Based in Pt Lisas, the Energy Chamber is the representative organisation for the energy sector. In a statement yesterday the Chamber said on an energy equivalency basis Trinidad and Tobago produces far more natural gas than it does oil (by a ratio of about seven to one). “Nevertheless the recent drop in oil prices has obvious implications for Trinidad and Tobago’s economy. Crude oil accounts for 17 per cent of our total exports while refined petroleum products accounts for another 16 per cent.”
Oil production is also a major source of Government revenue. Supplemental Petroleum Tax (SPT), the second largest category of tax, is only charged against oil production and not natural gas production.
The current decline in oil prices is offset by the continued higher prices for LNG in our key Latin American markets and for methanol and ammonia in the USA and elsewhere.
Finance Minister Larry Howai told the Express last week that Government will not resort to borrowing if there is a revenue shortfall from sliding oil prices. Government based its 2014/2015 Budget on an oil price of US$80 per barrel and a gas price of US$2.75 per mmbtu.
But it is not all worrying news.
The Energy Chanber said declining oil prices also have a positive side for (State oil company) Petrotrin, “whose costs for imported oil to run through the refinery will decrease, helping the refinery’s very low margins”. It noted: “Nevertheless, we need to be wary of the current situation. The last time we experienced significant declines in oil prices in 2008 other commodity prices also rapidly followed. Trinidad and Tobago must therefore monitor all of our commodity export prices carefully and be ready to revise expenditure in line with falling revenue if prices remain low.”
One important tool in monitoring the price of the country’s energy exports is the Energy Commodity Price Index (ECPI) developed by the Central Bank and the Energy Chamber, the business group said.
“The ECPI tracks the price movement of the country’s top ten energy-based commodity exports. The index is weighted by each commodity’s relative share of its value. The commodities and their weights are: US natural gas (40 per cent); oil (16.6 per cent); ammonia (11.8 per cent); methanol (9.4 per cent); Diesel (seven per cent); motor gasoline (4.3 per cent); natural gasoline (3.5 per cent); jet fuel (2.7 per cent); propane (2.4 per cent); and urea (2.3 per cent).
The value of the index is currently 134.61, the lowest value since November 2013 and represents a fifth consecutive month of decline in the index’s value. The current September 2014 value is also the second lowest value in the past two years, the Chamber stated.