Home' Trinidad and Tobago Guardian : July 30th 2015 Contents The T&T government has
lost more than $100 million
during this last fiscal year
in opportunities for higher
netback payments as some of the Atlantic LNG
partners have not been sending cargoes from Point
Fortin to the highest priced markets.
Investigations by the Business Guardian revealed that while the
three major shareholders of Atlantic LNG, namely bpTT, BG and
Shell are operating within the strict terms of their contracts, their
actions are significantly hurting the country s revenues.
In fact, the matter is so bad that Energy Minister Kevin Ramnarine
has confirmed he has been forced to write to at least one of the
companies on the issue.
He told the Business Guardian in an email: "We have been mon-
itoring the netbacks for all contracts for the last year. In the case
of one Atlantic partner there has been a significant drop in the
netback. I wrote to the company expressing the concern of the
The Business Guardian has learnt that the company Ramnarine
wrote to was Royal Dutch Shell which announced in April that it
was acquiring BG for US$70 billion. If all the regulatory bodies
approve the acquisition, Shell would eclipse bpTT as the largest
single shareholder of Atlantic LNG and the country s second largest
natural gas producer. It will also become a player in the deepwater
as a member of a consortium with operator BHP Billiton.
The Business Guardian questioned Shell on the issue and the
company was careful to neither deny the allegation nor to confirm
it. Instead Shell insisted that it was operating within the terms
and conditions of its contract with the Government.
In an emailed response, Shell said: "Shell does not share specific
details about commercial deals. However, Shell is satisfied that we
have met all of our regulatory and contractual obligations for the
sale of LNG from Atlantic LNG, T&T. Beyond this, it would not
be appropriate to discuss matters involving our commercial part-
Shell has sent a number of cargos to Chile where natural gas
prices are not indexed to oil but instead pegged to the US Henry
Hub benchmark price, a market that is depressed and has one of
the lowest price, explained credible sources, who requested anonymi-
ty because they were not authorised to speak on this sensitive
The way the contracts work in Atlantic, the companies in the
main have fixed, long-term contracts in different markets, but they
are able to divert cargoes to other markets where they can get a
higher price. The upside is shared in a pre-agreed formula with
With some of the traditional markets like the US attracting prices
at the Henry Hub at less than US$3 per mmbtu, the more lucrative
markets like the Far East are being sought after. However the inter-
national companies like Shell, BG and BP have global production
and markets and decisions about where to deploy LNG may depend
on where they are contractually bound to sup-
ply or what works best for them rather than
what benefits T&T.
Ramnarine said since writing to the com-
pany, they have responded and are holding talks with the Government
which the Minister of Energy anticipates "will be successful."
He said: "The ministry takes very seriously the business of value
being returned to the country. We treat companies fairly and we
expect in return they would treat the country fairly.
"When this does not happen we will intervene as we have done
in the past."
For its part, BP is also denying that it is undercutting the country s
It said in an emailed response, "BP s LNG shipments from T&T
are part of the company s global LNG portfolio, which is managed
carefully to ensure compliance with our local and global gas con-
tractual commitments and, in so doing, we continue to generate
value for the company and T&T. However, we would not comment
on any specific commercial arrangements."
BG argued that T&T is one of the key supply sources for BG
Group s global LNG portfolio and its LNG deliveries are managed
in accordance with our local and global contracts.
"Our investment in the LNG business in T&T ensures we bring
value not only to the company and other shareholders of Atlantic,
but also to the country. BG T&T has been active in the energy
sector in T&T since 1989 and is a key gas producer in the country.
We supply natural gas to the domestic market and to Atlantic for
BUSINESS GUARDIAN www.guardian.co.tt JULY 30 • 2015
Important news last week, from a place that s quickly
becoming the world s focus for high-impact oil and
That s Iran. Where government officials said they
are on the verge of revolutionising the country s petro-
leum sector. Which could provide big profit oppor-
tunities for foreign investors.
Iran s deputy oil minister for commerce and inter-
national affairs, Hossein Zamaninia, told Reuters that
the country has already identified 50 oil and gas projects
it will offer for bids. With the government pegging
the value of these properties at US$185 billion.
And officials are hoping to get these fields licensed
out soon. With Zamaninia saying that the government
plans to offer all of the blocks over the next five years.
Perhaps most importantly, Iranian officials say they
have designed a new petroleum contract structure for
international investors. Which they are calling the
"integrated petroleum contract" or IPC.
Officials said that the IPCs will last for a term of
20 to 25 years. A substantial improvement over the
older, shorter-term contracts which have been a major
stumbling point for the world s oil and gas compa-
Few other details on the IPC structure have yet been
provided. But the government noted that the new
contracts will address "some of the deficiencies of the
old buyback contract".
Deputy Minister Zamaninia said that full details on
the new contracts will be announced within the next
two to three months. Along with specifics on the fields
being offered by the government for bids.
Of course, all of this is predicated on the lifting of
Western sanctions against Iran which is still not a cer-
tainty. But if and when the country does open for
investment, it appears there will be substantial prizes
to won. Reuters
State-owned Mexican oil company Pemex reported
on Tuesday losses of US$5.2 billion in the second
quarter, due mainly to lower petroleum prices.
It said prices of Mexican crude were 44 percent
lower than in the same period a year ago.
In the first quarter of 2015, Pemex lost US$6.5 bil-
The new losses---84.6 billion pesos in local cur-
rency---far surpass those of the second quarter of
2014, which came in at 52.3 billion pesos.
Pemex is Mexico s largest company and its per-
formance is critical to the health of state finances.
The company has been reporting heavy losses since
2013 mainly as a result of slumping oil prices.
In an earnings report released Tuesday, the company
said the price of a basket of Mexican oil types used
for export fell from US$97.09 a barrel in the second
quarter of 2014 to US$53.95 a barrel in the same
period of this year.
Last year Pemex cut spending by 11.5 per cent,
suspending such projects as one for deep-water
In 2014, President Enrique Pena Nieto ushered in
a historic constitutional reform that opened up the
Mexican oil sector to foreign money.
The goal was to lure capital that would reinvigorate
the sector and stimulate Mexican economic growth.
The project got off to a disappointing start, how-
On July 15, Mexico held an auction of deepwater
offshore oil blocks in the Gulf of Mexico. But with
oil prices still low and Iran about to return to the oil
market, demand was slack and only two of 14 blocks
that were up for auction attracted bids large enough
for deals to be sealed. AP
Govt losing $100m
in netback payments
US$185 billion in
new oil, gas projects
up for grabs
Q2 loss of US$5.2b
What is netback?
Under the agreements with the international companies, the
Government gets a great deal of its revenue in what is called
the netback model. This essentially means that you start at the
final price that the LNG is sold at and work your way backwards.
In the case of, say, one million British thermal unit of LNG, if
that is sold in Japan for US$10 then that price is the final price
and you then have to subtract from that price the cost of trans-
porting the LNG, the cost of insurance. That then leads you back
to Atlantic LNG. You then have to take away the cost of pro-
cessing one million British thermal unit which is paid to Atlantic
as a processing fee.
Then you take away the pipeline tariff that is paid to the NGC
for use of its pipeline to transport the gas from the wellhead
offshore Trinidad to Atlantic.
After those costs are removed, you get what is called the
wellhead price or the netback price.
It is on the netback price that the Government applies its
taxes and so the higher the market price, the higher the netback
price and the higher the tax take.
Links Archive July 29th 2015 July 31st 2015 Navigation Previous Page Next Page