Home' Trinidad and Tobago Guardian : November 17th 2016 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 17 • 2016
The recent announcement by
Atlantic LNG of a 30 per
cent gas shortage and the
loss of some 75 cargoes of
LNG in revenue to the com-
pany and to the country was
shocking if only in terms of the extent of
the natural gas curtailment.
Atlantic CEO Nigel Darlow told an HSSE
conference last week that next year things
would get worse with production projected
to be down by 35 per cent.
"Atlantic is suffering very badly from big
gas supply shortages on a scale we have
never experienced before," Darlow said.
"Year to date 2016, Atlantic has suffered
on average over 30 per cent gas supply
shortage and there is no significant improve-
ment in the foreseeable future. In fact, 2017
is predicted to be worse still with overall
gas shortage close to 35 per cent. It is very
serious for us, equating to something like
75 LNG cargoes lost each year. Atlantic is
suffering the vast majority of gas supply
shortage in the country."
With a capacity of 15 million tonnes per
annum (mtpa) of LNG this means Atlantic's
annual production is now down to approx-
imately 10.5 mtpa.
Darlow added that the low gas supply
was impacting daily operations to the point
where Atlantic faced daily challenges in
continually turning turbines and compres-
sors "up and down and on and off."
He said: "That's not how they were
designed. We need to understand the impact
this is having on our operating envelope
and our maintenance requirements, on our
plant and equipment. We must ensure the
low levels of plant utilisation do not present
process safety risks which are not fully
understood and properly managed."
T&T's natural gas shortage started shortly
after the UNC came into office in 2010 and
was initially sold to the country to be due
to bpTT's heightened maintenance pro-
gramme which it began undertaking in 2010
due to the disaster in the Gulf of Mexico.
It was thought the maintenance programme
would last a couple of years and then pro-
duction would return to its 4.2 billion cubic
feet per day which is about the local demand
for the commodity.
In 2014, with increasing alarms going off
and concerns that the supply constraints
were not being resolved, the country's largest
gas supplier bpTT tried to clear the air on
the shortfall, saying it was not to blame but
instead pointing to both global factors and
government policy for the debacle.
It said the lower production that has
resulted in the gas curtailment is primarily
a result of a pause in new investment in
recent years by upstream producers, includ-
ing bpTT due to the culmination of many
factors which created an unfavourable invest-
The company said: "Factors such as the
global economic crisis, an unfavourable fiscal
environment and the expectations by state
enterprises that the industry would have
an oversupply of gas due to the cancellation
of downstream projects created a lot of
uncertainty which invariably affected invest-
It explained that maintenance activity
was necessary to ensure continued safe and
reliable operations and while it had con-
tributed to the gas curtailments, it was not
the primary factor.
"Measures have however been taken to
improve the attractiveness of investment in
the sector---such as improved fiscal terms
and more frequent bid rounds---and there
is clear evidence that investment is return-
ing. It will, however, take time to rebuild
upstream capacity," the company said.
It added that the challenge is to manage
a short-term period of supply shortfalls
while ensuring the investment climate con-
tinues to incentivise the search for and
development of more oil and gas.
"The issue is not whether there is enough
gas, but rather whether T&T has a robust
energy policy or road map that focuses on
the right structural and commercial terms
to ensure it attracts the level of investment
necessary to bring those resources into pro-
duction," bptt's release noted.
But what has brought us to this point?
A point where there seems to be a crisis of
confidence in the downstream sector, where
the President of Methanex Trinidad, Charles
Percy, lamented at the recent annual general
meeting of the Energy Chamber that his
company was suffering a 20 per cent gas
shortfall and he did not know when it would
Percy added there was a possibility that
plants could simply relocate from T&T.
Helena Inniss---who for more than a
decade was responsible for managing the
country's energy resources---told the Busi-
ness Guardian that the shortage of natural
gas was as a result of a lack of good decision
making and due to companies not keeping
their commitments to drill out wells.
In an email response Inniss: "This is a
planning problem.The issue is not a below
ground problem. There was a gas compet-
itive bid round in 2005/2006, the problem
is that most of the drilling never happened.
The drilling that was completed was suc-
cessful in discovering gas. The State was in
a position to negotiate, even though there
may have resulted in negative changes to
original terms and condition.
"A few of the companies bid terms and
conditions to get a foot in the door after
which they realised that the commercial
terms were overly generous. The problem
is we needed to address these issues early
and did not. One wonders how the problem
is being addressed now. We have waited a
bit too long and now we are being held over
a barrel and stand to lose more, I think,
than we would have if we had addressed
these issues earlier."
Inniss added that management of acreage
is about innovation.
"The question remains: should we keep
doing the same things, the same way, even
though it has become evident they are now
not working for us?" Inniss asked.
She said one should look at De Novo and
how Proman---owners of Caribbean
Methanol Company Ltd---once Clico
Methanol, has decided they are not waiting
on the State to supply their plants with gas.
Inniss noted they are investing in the
upstream and ensuring that their plants are
"Is this a model we wish to encourage?
It has worked in the case of BP and BGTT
but a lot depends on a company's invest-
ment philosophy, their competition for cap-
ital and their shareholders. These are issues
which need to be examined in planning for
the future," said Innis.
Conrad Enill---the Minister of Energy for
the period 2007 and 2010 or immediately
before the crisis---began has denied any cul-
pability in the issue. Enill said the blame
lay on the shoulders of the last government.
The former minister said when he was
minister there were discussions on an ongo-
ing basis with the upstream producers to
ensure that there was sufficient gas for the
He alleges that the heightened BP main-
tenance issues could not have been foreseen
and that the former government should
have moved more swiftly to deal with the
The shortage has led to lower government
revenue, lower production, company losses
in the downstream, a crisis of confidence,
and an inability to use the energy sector to
jump start the economy by using projects
to bring in direct foreign investment and
Enill said the country decided to change
its economic discipline and began borrowing
for recurrent expenditure. He said this has
caused the drop in GDP because it's not
sustainable and if there is a lesson to be
learnt it is that the country ought to recog-
nise that the energy sector is cyclical and
that countries should not spend more than
it can reasonably earn when prices are high.
T&T's natural gas production has fallen
from 4.2 bcf/d in 2010 to 3.4 bcf/d. It is
however expected to add an additional one
bcf/d by November 2017 when several proj-
ects including the bptt 575mmcf/d Juniper
field starts producing.
T&T is the largest exporter of methanol
in the world, the largest exporter of ammonia
to the United States and the sixth largest
exporter of LNG in the world.
Natgas shortage starts to bite
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