MESSAGE FROM THE CHAIR
By Victor Hart, Chair, TTEITI Steering Committee.

The current TTEITI Newsletter focusses on T&T’s EITI Report 2014 and 2015 that was published on 30 September 2016 and publicly launched on 21 October 2016 by then Minister of Energy and Energy Industries, the Hon. Nicole Olivierre.

The publication of that report marked six years since Cabinet took its decision in September 2010 to reaffirm T&T’s commitment to the Extractive Industries Transparency Initiative (EITI) Principles and to set in motion T&T’S journey as an EITI implementing country. December 2016 will mark six years since the launch of the EITI Multi Stakeholder Group Steering Committee, which I chair, with the mandate to take the necessary steps to obtain EITI membership for T&T and, if successful, to oversee EITI implementation.

During the ensuing six years, with the help and support of the extractive sector stakeholders (Government, companies and civil society), T&T gained EITI membership on 1 March 2011 and EITI Candidate Country status, the highest level of membership, on 23 January 2015. We gained further recognition among the EITI’s 51 member-countries when, on 23 February 2016, I was elected to the EITI International Board as representative of the 11 implementing countries of EITI Region 6 (Europe: Norway, Albania, UK and Germany; Americas: USA, Peru, Colombia, Guatemala, Honduras, The Dominican Republic and and T&T). We also published four EITI Reports covering fiscal years 2011 to 2015 (www.tteiti.org.tt-reports/).

Thus far, T&T’s EITI journey has been an exciting one that has benefitted the country in many ways, some of which are described in this Newsletter. Expect the EITI, being a dynamic initiative, to deliver even more benefits to all stakeholders in the years to come. Given that the EITI seeks to protect the people’s patrimony and our children’s inheritance derived from our oil and gas natural resources, I invite you to take an interest in the EITI and to keep informed of implementation progress through the TTEITI website (www.tteiti.org.tt).

Finally, on behalf of all of us who are working at implementing the EITI in T&T, I express thanks to Former Minister of Energy and Energy Industries, Ms. Nicole Olivierre, for her support. Also, I extend congratulations to the newly appointed Minister of Energy and Energy Industries, Senator Franklin Khan, our Line Minister, with whom we look forward to a close working relationship.

In terms of individual tax paying companies, 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 (as compared with bpTT’s TT$6.5 billion in 2013). Petrotrin followed NGC in 2014 with a contribution of over TT$6.7 billion, and by bpTT in 2015 with a contribution of over TT$4.5 billion.

The Energy Sector’s share of GDP declined steadily from 44.8% in 2011 to 37.2% in 2014, and further to 32.1% in 2015. The latter two years represent the smallest energy sector GDP contribution since 2009, when the global financial crisis triggered the collapse of all commodity prices. While Government’s overall revenue increased up to 2014, the contribution of the energy sector to Government revenues declined consistently between 2011 and 2015. In 2011 petroleum revenues accounted for 57.6% of total Government revenue. By 2013 that share dropped to 50% and, in fiscal year 2015, it dropped further to 30.5%, the lowest level in 15 years. Energy employment as a percentage of total employment increased slightly from 3.3% in 2014 to 3.4% in 2015.
Companies were asked to disclose any social expenditures and infrastructure provisions. Heading the list of eight groups of companies were NGC with TT$44 million in social expenditure and TT$27 million in infrastructure provision in 2014, followed by bpTT with TT$20 million in social expenditure. NGC topped the list again in 2015 with TT$76 million in social expenditure and TT$2 million in infrastructure provision.

This EITI Report also includes, for the first time, a Pilot Project on the Mining Sector, given the expansion in construction and road infrastructure projects over the past decade, making mineral production integral to Trinidad and Tobago’s national development. Four companies, two state-owned (National Quarries Company Limited and Lake Asphalt of Trinidad & Tobago (1978) Limited) and two private companies (Hermitage Limestone Limited and Trinidad Cement Limited) participated in the Pilot Project. In 2015 quarry operator tax payments to the BIR totalled over TT$1 billion, a major increase from 2014 when the contribution totalled over TT$37 million.

Another new topic covered in EITI Report 2014 and 2015 is that of the environmental legal framework in Trinidad and Tobago. Over the period 2011–2015, there have been roughly 530 CEC applications from within the Oil and Gas Sector. In the vast majority of these cases, the applications for a CEC had been approved by the EMA. There were only three refusals of CEC from the EMA over the said period.

The EITI Report 2014 and 2015 Informs on Profit Sharing Contracts

In the EITI Report of 2013, the Administrator recommended that payments made to the Ministry of Energy and Energy Industries (MEEI) by companies under their Profit Sharing Contacts (PSCs) be a reconciled item in EITI Report 2014 and 2015. The Steering Committee discussed the matter and agreed to implement the Administrator’s recommendation and, as a result, EITI Report 2014 and 2015 contains information on PSC Audits.

Under the PSC agreement, the lead contracting company that signs the PSC is responsible for paying to the MEEI a profit share on behalf of itself and other parties to the PSC, in an amount determined by the terms of the PSC. The MEEI in turn is responsible for payment to the Board of Inland Revenue (BIR), on the contractor’s behalf, its liability for all taxes or impositions measured upon income or profits arising from the operations. During the reconciliation process done for the EITI Report 2013, the Administrator noted that the amounts reported by the MEEI as paid to the BIR, and the amounts reported by companies as paid directly to the BIR, did not agree in all instances. Hence the reason for including PSC Audits in the EITI Report 2014 and 2015.

The following summarizes some of the information found in the latest EITI Report.
Under the terms of the PSC, MEEI has the right periodically to audit the costs and revenue for each PSC. The purpose of the audit provisions is to allow Government to confirm that the Government share of profits and revenues has been properly accounted for, and the timely conduct of these audits is important for this reason.

Below is the MEEI data provided of its position at 31 May 2016.

The Administrator recommended that a time bound plan be formulated and monitored by senior MEEI officials to bring these audits up to date, and that the level of resources required to carry out audits on a timely basis in the future should be addressed, since there may otherwise be a loss of revenue to the Government.

The MEEI provided a schedule showing amounts due for the calendar year 2015 from PSCs in respect of Administrative Charge, Surface Rental, Minimum Payment, Training Contribution, Research and Development Contribution (R&D) and UTT scholarship, and detailing amounts received for each of these items. In summary, this shows only small differences between amounts due and paid, with the exception of Niko Resources, which has withdrawn from operations in Trinidad and Tobago.

This monitoring is to be continued by MEEI. A review of prior periods should also be undertaken.

Each company which is a party to the PSC notifies the MEEI of its liability for Petroleum Profits Tax, Supplemental Petroleum Tax and other taxes and levies payable to the BIR. An internal settlement is made between MEEI and BIR, and BIR issues a receipt to each company for the amount of the settlement. The following table shows the difference between the amounts that the MEEI paid to the BIR with the amounts that the BIR reported being paid:

The MEEI comments that resources in the Audit Department have not increased in line with the award of additional PSCs, and that in February 2016 additional staff was brought in to assist. As a result, the rate of audit completion has improved and the backlog is being reduced.

Minister of Energy and Energy Industries Pledges Support For EITI Legislation

Former Minister of Energy and Energy Industries, Ms. Nicole Olivierre, pledged her support for EITI legislation at the launch of Trinidad and Tobago’s EITI Report 2014 and 2015 on 21 October, 2016.

She stated that, “For companies, the dynamics of disclosure is changing. With the new EU Accounting and Transparency directives, the Dodd-Frank Act in the US and Extractive Sector Transparency Measures Act in Canada, publicly listed companies are expected to reveal their tax payments to foreign governments. Therefore, the EITI dogma of disclosing revenue payments is already accepted as a norm. In this vein, our Government is progressive and is willing to enact changes to existing legislation to allow for greater disclosure by extractive companies. You would already know of the efforts by the Attorney General to amend the Income Tax Act so the Auditor General has access to data from the Board of Inland Revenue. I personally wrote to the AG asking that, when the Act is amended, the EITI is also included in the exemption so that we can have greater access to the information vital to this report. We are in the advanced stages of taking draft EITI Legislation to the Cabinet. Companies have already provided feedback on the draft legislation and the next steps would be review by the AG’s office, parliamentary debate and vote, and then proclamation.”

It should be noted that Tanzania, Liberia, Nigeria and Norway have successfully enacted dedicated EITI legislation, and Trinidad and Tobago will join their ranks shortly and help formalize the initiative in the country’s legislative framework.

The EITI Standard advises that Administrators (the audit firms selected to undertake reconciliation and produce the final EITI Report) make recommendations for strengthening the reporting process in the future, including any reforms needed to bring audit practices into line with international best practices. The following is a summary of the recommendations made by the Administrator.

• Auditor General Department to continue training to ensure department audits under international auditing standards.
• Government to promote legislative change to remove restrictions on disclosure of information to both Auditor General and TTEITI by enacting EITI legislation and amending Income Tax Act.
• Companies to provide confirmation letter from external auditor confirming information submitted is consistent with their audited financial statements.
• MEEI to computerise record keeping system for both production and revenue.
• MEEI to publish license register with all EITI requirements as well as model Exploration and Production license.

• Need for greater monitoring of amounts due and paid from PSCs to Government and more in-depth reconciliation and review of PSC Share of Profit and PSC tax settlement by MEEI.
• Greater transparency around royalty gas/ in-kind agreements between Government and SOEs.
• Mining sector regulation to be given priority as there needs to be greater efficiency in licensing operators with a time bound plan developed to grant outstanding licenses; independent verification of production to determine royalties payable and a process to map regional payments of royalties.

The TTEITI Secretariat will include the implementation of these recommendations in its work plan and will report on the progress made in our next EITI Report. More detailed information of the recommendations can be found in the full Report, which is available on our website: www.tteiti.org.tt.

Congratulations to the TTEITI Steering Committee and Secretariat on the publication of their fourth EITI Report which cover fiscals 2014 and 2015. In my opinion, the Report offers valuable information that will help unearth some of the truly important details of our country’s Energy Sector. The following are highlights, aspects and areas that need to be noted and addressed in the future.

Positive Aspects

• The compilation of data for two fiscal years i.e. 1 October 2013 to 30 September 2015 for the fourth Report helps bring the EITI Reports revenues data up to date.
• The section on the Corporate Social Responsibility from the State Enterprise Sector highlights the contribution to sustainable development by State Enterprises in the areas of sport, education and training, community development and the environment.
• The valuable contextual information about the extractive industries and their economic contribution to Government revenue. The reader-friendly format and the visual representation of key information were succinctly captured in the use of appropriate graphics, tables and diagrams. Two of my favourites are: i. Summary of Energy Sector Taxes Table, and ii. A snapshot of the Extractive Industries Legislative Framework diagram.

Areas to Address

• The urgent need for the MEEI to forgo their manual information system and embrace a computerized system for greater efficiency and accuracy of data.
• To continue the call for Midstream and Downstream sector companies to be part of the EITI initiative. The citizens of T&T deserve a more comprehensive Report examining the revenue contribution of all levels of the Energy Sector value chain going forward.
• The need to give legislative priority to the Extractive Industries Transparency Initiative Agency Bill that is currently being reviewed by the political directorate. The step toward EITI legislation is important for us to solidify our country’s continued commitment to the EITI initiative–and to avoid the continual need to sign MOUs–which hinges on the voluntary support of the extractive industries companies and other stakeholders.
• A more sustained and effective communications campaign is needed to encourage the citizenry to be actively engaged with the findings of EITI Report 2014 and 2015.

The publication of T&T’s Fourth EITI Report has brought to light what we, the citizenry, have observed over the past couple of years in terms of a contracting economy mainly due to the fall of oil and gas prices and lower production. Government has taken steps to address our new economic reality, most notably through the ongoing incremental removal of the fuel subsidy, expenditure cuts across all ministries, the controversial withdrawal from the Heritage and Stablization Fund, reform of the GATE programme, and so on. Apart from expenditure adjustment, the issue of the slow diversification of the economy remains an area of concern given the recent declining fortunes of the Energy Sector. The EITI Report has provided an important platform for us to examine all these pertinent issues, and now it is up the citizenry to demand, more than ever, that the revenue we earn from the Energy Sector is managed appropriately and in the best interest of national development.