Belmopan seeks bigger share of oil revenues
It may just be coincidence but following last week’s unprecedented budget briefing by the Financial Secretary and today’s petroleum presentation by the Ministry of Natural Resources, one gets the impression that a dangerous outbreak of transparency may have infected Belmopan. This morning for example, not only did the technicians at the Geology and Petroleum Department offer a thorough explanation of the oil situation in Belize, but both the Minister and Chairman of the Petroleum Advisory Board responded forthrightly to a wide range of sometimes penetrating questions.
So what did we learn? That Belize’s six million barrels of proven reserves are a drop in the ocean. Even Mexico’s huge oil reserves represent only one percent of the world total. But the geology of certain areas of Belize is similar to oil bearing parts of Mexico and Guatemala and this similarity holds great promise for future discoveries.
Perhaps more importantly we were informed that when it comes to government’s revenues from oil there is more to consider than just the seven point five percent royalties; that after all taxes, fees, and production sharing are tallied the take comes to much more. How much more is a matter of debate. Belize Natural Energy says the figure is around thirty-eight percent and while Minister of Natural Resources, Johnny Briceno, would not confirm this number, he made it clear that his government believes a figure of around fifty percent would be acceptable. The best method to claim this additional revenue seems to be the setting of a new rate of income or business tax on the industry. When asked by News Five’s Stewart Krohn if this special tax hike amounted to an act of bad faith, Petroleum Advisory Board Chairman Eamon Courtney made it clear that the government of Belize would some way or another have to get its fair share.
Eamon Courtenay, Chairman, Petroleum Advisory Board
?What we have today is the position that government believes that it is fair and just for the share to be around fifty-fifty. The tax situation in Belize today may not yield a fifty-fifty ratio. However, the point you make is fully respective. The production sharing agreement provides, Dr. Ram emphasised it, it provides that the income tax payable is the law as amended from time to time. So, no company can say to the government of Belize at any time that we invested in 1950 and the income tax was this in 1950 and you can?t change it, because that is what I expected. If you read your production sharing agreement, it says as amended from time to time. The matter is under study, no decision has yet been made. However, the philosophical basis is that there should be equity and fairness between the investor and the country. That?s the point, so it is not being unfair to any particular investor, nor has government taken any decision in that regard yet. But fairness must be had.?
Just how hard government intends to squeeze the oil industry is not clear. Responding to a question about rumoured friction between government and Belize Natural Energy, Minister Briceno said any differences were minor and just a matter of meeting some deadlines.
Johnny Briceno, Minister of Natural Resources
?As to our working with B.N.E., we have maintained good working relations with them from the time they started way back in 2002. But what happened is that last week there were two outstanding issues that we had to address. The first one was that moving from the production testing to actually production of oil, and secondly was the issue of the ten percent buy-in that we had asked for the P.S.A. We had a deadline that we should have finished those discussions and we had it as of Wednesday. Because we did not finish on Thursday, it was just?I was just advised that it was just in our interest to put it on record, which is what we did. We did send a letter to B.N.E. on Thursday that we need to settle on these outstanding issues and they need to stop the actual production. I met with them, along with Dr. Ram and our director Mr. Andre Cho, on Friday evening after the House meeting. And we basically settled the two outstanding matters, so we allowed them to continue to produce. What we have done then yesterday and then this morning, we actually finished the agreement and I have in writing now where what has happened is that they have agreed to the conditions that we?ve asked. They have given us our first cheque on royalty, just for royalty up to March third for a hundred and sixty-five thousand U.S. dollars and then we have the other, the one and a half percent production that we have?the tax that is going to be charged, all of that has to be worked out. But what they have done right now is pay the seven and a half percent royalty.?
Today B.N.E.’s Sheila McCaffrey confirmed that some contractual clarifications were made but that its relationship with Belmopan was cordial and amounted to business as usual. She confirmed that the company welcomed government’s decision to buy a ten percent interest in the Spanish Lookout field, a purchase that B.N.E. will finance interest free. As for the issue of taxation, oil experts tell News Five that while government is well within its rights to raise taxes on the oil companies, the long term development of a petroleum industry–including the costly infrastructure of tank farms, ports, and delivery systems–will require an environment condusive to large scale investment and above all a climate of fiscal stability.
