Trinidad's budget is based on $ 70/bbl oil price

Sep 25, 2008 02:00 AM

As Government insists that diversification of the economy is the way to go, Finance Minister Karen Nunez-Tesheira said that the energy sector will remain the backbone of the local economy for the next decade.
During her budget presentation, she said that the non-energy sector grew at a faster rate that the energy sector in 2008. However, the energy industry has supported Government's fiscal surpluses over the past five years and its external accounts have been strengthened by the global high oil and natural gas prices, she said.

The $ 49.465 bn budget -- a $ 20 bn leap over last year's -- is based on an oil price of $ 70 and a natural gas price of $ 4 per mm Btu. Nunez-Tesheira said Government expects the energy sector to produce revenues of $ 19,924.6 mm.
"The oil price for the budget is determined on a moving average basis. It is our assessment that oil prices will align to market fundamentals over the medium-term and, therefore, we do not believe that there is any need to revise the assumptions on which our budget is based," she said.

The oil price, which has been declining steadily over the past few weeks, jumped $ 25 to close at $ 130. She said that the long-awaited revision of tax incentives, which energy majors have long clamoured for and which were expected to have been included in this year's budget offering, would be completed before year's end.
Meanwhile, in a bid to stem the Government's gas subsidy, which stands at $ 2.4 bn, the price of premium unleaded gasoline was increased from $ 3 to $ 4 per litre. The Government's agenda for the local energy sector is that "an aggressive development programme is being undertaken by operators to bring natural gas on line for the projected growth in the demand on the domestic market."

In the upstream, three new field developments are in progress and two will commence shortly, she said. And on the heels of a 2007 Ryder Scott audit, which reflected in Trinidad's favour, the Government will undertake an independent certification of Trinidad's natural gas reserves, which is carded for completion by the end of May 2009.
Nunez-Tesheira said that this data is available to enable strategic planning for the downstream natural gas sector while an independent certification of the country's oil reserves will be completed by January 2009.

Two new announcements in this year's budget:
-- A methanol-to-power project, as a fuel power generation, a joint venture between the University of Trinidad and Tobago and the Natural Gas Institute of the Americas. Cost: $ 1.2 bn.
-- Construction and licensing of a plant to produce animal protein (a single cell protein used as an alternative to soybean) from natural gas. This is between UTT and UniBio, which should be completed by January 2009.

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