Home' Trinidad and Tobago Guardian : November 27th 2014 Contents BG10 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 2014 • WEEK FOUR
Most of those
tary on the
fall in oil
prices make it appear that our
hydrocarbon industry consist of
only a homogeneous product, oil.
They only concentrate on one half
of the story, ie what will happen
to oil revenue.
Currently, gas prices are rising,
which is typical at this time of the
year with winter conditions in the
US. Additionally, we are selling our
gas at above market prices, which
is even more significant.
Also, too, we eagerly await the
outcome of the November 27
meeting of the Organisation of
Petroleum Exporting Countries
(OPEC) to see if there will be an
implementation of supply side
policies to support falling oil prices.
They normally say that the best
illustration is the simplest. I will
attempt to make this example as
simple as possible to illustrate what
is currently happening with our
Assume we have a fruit stall sell-
ing two fruits only: mangoes and
pineapples. Mangoes are $5.00
each, and pineapples are $30.00
each (they are extremely large and
sweet). We sell 170 mangoes and
5 pineapples, so that revenues are
$850 from apples and $150 from
pineapples, for a total of $1,000,
split in a 85 per cent to 15 per cent
ratio (this is the ratio of our gas/oil
Assume the price of pineapple
falls by 30 per cent to $21.00, and
there is a concurrent 20 per cent
rise (this is incidentally the rate at
gas prices are rising) in apple prices
Assuming inelastic demand for
fruit, the quantity demanded does
not change. Revenue would now
be $1,020 from apples and $105
from pineapples, for a total of $1125,
an increase from before.
In short, and as simplified as
this example may be, this is what
is happening in our energy market.
Using basic economics and math-
ematics, I have attempted to pro-
vide a simplistic analysis of our
Most analyst agree that this
volatility cannot last for a pro-
longed period, as it would make
for a turbulent investment climate.
We should do well to keep calm
and allow the dust to settle.
EDITOR S NOTE: On the face
of it, this analysis seems reasonable,
but there are several issues with it:
• Oil and refined products com-
prise about 33 per cent of T&T s
energy export, according to the Energy Chamber;
• LNG exports account for another
40 per cent of energy exports and
methanol, ammonia, urea etc account
for the balance;
• These percentages are not cast in
stone as they vary from day to day based
on the prevailing world market prices;
• It has become very difficult to esti-
mate the revenue derived from LNG
because all of exports of the commodity
go to the offtakers under contract, but
some of those cargoes are then sold in
the spot market.
On Tuesday, the LNG company said
in response to questions from the Business
Guardian: "Atlantic sells all our product
by contract and not on the spot market.
Our off-takers may sell on the spot mar-
ket, but we do not have sight of those
As well, according to Atlantic, some
48 per cent of T&T s LNG exports from
Trains I, II and III now go to South
American markets, where the level of
transparency with regard to the price of
cargos is very limited.
Included, at left, is a chart of cargo
destinations for Trains I, II and III
from January to the end of October:
Atlantic also said: "Please note that
this does not include Train 4 destinations.
For Train IV, we don t have sight of that
"We would also want to add that while
there has been some softening of LNG
prices recently, the average 2014 prices
we have seen have been strong. The out-
look for LNG prices remains robust.
Allow the dust to settle
in the energy markets
Jan-Oct 2014 LNG
exports from T&T
Dominican Republic 1%
It has become very difficult to estimate the
revenue derived from LNG because all of
exports of the commodity go to the offtakers
under contract, but some of those cargoes are
then sold in the spot market.
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