T&T: Peak Oil – less Govt revenue

Governments like ours, that depend generally on taxes from Big Oil for their revenues to support the county’s economy, then have to give more and more incentives to encourage Big Oil’s exploration. Countries with the Dutch disease are caught in a Catch 22 situation since the exploitation of and returns from the natural resource are the unique drivers of the economy.

The revenues due to government, that reflect the new exploration and increased production costs funded by further incentives, will be consequently reduced. Peak Oil/Gas is reached then for such governments when change in revenue from taxes etc, with respect to corresponding change in production (i.e. marginal returns to government on production) is inconsequential.
What this means is that the remaining petroleum to be explored may be un-commercial or does not exist physically. Hence the then current proven reserves would be all we have, subject to technological or economic change.

This marginal revenue will tend to increase because of technological efficiencies, large sizes of unit field discoveries and/or increases in the selling price of the resource. It decreases because of the increased unit costs due to actual exploration, production and risk premiums charged by Big Oil, also revealed in more incentives so as to maintain profits. Recall Lord Browne of BP that that company is now more concerned about the bottom line.

Hence it is not good enough for the Prime Minister to say simply that the Ryder Scott report indicated that we need to go looking for more gas. We have, also, to get an indication of the expected marginal returns to the Government with respect to production compared with what we got in the past – a definition of where we are on the marginal-returns depletion curve for natural gas.

Trinidad Express