Gas equivalent of OPEC

Trinidad and Tobago, which provides the United States of America, for example, with its largest volume of liquefied natural gas, should examine not only OPEC’s earlier introduction of a special taxing arrangement but a natural gas or energy profits tax. And, in turn, in the same manner that OPEC revised upward the US$2.60 a barrel price which foreign oil companies had, arbitrarily, fixed for crude, and taxed the oil produced in their countries as though it was being sold at approximately five times the price, an Organisation of Gas Exporting Countries (OGEC) would take an equally searching look.

In other words, an Organisation of Gas Exporting Countries, if set up, would after close examination tax theforeign exploration majors as though they were selling the natural gas at an OGEC decided upon price. Natural gas, like crude oil which has been fetching prices in excess of US$130 a barrel, is a wasting asset. We have to bear in mind that crude oil prices, up to 1973, had been depressed for decades by foreign companies exploring and marketing crude at between some US$2.40 and US$2.60 a barrel! Today, the price of crude has more than doubled in the past 12 months because of “demand” and “factors affecting production” and supply.

Yet, in World War 11 (1939-1945), what with German U-Boats regularly sinking Allied oil tankers and the aircraft of the Luftwaffe attacking oilfields controlled by the Allies, somehow the price of crude managed to remain fairly constant. The rub, of course, was that before, during and long after World War 11, the massive profits of the international oil majors lay at the refining end of the petroleum industry.

It was this terribly unjust exploitation of Trinidad and Tobago’s crude oil which, for example, in 1937 saw oil workers being paid the dehumanising wage of eight cents an hour that had led to the June 19 Social Revolution headed by Tubal Uriah Butler. The oil companies operating in Trinidad and Tobago had earned considerable profits yet refused to pay decent wages. I quote from a speech from the Colonial Secretary, A.

Nankeville, made in the then Legislative Council in July of 1937: “In the past... we have had to satisfy labour with platitudes... Today... the oil companies are paying big dividends.

Even sugar is now to a considerable extent paying its way...” For the record the profits which had been declared by oil companies operating here at the time were in excess of 30 percent of invested capital. But I have strayed. Several OPEC countries, even within the first 12-month period following on the introduction of their clearly revolutionary approach to the taxing of crude produced by foreign oil companies operating there, did not restrict themselves to the initial tax system as noted earlier for the purpose of calculating overall tax revenue.

Indeed, Mr George Chambers, late Prime Minister, (he was then Minster of Finance) had pointed out in his 1975 Budget Speech, delivered on Friday, December 20, 1974, that some of the OPEC countries “reduced their posted prices but increased their royalty and tax rates and so enlarged their revenues from each barrel of oil produced”.

Trinidad and Tobago should seek to ensure that if a natural gas equivalent of OPEC is created that it is one of the founding members of this organisation.

Additionally, it should immediately draft and introduce in Parliament a Natural Gas Bill, based on the principles stated in its Petroleum Taxes Act, 1974, which (the Bill) would seek to have a natural gas or energy profts tax levied on gas producing companies operating here. While this would lead to an increase in the price of natural gas sold to the National Gas Company this is immaterial as the price would be passed on to the industrial consumers. Special arrangements could be made for household gas and natural gas for vehicles.

It may be, however, that Government may not be able to effect changes on its own to any royalty rate with respect to natural gas. Changed tax reference prices, though, can make up for that.

Meanwhile, instead of the current relatively low price paid for natural gas in Trinidad and Tobago and internationally there will be an appreciation in the real price for our and other countries’ natural gas. I see all of this, however, as contingent on the setting up of an Organisation of Gas Exporting Countries which I am suggesting in This Column for the second time.