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Trinidad and Tobago's Finance Minister Colm Imbert

T&T finance minister defends management of State-owned oil company

Trinidad and Tobago's Finance Minister Colm Imbert

Trinidad and Tobago’s Finance Minister Colm Imbert has dismissed claims from a Trinidad Guardian editorial that the Government treated State-owned Heritage Petroleum Limited (HPL) with preference over private companies by waiving the imposition of oil taxes, specifically supplemental petroleum tax.

In response, the finance minister pointed out that last year the State-owned company paid more than TT$800 million in royalties, levies, licences and taxes,

Imbert said that the editorial in the Trinidad Guardian was erroneous and instead indicated that because HPL was not required to pay supplemental petroleum tax in fiscal 2020, “this may have prevented the auditors from questioning whether Heritage Petroleum Limited was a going concern.

“That is simply untrue and misleading in the extreme,” he added.

However, in its editorial, the Trinidad Guardian explained that it went through the KPMG examination of Heritage Petroleum’s financial statement. The newspaper clarified that it looked at whether Heritage would have been considered a going concern had the Ministry of Finance not decided to forego Supplemental Petroleum Tax, as is the law.

“From the KPMG report, it is clear that the nature of the oil business is such that small changes can have a significant impact on the cash flow of Heritage and on determining if the company is a going concern. It must be noted that while Heritage is not in and of itself heavily leveraged, it is part of the Trinidad Petroleum Holdings (TPH) group which owes bondholders US$850 million-plus interest,” the editorial read.

The newspaper noted that “it is Heritage’s cash flow that is being relied upon to pay that debt.

“Therefore, if Heritage is to pay the debt, deal with commodity volatility and moderate commodity prices, then one can see how the assurance that it will retain its earning from windfall prices would allow the company to be more viable in the medium term, ceteris paribus,” Trinidad Guardian said.

But in a statement, Imbert said that HPL is a subsidiary of Trinidad Petroleum Holdings Limited, which is a wholly owned State enterprise. Heritage Petroleum is the national oil company which was created in 2018 when the former state-owned company, PETROTRIN was restructured.

“It is also basic business common sense for the Government to ensure that the national oil company has sufficient cash flow to maintain its oil production volumes,”

— Colm Imbert, minister of finance, Trinidad and Tobago

Imbert said that as part of the restructuring of PETROTRIN and the refinancing of the US$850-million PETROTRIN bond that was taken over by Trinidad Petroleum and due for payment in August 2019, the Government gave an undertaking to make equity investments in Heritage Petroleum to finance the exploration and production of oil, in sums equal to the amount of supplemental petroleum tax that would be due and payable over the period July 2019 to June 2021.

“As any oil producer will know, investment in exploration and production, specifically the drilling of new wells, the workover of existing wells, and the maintenance and upgrade of ageing infrastructure, such as pipelines, pumps, tanks and machinery is critical to the maintenance of oil production volumes.

“It is also no secret that because of its financial difficulties, the former PETROTRIN was unable to make the required investment in exploration and production, which led to a reduction in oil production.”

A man pumps petrol into a Heritage tanker. (File photo)

Imbert said as the owner of Heritage Petroleum, therefore, the government is entitled to make “any investment in this important State-owned company that is appropriate and necessary.

“It is also basic business common sense for the Government to ensure that the national oil company has sufficient cash flow to maintain its oil production volumes,” he said, adding “it is noteworthy that in 2019, Heritage paid the Government TT$833 million in royalties, levies, licenses and taxes, a complete turnaround from the situation with PETROTRIN in previous years, where PETROTRIN owed the government billions of dollars in unpaid royalties and taxes”.