P.M. discloses windfall tax agreement with B.N.E.

In April, Prime Minister Dean Barrow announced that his government would seek to institute a windfall tax on the oil industry in light of the internationally skyrocketing fuel prices, and in his budget presentation this week, the P.M. reiterated that government expected a larger share of the earnings. Those negotiations with Belize Natural Energy and other stakeholders in the industry began in June and today the Prime Minister held a press conference to report that the parties have reached an agreement.

Prime Minister Dean Barrow
“These negotiations have produced in effect two outcomes. We’ve had to ultimately do a differentiation between B.N.E. as the only current producer and the others. With B.N.E., I can say that we have agreement. With the others, we had our last meeting with them towards the end of last week and we left off from that meeting without having reached an actual agreement. The government side met subsequent to the last meeting with the oil industry and we have arrived at a final position. Anything that B.N.E. gets above ninety dollars per barrel is what will be treated as the windfall and that windfall will be split fifty/fifty between B.N.E. and the Government of Belize. With respect to the rest of the industry, which is not yet producing, there is a sliding scale that we have come up with. That scale kicks in at a threshold price of one hundred dollars per barrel and it moves from fifteen percent at a hundred and one to fifty percent at the upper end of the scale which I think kicks in at a hundred and ninety is it and thereafter.”

Cleavon Louis, Oil Expert, Trinidad and Tobago
“In terms of the computation of the petroleum surcharge, we start with gross revenues to the petroleum company and we allow for deductions for one, royalty at the rates that would be specified in the production sharing agreement and we allow for two, a deduction equal to the production share that is paid to the government under the production sharing agreement. The threshold price is used to separate the windfall revenue from revenue that would normally accrue to the company and that threshold price determines the base that would be used for the computation of the petroleum surcharge.”

The agreement with B.N.E. is only for the Spanish Lookout oil well. Should the company strike oil elsewhere, those new wells will come under the other industry agreement.