Nov 2014 Financial News

Budget reworked at US$70—Howai

Nov 21, 2014

T&T’s 2014/2015 budget has been reworked with revenue calculated assuming a US$70 oil price, Minister of Finance and the Economy Larry Howai told CNC3 business reporter Judy Kanhai in an e-mail. T&T’s oil price is based on West Texas Intermediate (WTI) crude. “We have reworked our figures using a reduction in oil prices at an average of US$70 for the remainder of this year, and assuming that gas prices come down to US$2.75. With these numbers, we do not expect a reduction in revenues of more than two per cent. Prices have not gone to these levels but if they do, the effect on the Budget of this price structure will therefore be nominal,” he said.

The 25 per cent drop in the price of oil since July is still officially being offset by higher gas prices, both Howai and Energy Minister Kevin Ramnarine maintain. Increasingly reliant on natural and liquefied natural gas (LNG) for energy revenue, T&T gas prices have been fetching double digits per million British thermal units (mmBtu) in places like Asia. “While energy revenues are ahead of budget so far, I did indicate that oil revenues are expected to be lower on a year on year basis for this fiscal year. I did not say this at the time, but this assumes that oil prices do not go back over the US$80 benchmark this year,” Howai said. 

He added: “For the month of October WTI averaged just over US$84 per barrel and therefore was ahead of budget. Gas prices have also been averaging some 22 per cent more than budgeted. This resulted in October energy revenues being better than budget.” T&T’s budgeted gas price for 2014/2015 is US$2.75 per mmBtu.

No need for new Budget
At yesterday’s post-Cabinet media briefing, Howai said there was no need to bring a new budget for approval following the drop in oil prices since it not likely to have any major impact on the economy. He said the situation is being constantly reviewed and a range of responses is being developed depending on where prices end up.

The minister predicted that the price “would probably average out at somewhere between US$73 and US$80 a barrel.” Howai said if the oil price fell to US$73 “revenues will fall against budget by approximately two per cent, so we expect that we will come in about two per cent below budget, if that scenario occurs.” “At the present time we are ahead of budget because the natural gas price has exceeded the price which we have used in the budget,” he said. —With additional reporting by Richard Lord

Source:
Aleem Khan
Trinidad Guardian
Friday November 21, 2014

http://www.guardian.co.tt/business/2014-11-21/budget-reworked-us70%E2%80%94howai