing Authority 25

6.2.2. Regulatory Agency 25

6.2.3. National Oil Company 26

6.3. Licensing Process 26

6.3.1. Licensing Rounds 26

6.3.2. Pre-qualification Process 26

6.3.3. Bid Evaluation 27

6.4. License Terms 28

6.4.1. Contract Duration and Relinquishments 28

6.4.2. Work Obligation 28

6.5. Local Content 29

6.6. Domestic Market Obligation 29

6.7. Management Committee 29

7. Outlook 30

8. Appendix 31

8.1. References 31

8.2. Contact Us 33

8.3. Disclaimer 33

Table

1.1. List of Tables

Table 1: Regime Overview 4

Table 2: Trinidad and Tobago, Royalty/Tax, Production Bonuses, Ortoire (2014) 8

Table 3: Trinidad and Tobago, Petroleum Impost Rates, 2010 – 2017 9

Table 4: Trinidad and Tobago, Supplemental Petroleum Tax Rates (%), 2010 onwards 10

Table 5: Trinidad and Tobago, Supplemental Petroleum Tax Rates (%), 2005 – 2009 11

Table 6: Trinidad and Tobago, Supplemental Petroleum Tax Rates (%), 1992 – 2004 12

Table 7: Trinidad and Tobago, Supplemental Petroleum Tax Rates (%), 1981 – 1991 13

Table 8: Trinidad and Tobago, Petroleum Profit Tax, 1974 – 2019 13

Table 9: Trinidad and Tobago, Overriding Royalty, Trintes 15

Table 10: Trinidad and Tobago, PSA, Production Bonuses (US$), 2010 onward 16

Table 11: Trinidad and Tobago, PSA, Rental Fees, US$/Quarter 17

Table 12: Trinidad and Tobago, PSA, Annual Training Contribution (US$) 18

Table 13: Trinidad and Tobago, PSA, Annual Research and Development Contribution (US$) 18

Table 14: Trinidad and Tobago, Cost Recovery Limit (%), 2010 – 2018 19

Table 15: Trinidad and Tobago, Cost Recovery Limits (%), Representative Pre-2010 Contracts 19

Table 16: Trinidad and Tobago, Oil Profit Sharing Biddable Thresholds, 2018 round 20

Table 17: Trinidad and Tobago, Gas Profit Sharing Biddable Thresholds, 2018 round 21

Table 18: Trinidad and Tobago, Representative State Share of Profit Oil (%), Pre-2018 Contracts 21

Table 19: Trinidad and Tobago, Profit Share Price Classes, 2001 onwards 22

Table 20: Trinidad and Tobago, Operator Points Scheme, 2016 27

Table 21: Trinidad and Tobago, Marking Scheme, 2018 Shallow Water Bid Round 27

Table 22: References 31

Figures

1.2. List of Figures

Figure 1: Regime Flow Chart, Royalty/Tax 5

Figure 2: Regime Flow Chart, PSA 6

Figure 3: Trinidad and Tobago, Indicative NPV10/boe, IRR and State Take Comparison, Regional 7

Figure 4: Trinidad and Tobago, Legal Framework 24

Figure 5: Trinidad and Tobago, Institutional Framework 25

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