Shaping a Brighter Future:

Comments on the 2016/2017

National Budget

POST BUDGET FORUM

4RD OCTOBER 2016

DAAGA HALL, THE UWI

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Table of content

Areas of concrete interventions

What is the state of the economy?

A few observations

Closing comments

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Overall Comments

Good job to bring total expenditures down to TT$52.2bn,

Would have like to see a push to bring it to TT$50 instead

of increasing it to TT$53.4.

Noticeable effort to try and raise further non energy

sector revenues. Returns are slow but the effort is good.

Huge error made in VAT forecast not acknowledged by

the Minister but mentioned here for clarity and

transparency.

Reviewing the fiscal regime in the energy sector so there

won’t be overkill in favor of the energy sector firms.

Eliminating the fuel subsidy even further.

Caribbean Gas Chemical Limited: However if we have agas shortage now, what will make us have more gas

then?

The US$10mn facility at the EXIM bank is long overdue.

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Overall Comments

Increasing capital expenditures byTT$400mn this FY, (although I think this is anerror given the ports roads and highwaysetc. mentioned).

Steps towards the separation of the SF intoa Heritage fund and a stabilization fund(imagine if this fund had US$30bn!!!! –what a horrific error).

Entrepreneurial talent grant – it should“born global”.

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Medium term fiscal framework

500

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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p

Figure 1: Trends in real gdp and natural gas production, 1996-2016

real gdp Natural Gas Production (mmcf/d)

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Table 1: New Gas projects expected between 2016 and 2020

Project Expected start

up

Notes Output

Trinidad Regional

Onshore Compression

2017 Funded by bpTT. Located at and operated

by ALNG. Early 2017.

200 mmscfd according to

various news reports for

around 2 years

Angostura Gas

Project Phase 3

2016 Will prolong the BHP Billiton Block 2c plateau

to 255 mmscfd plus until near the end of the

PSC contract which was recently extended

to 2026.

It will also help BHP to slow down the decline

in oil production.

Minimal since BHPBilliton

is already producing near

its maximum gas

processing capability.

EOG Joint Venture

with bpTT in the

Sercan field

2016 EOG operated development on acreage

licensed to bpTT and using EOG’s gas

processing facilities on their Toucan Platform

in an adjacent block (4b).

Peak production of

around 230 mmscfd for 4

plus years

Juniper 2017 BPTTs first subsea development in Trinidad

and Tobago

550 mmscfd to 590

mmscfd for 4 to 5 years

DeNovo in the Gulf of

Paria

2018 Acquired from Centrica and is set to

develop the Iguana field

80 mmscfd

bpTT Angelin Field 2019 Still awaiting final sanction, but based on

recent comments by bpTT President seems in

jeopardy!!

Between 200 and 250

mmscfd for about 5 or 6

years

Savannah exploration

well

Possibly 2017 Adjacent to the Juniper Development and

will piggy back on the Juniper facilities. Will

be drilled in 2016/2017.

Unknown.

Honourable mention to the Venezuelan owned Dragon field which has been quoted as having over 2.6 tcf of

resources, some of which could be made available for sale to Trinidad via an intercountry pipeline. No date or

volumes available to Trinidad and Tobago has been announced but it is possible that significant volumes of gas

could be accessible in the mid to long term. The Loran Manatee field has about 10tcf. But discussions on

monetizing this seem to be considerable stop-go issues.

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Medium Term Fiscal Framework

Expected price of oil of US$50 per barrel in 2017 and US$60 in 2018 and beyond.Budgeted oil prices of US$48 per barrel of oil and gas prices of US$2.25 mmbtu.

Was the Cobweb model logic taken into consideration?

Was the uncertainty in Europe considered

Was the slowdown in China and India factored into the Minister’s projections?

Table 3: Oil Prices Source 2016 2017 2018 2019 2020

Date of publication

WTI $/bbl EIA 36.91 48.08 51.53 64.24 71.12 May 17 2016

Crude Oil

Average, spot $/bbl WB 43.0 53.2 59.9 62.7 65.6 July 26th 2016

Crude Oil

Average, spot $/bbl IMF 43.0 50.6 53.1 54.4 56.3

August 18th 2016

Table 4: Gas Prices Source 2016 2017 2018 2019 2020

Date of publication

Natural gas, HH $/MMBTU EIA 2.58 3.09 3.62 4.01 4.43 May 17 2016

Natural gas US

market $/MMBTU WB 2.3 3.0 3.5 3.7 3.9 July 26th 2016

Natural gas US

market $/MMBTU IMF 2.4 3.1 3.0 3.0 3.1

August 18th 2016

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Medium Term Fiscal Framework

Expected price of oil of US$50 per barrel in 2017 and US$60 in 2018 and

beyond. Budgeted oil prices of US$48 per barrel of oil and gas prices of

US$2.25 mmbtu.

Table 5: Actual and Budgeted Price of Oil, 1991-2014

Actual Price (AP) Budgeted Price (BP) BPt / APt-1

1999/00 30.38 16

2000/01 25.98 22 72.42

2001/02 26.18 22 84.68

2002/03 31.08 22 84.03

2003/04 41.51 25 80.44

2004/05 56.64 25 60.23

2005/06 66.05 32.8 57.91

2006/07 72.34 50 75.70

2007/08 99.67 70 96.77

2008/09 61.95 55 55.18

2009/10 79.48 65 104.92

2010/11 94.88 75 94.36

2011/12 94.05 80 84.32

2012/13 97.98 80 85.06

2013/14 93.1 80 81.65

2014/15 62.2 80 85.93

2015/16 41.3 40 64.31

2016/17 48 116.21

Source: Author Compiled

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It may have made sense to forecast the

production level

Table 6: Oil and Gas

Production

Natural Gas Production

(mmcf/d)

Crude Oil Production Daily

Average (000's Barrels)

Sep-15 3810.0 75.9

Oct-15 3497.0 76.7

Nov-15 3762.0 75.7

Dec-15 3876.0 73.1

Jan-16 3804.0 74.4

Feb-16 3464.0 75.2

Mar-16 3499.0 74.4

Apr-16 3350.0 72.1

May-16 3428.0 73

Jun-16 3317.0 69.3

Jul-16 3314.0 66.3

Aug-16 p 3329.0 67.2

Source: Central Bank of Trinidad and Tobago

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Grow current revenues from TT$37 bn in 2016 to TT$$57bn in 2020.

Table 7: What an unnecessary build up of debt!

Central

Government

Total

Revenue

(TT$Mn)

Central

Government

Energy

Revenue

(TT$Mn)

Central

Government

Total

Expenditure

(TT$Mn)

Overall

Fiscal

Balance as

a Per Cent

of GDP

Net Public

sector Debt

Outstanding

(TT$M)

Central

Government

External

Debt

Outstanding

(TT$M)

2000-2001 11,972.8 3,689.1 12,069.6 -0.2 22,096.50 10,219.70

2008-2009 56,847.9 32,463.2 44,715.2 7.3 41,691.60 9,244.40

2009-2010 39,044.9 19,335.4 45,730.8 -4.8 43,533.90 8,924.00

2010-2011 47,862.9 22,700.6 49,674.9 0.1 48,100.20 12,016.20

2011-2012 49,500.6 27,169.8 53,602.5 -0.7 51,233.30 13,328.50

2012-2013 52,277.9 26,625.9 58,474.7 -1.3 61,661.90 11,677.60

2013-2014 58,760.2 26,603.6 62,668.6 -2.9 70280.90 15,694.80

2014-2015 57,378.4 28,111.3 59,820.5 -2.6 76,541.30 15,862.10

2015-2016 44.,900.3 18,642.3 52,200 -5.0 88,964.20 23,606.81

2016-2017p 47,400 .2 53,400 -3.9%

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Figure 2: The Impact of GATE

Conclusion The budget speech didn’t mention the TROC and Juniper

projects, are these off the radar? There were several others and I

will mention just two here a) the growth in government

expenditures was sharpest in the period 2000-2010 and the only

time that rapid increase occurred again was in the 1970s b) the

production of natural gas peaked in 2010, not 2011.

There are 6 ETeCK parks to be rolled out. Why are these being

kept back? What's the logic of spending TT$90mn on the Brian

Lara stadium and not on the ETeCK Parks?

We can talk about developing the manufacturing sector but

crime is a major deterrent of economic activity and at the current

pace the murder rate will come close to 500. According to TTPS

statistics, there were 420 murders in 2015, 403 murders in 2014, 407

murders in 2013, 379 murders in 2012, and 352 murders in 2011 out

of a population of approximately 1.3 million people.

By the end of FY 2016/17 we would have spent approximately

TT$5.2bn on CEPEP, cumulatively. What a persistent policy blunder.

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Conclusion

Transfers and subsidies remain too high a proportion of GDPand there were almost no modifications to CEPEP, URP etc.

Sandals: How has the hotel based sun, sand and sea model oftourism served Tobago in the last 25 years? More of the same?

The minister noted that the government is working on a systemof incentives to help small producers extract oil from marginalfields as there are around 3 billion stranded barrels of oil. This isa welcome development but why do we have to wait 1 yearfor these incentives. Didn’t we know oil production was slidingbefore? Seems like we are spending a lot of time re-findingfacts whilst the slide continues.

No real sense that the budget is part of a wider planningprocess, say the Vision 2030 agenda. Maybe in the 3rd budgetwe will see the dots connected.

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Conclusion No focus or discussion of

improved access to CARIFORUMor the stalled CARICOM CanadaFTA

No discussion of the EODB andGCI and a strategy to improvethe domestic business climate

VAT strategy backfired by aboutTT$6bn, i.e. the forecasted gainfell short by about 50%!

If we aim to balance the budgetby 2020 and in the interim we runfiscal deficits will real forecastedgrowth of 1%, 2%, 2%, 2% yieldthis desired result?

Table 8: Simple Ratings of Key

Indicators

Non-Energy

Revenue +

Expenditure

Control +

Current Account

Balance -

Fiscal Balance -

Unemployment

Rate -

Inflation +

Debt -

GDP growth -

EODB -

GCI -

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