Legal Insights

Principal Petroleum Legislation, Licencing Framework and State Authority for Upstream Petroleum Operations

The petroleum industry, which is Trinidad and Tobago’s largest and most important industry is governed principally by the Petroleum Act, Chap. 62:01 (“the Act”) and the Petroleum Regulations, Chap. 62:01 (“the Regulations”). The Act and Regulations together establish a regulatory framework for the grant of Exploration and Production Licences (“E&P Licences”) and Production Sharing Contracts (“PSCs”) for the conduct of upstream exploration and production operations, including activity on land and in the submarine areas beneath the territorial waters and the continental shelf of Trinidad and Tobago. The Act and Regulations also regulate several other types of petroleum operations apart from upstream exploration and production. The term “petroleum operation” is very widely defined by the Act and no petroleum operations may be conducted without the appropriate regulatory approval. Recently, the penalties for failing to obtain the appropriate regulatory approval under the Act were significantly increased. The primary regulator of the industry is the Minister of Energy and Energy Industries (“the Minister”) who acts through the Ministry of Energy and Energy Industries (“the MEEI”). Other regulatory requirements and regulatory bodies will however, inevitably become relevant to persons engaged in petroleum operations depending on the specific activities engaged in.

Private Petroleum Rights – Licences and Oil Mining Leases

In Trinidad and Tobago, the original grants of the fee simple title to real estate by the State included all sub-surface rights not expressly reserved by the State. This gave rise to private petroleum rights being vested in private persons. Fee simple owners sometimes dispose of their surface rights separately, but retain their private petroleum rights. As a result, private petroleum rights may not always necessarily be vested in the same person holding the surface rights. Where a person wishes to carry out exploration and production operations involving private petroleum rights, he must obtain an Exploration and Production (Private Petroleum Rights) Licence from the Minister as well as the consent of the owner of the private petroleum rights. Arrangements with private owners are normally embodied in the form of private oil mining leases which provide for the payment of rents and/or royalties.

Public Petroleum Rights – Licences and Production Sharing Contracts

Unlike with private petroleum rights, a person interested in exploring areas that are subject to public petroleum rights need only deal with the MEEI as these rights are vested in the State. Public petroleum rights exist on State Lands, private lands where the sub-surface rights have been reserved to the State and all offshore marine areas. Petroleum activities over areas that are subject to public petroleum rights are carried out either under the authority of an Exploration and Production (Public Petroleum Right) Licence (“Public E&P Licence”) granted by the Minister or by the Minister entering into a PSC with the contractor. The President exercises public rights of ownership in land and minerals on the State’s behalf and is therefore also made party to Public E&P Licences and PSCs though, under the Act, the Minister is responsible for determining the areas to be made available for petroleum operations. The State, through the President, may decide that the grant of any Public E&P Licence or PSC for such areas identified by the Minister, be made on a competitive bidding basis. Competitive bid rounds are now the norm in the case of offshore marine areas and were recently utilized for certain onshore acreages. Although not the normal course, PSCs have sometimes been awarded by the Minister “out of round”. This most commonly happens where there has been a bid for a block which, for whatever reason, has not been accepted by the MEEI (usually due to the bid not meeting the MEEI’s internal minimum benchmark) and the bidder is invited to submit a revised bid out of round. Though the traditional method of granting rights to explore for and win petroleum is by way of the grant of an E&P Licence (and there is a still a substantial amount of producing acreage that is governed by this regime), the modern trend is towards the use of PSCs in respect of marine acreage.

Other Petroleum Related Licences

The Act and Regulations also contemplate the regulation of petroleum operations other than upstream exploration and production and the Regulations provide for:

(1) Refining Licences;

(2) Liquefaction of Natural Gas Licences;

(3) Pipeline Licences;

(4) Transportation (other than by pipeline) Licences;

(5) Marketing Licences;

(6) Petrochemical Licences; and

(7) Compressed Natural Gas Licences.

State Petroleum Company

Petroleum Company of Trinidad and Tobago Limited (“Petrotrin”) is the state-owned company most actively involved in upstream operations. Where a competitive bid round involves state enterprise participation (which is not always the case), the MEEI will normally name Petrotrin as the state petroleum company to be involved in the development of the relevant block. Petrotrin does not have a regulatory role in offshore blocks (unless it is sub-licensing a marine acreage which it holds under an E&P Licence) which will be primarily regulated by the Minister and the MEEI.

Petrotrin’s regulatory function tends to be limited to the petroleum acreage with which it was vested pursuant to the Textrin Vesting Orders and Petrotrin Vesting Act, Chap. 62:07 (this acreage was previously purchased by the State from Texaco in 1985 for good and valid consideration and then transferred from the State to Petrotrin) or which it holds pursuant to an E&P Licence from the State. This acreage is primarily land based but there are some marine based acreages. Although grants by the State for upstream exploration and production are done either through E&P Licences or PSCs, Petrotrin (with the consent of the Minister) utilizes a variety of “hybrid” arrangements when parceling off acreage to operators, including sub-licences, farm-outs, lease operatorships and incremental production service contracts.

Apart from upstream operations, Petrotrin also owns and operates the country’s only petroleum refinery.

Dispute Resolution with Trinidad and Tobago Government

In our experience, the MEEI maintains a very open relationship with petroleum operators and where there is an issue will normally be amenable to open discussion and non-contentious settlement of the matter in dispute. There has never been, as far as we are aware, any government acquisition in Trinidad and Tobago that can be properly described as unilateral expropriation of petroleum assets nor are we aware of any disputes being submitted to formal arbitration under a PSC.

E&P Licences and PSCs normally provide for multiple dispute resolution options including consultation, mediation, expert determination and/or arbitration which generally specify Trinidad and Tobago as the seat and its laws as the governing law. The UNCITRAL Rules are the preferred arbitral rules of the Minister and these are normally utilized in the dispute resolution provisions in PSCs. Certain disputes between the Minister and E&P Licensees that cannot be settled amicably are required under the Act and Regulations to be settled via arbitration proceedings in accordance with the Trinidad and Tobago Arbitration Act, Chap. 5:01 and in no other way. However, disputes are virtually always settled by negotiation and discussion.

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