Tracking Energy Sector Revenue in a Recession

As a country historically dependent on its energy sector for growth, Trinidad and Tobago will definitely require revenue from the sector to finance any of our short, medium and long term ambitions. A decision to develop road infrastructure projects or even finance our entry into new industries like maritime services would be influenced in some way by our energy sector’s fortunes. Whether these ambitions come to fruition depend on how global energy prices, our oil and gas production levels, tax incentives and other investment indicators intersect. Therefore keeping track of the rise and fall in taxes the country earns from the sector is instructive and can help inform policy and project decisions and give a sense of the country’s economic health. Access to publically available, credible data analysis is therefore key for Government, companies and citizens.

The Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) provides independently verified and audited information on oil, gas and mining revenue. As the name suggests, the EITI focuses on promoting high standards of transparency and accountability in how a country governs its natural resources. The principles at the heart of the EITI require countries to publish accurate information on key aspects of their natural resource management including how much tax and social contributions companies are paying and how this money is allocated on a national and sub-regional level. The initiative also promotes reconciliation of company and Government production, disclosure of beneficial owners of companies and gives concrete recommendations on how countries can improve their tax collection, audit and assurance and even data management systems.

Based on information gathered by the TTEITI, it is clear that in the past seven years, there has been a sharp decline in revenue earned from the energy sector. In fact, all of the major energy sector taxes trend downwards. The following charts provide information on the trends of the major energy sector taxes paid between 2011 to 2017. However, it should be noted that the figures presented for fiscal 2016 and 2017 have not yet been audited by the Independent EITI Auditor/Administrator BDO Trinity Limited.


Chart 1 – PSC Share of Profit

This chart identifies the share of profit Government received from its producing Production Sharing Contracts (PSCs). From this share of profit, the Ministry of Energy and Energy Industries (MEEI) also pays the tax liability of its PSC partners to the Board of Inland Revenue (BIR). For instance, if Government partners with two companies for a PSC, the State is entitled to pay taxes such as Petroleum Profits Tax, Supplemental Petroleum Tax, Unemployment Levy, Green Fund Levy etc. on behalf of its two partners. Over the past seven years, Government received TT $12.8 billion in PSC share of profit and paid TT $8.5 billion in taxes from these profits on behalf of its PSC partners to the BIR. Between fiscal 2014-2017 there has been a 67% decline in PSC share of profit received by Government.

Chart 2 – Petroleum Profits Tax and Supplemental Petroleum Tax

Companies pay Petroleum Profits Tax (PPT) on their taxable profits after deducting expenses for activities linked to exploration and production e.g. drilling costs. PPT is charged at a rate of 50 percent on taxable profit generally but at a 35 percent rate for deepwater oil and gas developments. PPT applies to both producing and refining companies. In fiscal 2011, the Government collected TT $9.1 billion in PPT whereas in fiscal 2016 collections this fell dramatically to 901 million, a 90 percent decline.

Supplemental Petroleum Tax (SPT) is directly linked to the price of oil and is triggered when oil prices rise above US $50 per barrel. Between fiscals 2011-2015, the Government collected  $18.9 billion in SPT. Oil prices averaged US $78 during that period and averaged US $43 in 2016 and US $50 in 2017. Between fiscal 2015 and 2016 SPT collection declined from TT $4.7 billion to $135 million, closely mirroring the decline in oil prices. Between 2011 and 2016, SPT collection declined by 96 percent. Payment of this tax is due every quarter therefore short term oil price increases can lead to increased SPT. Similarly, if prices are depressed and below US $50 per barrel the Government will not receive any SPT payments. The Government has signaled its intention to amend the existing SPT regime in the near future.

Chart 3 – Royalty

Open Oil, an extractive sector NGO, describes royalties as “a percentage share of production, or the value of the production which goes to the Government regardless of the rate of production or costs to the operator”. Simply put, if a particular oil well produces 100 barrels per day in March and oil prices average US $50 per barrel for that particular month, the cash flow would be $5000 per day. If the Government agreed to a 12.5 percent royalty rate then it would receive $625 per day. Between fiscal 2011-2017, the royalty Government received fell by 63 percent, declining from TT $2.3 billion in fiscal 2011 to $855 million in fiscal 2017. Government recently amended the Petroleum Regulations and, from January 1, 2018, all Exploration and Production licensees or PSC contractors will have to pay a royalty rate of 12.5 percent.


Chart 4 – NGC Dividends

According to the EITI report 2014-2015, NGC was the single largest contributor to Government revenue in both 2014 and 2015, with payments totaling more than TT$8.3 billion in 2014 and TT$8.4 billion in 2015. In fiscal 2016 this trend is likely to continue with the company making payments of $5.6 billion (unaudited). It is important to note that dividend payments account for the bulk of the company’s contribution. In fiscal 2011, the company paid TT $350 million in dividends to the Ministry of Finance which ballooned to a historic high of TT$5.7 billion by 2015. In 2016, NGC’s dividend payments declined by roughly TT $ 1 billion to TT $4.6 billion and in 2017 payments dropped to $1.3 billion (unaudited).


The data presented above tells the story of energy sector revenue generation in the Trinidad and Tobago economy as well as the current economic challenges the country faces. The decline in energy sector revenue should force us to rethink how we manage and allocate what is earned from the sector. The data provided can help inform legal and fiscal reforms, provide independently verified research for analysts, policymakers and commentators. Most importantly, it empowers citizens with information to strengthen their demands for sustainable spending of the earnings from the energy sector, the mainstay of the national economy.

The latest Trinidad and Tobago EITI Report will be available in April.