FIFTH T&T EITI REPORT PROVIDES ANALYSES OF COUNTRY’S EXTRACTIVE SECTOR PERFORMANCE & PROMOTES LONG TERM REFORMS
The Minister of Energy and Energy Industries (MEEI), Senator the Honourable Franklin Khan, received the fifth Extractive Industries Transparency Initiative (EITI) Report from Trinidad and Tobago EITI Steering Committee Chair, Victor Hart, on Friday 11th May 2018. Present at the Launch were other Government officials, Members of the Diplomatic Corps, heads of energy companies, civil society representatives and Media. The T&T EITI Report 2016 details payments directly or indirectly made to the Government by 43 participating oil and gas companies, involved in upstream and associated activities during the fiscal year 2016, and compares them with revenues reported as received by Government agencies (Ministry of Finance-IRD/ Investment Division & MEEI). It includes an analysis and reconciliation of material payments and receipts. The Report was assembled by an Independent Administrator, represented for the fifth consecutive year by the local/UK alliance of BDO Trinity Limited as the lead consultant, supported by Hart Nurse Limited.
The Report shows that the government received total receipts of TT$8.8 billion for fiscal year 2016 from the country’s major oil and gas companies compared to TT$28.6 billion for 2014, a 70 percent decline. Reconciliation of Government receipts and energy companies’ payments of approximately TT$26.48 million was accounted for by:
- Timing differences between the date of payments at the end of one fiscal year and the date of clearing the MEEI’s Bank Account at the start of the next fiscal year.
- Foreign exchange differences which arise when payments are carried out in US$ and different exchange rates are used to report the amounts in TT$ by the Government and companies.
For the third year running, in terms of individual tax paying companies, the state owned National Gas Company Limited is the largest taxpayer contributing $5.7 billion to Government revenue followed by EOG Resources with payments of $1.3 billion and BPTT with payments of $480 million.
In light of the global drop in commodity prices and low levels of oil and gas production, the Extractive Sector’s contribution to the economy has been on a steady decline. During fiscal year 2016, oil and gas contribution to government revenue was 14.8 percent or TT$ 6,644.4 million in comparison to 48.2 percent or TT$ 28,111.3 million in 2014. The government’s export earnings from oil and gas have also been impacted, in 2014, 83.5 percent or TT$ 12,491. 5 million of total export earnings contributed to the economy, while in 2016, 78 percent or TT$ 6,430.8 million was contributed. Despite the decline in oil & gas contributions to the economy, the mining sector’s contribution has increased, in 2014, the mining sector contributed TT$4.12 million in comparison to 2016 where it contributed TTD7.58 million, a 54 percent increase.
Participating companies were asked to disclose any social expenditures and infrastructure provisions. Heading the list of nine companies is BPTT with TT$ 23 million in social expenditure, followed by Shell at TT$ 13,218 million. NGC was the only company to make infrastructure payment at TT$2.512 million during the reported period.
In his address, the minister expressed his support of the EITI and stated the initiative is in sync with his government’s own principles, “Openness, clarity, honesty. These are words we live by, especially as it relates to the energy sector. Government’s commitment to transparency is well documented. There has been a consistency in our candidness. We not only support the EITI. But we also laid the Gas Master Plan in Parliament and for the first time citizens had access to that level of detail into our energy sector policy.
Over seven years of EITI implementation, 866 million in differences between Government and company revenue has been reconciled and the Independent Administrator/Auditor has confirmed that there has been no revenue unaccounted for. We can therefore explain any difference between what companies pay to the Government and what Government says it receives. This independent verification is very important, as in other countries their EITI reports reveal that millions have gone missing and can’t be accounted for. Thankfully, this is not the T&T experience.”
For the second time, the report includes the Pilot Project on the Mining Sector, which was first implemented in the 2015 report. Five companies, two state-owned (National Quarries Company Limited and Lake Asphalt of Trinidad & Tobago (1978) Limited) and three private companies (Hermitage Limestone Limited, F.W. Hickson & Co. Limited and Trinidad Cement Limited) were included in the reporting and reconciliation for Fiscal 2016. Government claimed receipt of TT$13,345,199 while companies reported payments of TT$ 12,750,588, the TT$594,611 difference between these amounts was due to outstanding receipts.
In light of the Report’s findings, the Independent Administrator’s specific recommendations are as follows:
(I) AUDITED FINANCIAL STATEMENTS – MINING SOES
In view of the severe delay in producing current audited financial statements for NQCL and LATT, the Administrator recommends the Auditor General carry out the necessary audits for National Quarries Company Limited and Lake Asphalt of Trinidad and Tobago (1978) Limited to be able to produce to the Ministry of Finance by the end of the current year (2018) audited financial statements covering the period from the last audited financial statements to 30th September 2017.
(II) FEES FOR ASSIGNMENT OR TRANSFER OF PRODUCTION SHARING CONTRACTS (PSCS)
A number of PSCs have been transferred or assigned without fees to which the MEEI is entitled being charged (see section 2.3.1 in report). The Administrator recommends that the MEEI should review these cases promptly and take any necessary action to collect monies due and should also ensure that a system is in place in future transfers, assignments, relinquishments or terminations of PSCs so that appropriate provision is made for any monies due to be collected before approval is given by the Ministry.
(III) MONITORING OF AMOUNTS DUE UNDER PSCS
To improve the MEEI’s monitoring of amounts due under PSCs the Administrator recommends the following:
1) A review of prior periods should be undertaken as a matter of urgency in order to ensure that liabilities from PSC operators are correctly stated for any necessary action to be taken to collect sums owed.
2) The report should be produced on a cumulative basis – i.e. showing amounts owing from prior periods as well as the current period. The outcome of the review referred to in (1) above should be added to the report.
- 3. The report should contain a summary by PSC so that users can easily see areas requiring attention, and making it easier to ensure that material balances are followed up.
- The report should be endorsed by the PS and circulated to the PS and senior staff at the Ministry.
- The report does not include all amounts due under PSCs – e.g. profit share due, fees for transfers/assignments. Consideration should be given to including these amounts so that a complete picture is available for each PSC.
(IV) MINING SECTOR
The 2015 Minerals White Paper recognizes that there is significant room for improvement in the regulation and enforcement of regulations relating to the mining sector. The inclusion of a pilot study of the mining sector in the current report is commended as a good first step to increase transparency over licensing and revenue issues.
Stakeholders have made various suggestions on ways in which the government could intervene to improve the sector and it would be useful if the TTEITI Steering Committee were to provide a focus to crystallize suggestions from such interested parties.
Our necessarily brief discussions with stakeholders suggest that:-
- Resource levels in the mining sections within the MEEI need to be reviewed so that any planned improvements can be effective in practice
- b. The process for obtaining a mining licence should be simplified and existing operations brought into a regulated environment. A time bound plan is required for licensing operators. The transparency of the licensing process needs to be examined and published
- d. Government relies upon declarations of production from operators in the absence of weighbridges on sites and adequate resource to monitor production more closely. An appropriate system to monitor production – for example, introduction of public weighbridges on a progressive basis, use of drones to assess production and stockpiles – coupled with an effective monitoring regime, would improve control over operations and could be expected to improve government revenue from the sector.
We understand that there is no system in place for measuring production from quarries to determine royalties payable. This is currently being done via checks on record books from the quarries
In order to improve the coverage of the sector in future reports, the TTEITI Steering Committee should continue its efforts to engage with companies and widen the number included in the initiative.
About the EITI
The EITI is the global gold standard for resource revenue transparency and management that has been adopted by 51 countries worldwide, including many of our trading partners in Europe, Africa and the Americas. Trinidad and Tobago, Suriname and Guyana are the CARICOM countries that participate in the initiative. The EITI’s mandate is to collect and disseminate independently verified information on revenue payments made to government from the oil, gas and mining companies operating in the country’s extractive sectors, audited and reconciled with government’s declared corresponding receipts, so as to promote greater revenue transparency and accountability for citizens. The information is disseminated through annual EITI Reports and T&T has published five such reports to date covering Fiscal Years 2010 to 2016. Based on the reports’ findings, an estimated $866 million in differences between extractive companies’ declared revenue payments and Government’s declared corresponding receipts have been identified, audited and reconciled. The reports have also provided extensive recommendations on improving Government revenue collection, data management and audit and assurance processes. Data published in the reports have also informed the findings of the recent Gas Master Plan and assisted T&T in meeting its obligations to the Open Government Partnership.