By Raffique Shah
October 02, 2018
I am writing this column before the Minister of Finance delivers his 2018-2019 Budget, and no, Colm Imbert and I are not friends, so I can’t call him on the phone and ask for a few tips on some of the measures he proposes to introduce to restrain the population from open rebellion, especially after his boss, the Prime Minister, declared last week that he will put the ruling People’s National Movement on a general election footing from early next year.
I do not need to see details of revenues and expenditures, of reducing the fiscal deficit and reining in the runaway national debt. These are pretty much standard for all governments we’ve had for the last fifteen to twenty years, although all but party sycophants will agree that the People’s Partnership government had taken spending to hitherto unknown heights—topping $60 billion in expenditure during their tenure in office.
What will interest me in Imbert’s package is the Arithmetic of his oil, gas, petrochemicals and taxation measures, given Government’s decision to shut down the State-owned behemoth, Petrotrin, and reopen it in a new, downsized format. The oil giant has been such an integral part of the national economic landscape for so many decades, it’s hard for simpletons like me to imagine the Budget’s balance sheet without its 10- to11-digit impact in one column or other.
For instance, Central Bank data show that oil production (crude and condensate) fell from 29.6 million barrels per year (81,000 barrels per day) in 2013 to 26 million (71,853 bpd) in 2017. However, oil imports, which will have been for refining purposes, averaged 30 million barrels per year over the same period. So we imported more oil than we produced.
In fact, we exported an average of just around 11 million barrels of oil per year, dipping to 9.9 million in 2017—or approximately 28,000 bpd. Now, from the 40,000 bpd of crude that Petrotrin produced (mostly via Trinmar), and the imported 82,000 bpd (that will have been paid for in US dollars), the company produced refined products (gasoline, diesel etc) amounting to 52.7 million barrels in 2016, and 46.3 million in 2017.
Of this, Petrotrin exported 44.2 and 36.2 million barrels of petroleum products for the respective years, which suggests that domestic consumption averages 10 million barrels per year.
More important than oil and petroleum products in terms of foreign exchange earnings is the 4.2 billion cubic feet of natural gas that the country requires per day to enable our petrochemical and power generation plants, as well as Atlantic LNG, to operate at optimal levels. Last year, production averaged 3.4 bcf/d.
The Bank’s balance of payments table shows that export earnings from oil and refined petroleum products tumbled from US $5 billion in 2013 to $1.9 billion in the first nine months (Jan-Sept) of 2017. Fuel imports (presumably crude for Petrotrin) over the same two periods cost US $4.5 and $2.5 billion.
Of relevance, LNG and petrochemicals exports in 2013 earned us US $4.6 and $4.2 billion respectively, but declined to US $1.6 and $2.0 billion in Jan-Sept 2017.
Out of this maze of numbers, what should be of concern to citizens in Mr Imbert’s Budget is whether or not the closure of the oil refinery would result in a healthier balance of payments chart. At a glance, there will be immediate savings of at least US $3 billion a year not having to import crude oil for processing. Also, exporting Petrotrin’s approximately 40,000 bpd of crude should add another US $1 billion or so to foreign exchange earnings.
However, Government or the new Petrotrin or maybe NP will now need to import approximately 10 million barrels of oil equivalent of refined fuels per year, for which it must pay in US dollars. This will hardly be more than US $1 billion, which will be recovered in local currency when consumers purchase the fuels. I suspect, though, that in order not to anger the population, Government will maintain the subsidies it had vowed to remove over the past fiscal year.
Staying with the energy sector, I ask the Finance Minister: what is the real score with the “transfer pricing” that these big, supposedly respectable energy companies engaged (or engage?) in, cheating the people of T&T billions of dollars in natural gas revenues? Imbert repeated the charge several times and said Government will stamp it out so that the nation will benefit fully from its LNG sales. Are they now paying up on the final price, Minister?
On a similar note, whatever happened to proposals for adequately taxing and closely monitoring and regulating the euphemistically-named “gaming industry”? While I’m on the get-rich-quick scam, I wonder how many readers have noted the mushrooming of solve-it-all “gurus” and assorted “healers” who boldly advertise their “services” on prime time television. Surely, these quacks must be making piles of money, hence they ought to pay taxes.
The working public and most legitimate businesses and professionals bear the burden of taxation in this country. They cannot carry the cheaters on their backs any longer. I trust the Minister understands this, and, instead of increasing taxes, through the BIR (or the proposed Revenue Authority), spread the tax-net far and wide to capture every crook and dodger.
If everyone pays his fair share, we may well be in a position to reduce taxes.