EITI is unmasking oil and gas production discrepancies
How well does Trinidad and Tobago monitor its oil and gas production? The recent “fake oil” allegations at Petrotrin has helped focus public discussion on this often overlooked national issue. There are billion dollar ramifications if the country does not correctly quantify its oil and gas production, particularly in the current environment of low global oil and gas prices and declining domestic production. Given these circumstances, the country’s participation in the Extractive Industries Transparency Initiative (EITI) is necessary to provide independent assurance of the energy sector’s production by companies and the resulting revenues due to government.
As part of the EITI reporting process, an Independent Auditor reconciles production (and revenue) from the oil, gas and mining sectors to identify any discrepancies and explains from the audit process the reason for the difference in the annual EITI Report (www.tteiti.org.tt). The process may seem simple but it is rigorous. For example, in fiscal 2015, the EITI Auditor found differences of 173,077 barrels of oil and 139,405 mcf of gas. This variance occurred because, in some instances, different units were used to measure production and revised production data was used by Government and the companies. The TTEITI Steering Committee collaborated with the Ministry of Energy and Energy Industries (MEEI) to implement the Auditor’s recommendations by (i) clarifying the definition of production, (ii) standardizing units of measurement, (iii) disaggregating monthly production by blocks and (4) stating the sources of company production data (e.g. Prod 1 field summary reports, impost tax obligation etc.).
Despite the Auditor’s best efforts to identify discrepancies in production and revenues and to recommend ways to close the gaps found, more needs to be done to paint the full picture. Because EITI participation by companies is voluntary, not all extractive companies operating in Trinidad and Tobago report to the Auditor. This means that information on some companies’ production volumes and revenue payments are not captured and reported, therefore, such data is not available for public scrutiny. To overcome this challenge, the TTEITI Steering Committee developed draft legislation which, if enacted in its present form would make EITI participation mandatory by all oil, gas and mining companies operating in T&T. All such companies will be obligated to disclose production and revenue information to the EITI Auditor, whether they are an independent company like A&V Oil and Gas Limited, or a multinational company like Shell Trinidad Limited, or a state-owned company like Petrotrin.
Mandatory participation in the EITI is valuable but it is not a magic pill. What it will do is provide an extra layer of assurance for a public prone to suspicion, act as a disincentive to corruption and ultimately help Government increase its revenues.