Enill spells out new Petroleum Tax structure

Piloting the measure, called the "Variation of certain Taxes Bill," was Minister in the Ministry of Finance Conrad Enill, who also announced the removal of a number of allowances in the petroleum sector.

Enill said Government would receive Supplemental Petroleum Tax (SPT) at prices above US $15 per barrel for land oil and US $16.50 per barrel for marine oil. If the price of crude dropped below US $15, there would be no SPT.

He said the SPT would now be calculated on gross crude oil income less royalty and overriding royalty. The restructure would also involve a removal of all other allowances and discounts for both crude oil and gas expenditure.

Enill said the following allowances would no longer be granted from January, 2004 — geological and geophysical allowance (which was 50 percent); exploration allowance (100 percent); investment allowance (40 percent); heavy oil allowance (100 percent); enhanced recovery (100 per cent); field discount allowance (20 percent); production discount (20 per cent).

Enill stated that the SPT rates would be reduced on the basis of the following framework: a) Where the price of crude falls below US $21 per barrel, the bands will increase from US $1 to US $1.50 and the rates will be reduced by 5, 4, 3, 2 percentage points.

b) Where prices are above US $21 per barrel, the bands will be retained and the rates reduced by 3 percentage points and will be applicable to both land and marine operations.

Enill said that the new structure would ensure that when oil prices were high, the Government got a proper share of the windfall profits and the companies would benefit from a built-in incentive when the prices were low.

Enill also announced that production-sharing contracts would be subject to SPT. He said the producer of condensate would be liable for SPT. This, he said, would correct the anomaly whereby condensate from a natural gas pipeline is generally subject to the SPT, but some of the condensate escapes the charge since it is recovered after the gas is sold.

He said Government had agreed to restructure the Petroleum Taxation Regime in nine key areas. He said the computation and assessment of the SPT on crude oil would be restructured. In order to correct the anomaly resulting from gas expenditure being included in the allowances claimed against crude oil income for SPT purposes and the purposes associated with the granting of the allowances, the SPT would be restructured in a manner which would eliminate these problems and also generate additional revenues.