An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

To at­tract in­ter­na­tion­al in­vest­ment, the lay­er of tax­es that en­er­gy com­pa­nies are faced with needs to be ad­dressed.

 This was the ob­ser­va­tion by Touch­stone Ex­plo­ration’s pres­i­dent and CEO Paul Baay, as he spoke to the Busi­ness Guardian at the En­er­gy Con­fer­ence this week at the Hy­att Re­gency.

Baay said the en­er­gy in­dus­try’s max­i­mum tax rate is 55 to 60 per cent, while petro­chem­i­cal and every oth­er com­mer­cial tax rate is a max­i­mum of 35 per cent.  

 The sup­ple­men­tal pe­tro­le­um tax on oil, he not­ed, is a dis­in­cen­tive to ex­plore for the com­mod­i­ty in this coun­try and that must be dealt with by the rel­e­vant au­thor­i­ties.

Baay de­scribed it as be­ing an easy fix to get more in­vest­ment from in­ter­na­tion­al en­er­gy com­pa­nies.

On the is­sue of the bu­reau­cra­cy in T&T, which the CEO has spo­ken about tire­less­ly with a smile on his face, the Touch­stone pres­i­dent said “The bu­reau­cra­cy has changed im­mense­ly in the last two years.  It’s been stream­lined and there’s a will­ing­ness to get things done.”

Baay urged the gov­ern­ment to wrap their minds around hav­ing a small­er piece of a much larg­er pie ver­sus a very big piece of a shrink­ing pie.

“Right now, the in­dus­try’s shrink­ing. We have to re­mem­ber that in 2027 and 2028, some big projects are com­ing on stream, the Man­a­tee Project and all the rest that are go­ing to move that pro­duc­tion up. I don’t think it’s sort of as dire as every­body thinks. I be­lieve you just have to fig­ure out how to get past the next two years and then how you get be­yond that. Some chal­lenges, but it’s still an un­be­liev­able place to do busi­ness. I wouldn’t trade it for any­thing, but there is lots of room for im­prove­ment,” he said.

Touch­stone pro­jec­tion 2025

Baay said 2025 is go­ing to be a great year for the Cana­di­an en­er­gy com­pa­ny, as it is go­ing to be drilling sev­er­al wells to fill its gas fa­cil­i­ty.

He said that the big deal for the en­er­gy com­pa­ny was the agree­ment to ac­quire Shell Trinidad’s Cen­tral Block Ltd (STCBL) last De­cem­ber, from BG Over­seas Hold­ings for US$23 mil­lion in cash, pend­ing reg­u­la­to­ry ap­proval.

“Touch­stone is just in the midst of clos­ing that deal and it should close in the first half of this year. Re­al­ly, what that does is it gives us an­oth­er gas fa­cil­i­ty, but it’s hooked in­to both the petro­chem­i­cal plants and the LNG fa­cil­i­ty. It makes our mar­ket much bet­ter in what we do. Quite frankly, it makes us the biggest on­shore gas play­er, which is what we’ve al­ways strived to do,” he said.

In a re­lease in De­cem­ber, Touch­stone said that the Cen­tral Block cur­rent­ly pro­duces ap­prox­i­mate­ly 18 mil­lion cu­bic feet per day (MM­cf/d) of nat­ur­al gas and 200 bar­rels per day (bbls/d) of nat­ur­al gas liq­uids, trans­lat­ing to about 3,200 bar­rels of oil equiv­a­lent per day (boe/d). Her­itage Pe­tro­le­um Com­pa­ny Ltd holds the re­main­ing 35 per cent in­ter­est in the Cen­tral Block.

The ac­qui­si­tion in­cludes STCBL’s four wells in the Cara­pal Ridge, Bara­ka, and Bara­ka East nat­ur­al gas pools, which pro­duce a mix of nat­ur­al gas and nat­ur­al gas liq­uids.

Ex­plain­ing why the en­er­gy com­pa­ny went in this di­rec­tion, Baay said it had been in ne­go­ti­a­tion with Shell and talked to them about it al­ways be­ing of in­ter­est.

“It con­sol­i­dates our po­si­tion there and al­lows us to bring any new gas we find down there. That plant is a lit­tle unique in that it takes all the liq­uids out. You get the liq­uids as well as the gas be­fore you send it to the mar­ket. Shell’s main fo­cus here is off­shore. 

“They haven’t fo­cused a lot of tech and cap­i­tal on that prop­er­ty. It al­lows us to go in as a small­er com­pa­ny. It may not meet Shell’s hur­dles, but it’ll meet our eco­nom­ic hur­dles.  So, we can then go in and drill that up and bring that up to pro­duc­tion,” Baay dis­closed.

On the top­ic of ac­qui­si­tions, Baay was asked why Touch­stone Ex­plo­ration’s at­tempt to ac­quire Trin­i­ty Ex­plo­ration and Pro­duc­tion fell through. Baay said the long and short is that a lo­cal com­pa­ny out­bid them.

“Touch­stone didn’t see the val­ue that they saw.  We walked away and Lease Op­er­a­tors Lim­it­ed picked up the as­set. I mean, we would have liked it, but we just didn’t see the val­ue that they saw. So, it was pret­ty sim­ple. We got out­bid,” he said.

In May 2024, Touch­stone dis­closed in a news re­lease an agree­ment be­tween the boards that the ac­qui­si­tion rep­re­sent­ed an im­plied val­ue for Trin­i­ty of ap­prox­i­mate­ly US$30.1 mil­lion, based on the clos­ing Touch­stone share price as of April 30, 2024.

Fast for­ward to Ju­ly 17, the Trin­i­ty board re­ceived an un­so­licit­ed, con­di­tion­al, non-bind­ing, in­dica­tive pro­pos­al from Lease Op­er­a­tors, a pri­vate com­pa­ny in­cor­po­rat­ed in T&T, owned by the Brash fam­i­ly and run by Charles Brash and his son An­tho­ny.

The Lease Op­er­a­tor pro­pos­al, which was for all of Trin­i­ty’s shares, was a cash of­fer, with the price of 68.05 pence per Trin­i­ty share. That val­ued the oil com­pa­ny at £26.5 mil­lion (about US$34.18 mil­lion).

About Touch­stone’s fi­nan­cials for this year, Baay said there would be a sig­nif­i­cant in­crease from last year,

How­ev­er, he said the one thing the com­pa­ny looks at as dis­ap­point­ing is the Cas­cadu­ra fa­cil­i­ty in the Rio Claro field, which re­port­ed a 23 per cent de­crease in av­er­age pro­duc­tion be­tween the first and sec­ond quar­ters of 2024, with nat­ur­al de­clines from the Cas­cadu­ra field be­ing the pri­ma­ry cause.

Baay not­ed that the de­cline was not un­ex­pect­ed, as these big wells, when they come on stream can be what is called a flush pro­duc­tion, and then they start to lev­el out.

“The com­pa­ny is see­ing that now. If you look back at our No­vem­ber, De­cem­ber, and Jan­u­ary pro­duc­tion, we’re start­ing to see those lev­el out. It is lev­el­ling out at a low­er place than what we ini­tial­ly thought. What that means is we’re go­ing to have to re­al­lo­cate our cap­i­tal be­cause we’re get­ting less cash. So we’ll have to re­al­lo­cate our cap­i­tal around a lit­tle bit. It’s noth­ing re­al­ly dra­mat­ic. It’s just that fine-tun­ing that we have to do on where we’re go­ing to spend our mon­ey,” he said.

He made it clear that Cas­cadu­ra is still a world-class as­set, and noth­ing has changed there for sure.

“The oth­er places that we’re look­ing at drilling now that we have the Shell fa­cil­i­ty, the oth­er nice thing would be we’d be able to ramp up our Co­ho pro­duc­tion be­cause it comes down in­to Shell and there were some ca­pac­i­ty con­straints. But when you own it, you can make room for things,” Baay added.