Home' Trinidad and Tobago Guardian : August 24th 2017 Contents AUGUST 24 • 2017 guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG7
Mottley to take key role in gas negotiations
Former Finance Minister Wendell Mottley
is to lead government's team to negotiate a
new natural gas contract with the owners of
Atlantic LNG Train 1.
Atlantic's gas contract comes to an end in
2018 and the government and Atlantic's share-
holders, BP, Shell, NGC, Summer Soca LNG
Liquefaction SA (a subsidiary of the China In-
vestment Corporation), are due to commence
negotiation for a new contract.
Cabinet sources said the government's
team will include Mottley, technocrats from
the Ministries of Energy and Finance, the of-
fice of the Attorney General, the National Gas
Company (NGC), and consultants from Poten
Poten and Partners is the company that pro-
duced the Natural Gas Master Plan in which it
raised significant issues with respect to LNG
and the way forward.
It said that post-expiry of the existing con-
tracts, any future gas supply should be routed
through NGC to provide an efficient route for
government to maximise its take from the LNG
This is likely to be a major sticking point
in the negotiations as Shell and BP---the two
largest owners of Atlantic LNG Train 1---sell
gas directly to Atlantic LNG thereby bypassing
A change, as proposed by Poten and Partners,
is likely to impact their bottom line although
it is may result in more revenue for the NGC
and, by extension, the Government.
Poten and Partners said: "Poten's view is that
post-expiry of the existing contracts any future
gas supply should be routed through NGC to
provide an efficient route for the Government
to maximise its take from the LNG value chain."
It rationalised this by saying such an expand-
ed role would not compromise the ability of
the sector to provide more attractive prices to
upstream in order to support new develop-
ments as NGC would be able to provide LNG-
linked pricing to upstream suppliers if this was
deemed necessary to support new upstream
It could also provide gas pricing to upstream
linked to a basket of LNG, methanol and am-
"Rather than maintaining the status quo
of direct gas supply contracting between up-
stream and Atlantic, Poten's view is that, on
expiry of the existing LNG contracts, NGC's
wholesale role should be expanded to include
Atlantic, ie for new gas supply to Atlantic. NGC
would buy gas from upstream and sell it to or
toll it through Atlantic," the master plan read.
"NGC would also continue this wholesale
role for supply to methanol and ammonia. Al-
though this is very much an interventionist
approach, Poten's view is that this approach
is likely to maximise government's overall take
from the sector in the future, due to the signif-
icant economic rent that is captured by NGC
in the midstream and ultimately distributed
back to government as a dividend."
In the Natural Gas Master Plan, Poten and
Partners told the government that NGC should:
• Continue to act as the monopoly buyer
of gas from upstream, gas transporter and
wholesale supplier of gas to the methanol and
• Expand this role to include gas supply to
LNG on expiry of the existing gas supply/LNG
• Be forced to divest its non-core assets, eg
• Be forced to automatically dividend back
surplus funds to government.
• Provide the necessary analysis and recom-
mendations to government/ministry on future
downstream gas allocations, with the govern-
ment/ministry making any final decisions.
In terms of LNG marketing, Poten's view is
that continuing with the negotiated contracts
model is unlikely to provide the best value for
It urged having a process to ensure "that the
best price is realised for sales over the period
that is covered by a tender. It is also gaining
increasing traction in the LNG business as
the number of market players, shipping / re-
gasification availability, and overall liquidity
increases. As such, Poten's view is that this is
the route that T&T should follow for future
LNG sales to avoid the issues under the existing
It noted that such a tender process can be
done via the NGC's subsidiary TTLNG which
has already accumulated substantial experi-
ence in short-term LNG sales via its Train 4
"It should be relatively straightforward for
NGC to utilise this expertise to oversee any
future tendering process for sales from Atlan-
tic. Again, there would need to be guidelines
in place to manage this, under the ultimate
oversight of government/ministry,"the report
For the first nine months of the fiscal year, Finance
Minister Colm Imbert received significantly
higher revenues from LNG than was budgeted.
According to a Cabinet Note obtained by the
Business Guardian, from October 2016 to June
2017, the average price for LNG was US $3.45
This is 53 per cent higher than was budgeted.
In the 2017 budget presentation, Imbert predicated his rev-
enues on a natural gas price of US $2.25 per mmbtu.
He told the Parliament, "The budgeted revenue for 2017 is
predicated on an oil price of US$48 to US$50 and a gas price of
$2.25 per mmbtu. It should be noted that our assumed oil price
is below the International Monetary Fund (IMF) forecast of
US$50 per barrel for 2017, and lower than the current oil price
forecasts made by the World Bank, USEIA, IEA, and so on."
Last week, the Business Guardian showed that the average
price for T&T's basket of crude exceeded US$50 bo/d and,
therefore, the minister is expected to tell Parliament that his
receipts from the energy sector was much better than was
According to the Cabinet Note, "LNG prices are as a result
of the prices in the receiving markets as well as based on con-
tractual arrangements for each Train in production at Atlantic
LNG. As such, the prices will fluctuate based on the final price
at the destination market."
This effectively means that it is likely with divergence of
cargoes that the LNG receipts would be higher than the average
US $3.45 per mmbtu.
Revenue from LNG is as much a function of production as
it is of price. When one looks at the production of natural gas
at the time of presenting the budget in September, its daily
average was 3.171 bcf/d, as compared to the average produc-
tion for the first nine months of fiscal year 2016/2017 which
was 3.278 bcf/d.
The average production for the first nine months is essen-
tially in line with what obtained in 2015/2016.
There is further good news for Minister
Imbert as gas production started increasing
in June with the coming on stream of bpTT's
Trinidad Onshore Compression Project
(TROC) and will be further enhanced with the start up earlier
this month of Juniper.
Juniper is expected to add 590 mmscf/d when it is fully
On the production side, the finance minister should be able
to breathe more easily when he presents the budget for next
year as not only will he see sustained production by bpTT of
over two billion cubic feet of natural gas per day, but the coun-
try's second largest natural gas producer---Shell---is gearing
up for development work in its Blocks 5c and the East Coast
The company is expected to drill several development wells
as it attempts to bring onstream additional natural gas.
According to the Cabinet Note, approximately 53 per cent
of natural gas production was converted to LNG.
This accounted for the largest usage of natural gas for June
Other significant usage was in ammonia (18 per cent) and
methanol (15 per cent) production.
The Minister of Finance will also have
received higher revenues from other
commodities this fiscal year including
Over the last fiscal year methanol
prices have averaged US$358.69 per metric tonne having been
as low as US $154.07 in January 2016.
In the case of ammonia, Imbert will have to look carefully
at the challenges posed to global prices by additional product
coming out of the Black Sea region and additional production
out of this country which both have an impact on global prices.
According to Bloomberg, "Ammonia prices continued to
decrease in June 2017 as the market remained oversupplied.
Improvement in product availability in the Black Sea and gas
supply in T&T contributed to lower prices.
"In the US, demand was negatively affected by the rainy
weather, which led to lower pre-plant volumes and relatively
slow corn growth. Since demand was not as strong as expect-
ed, suppliers were forced to compete aggressively for sales."
All in all, Minister Imbert will have a better story to tell of
the performance of the energy sector than he did last year but
will be mindful that the rest of the economy will have to get
going if there is to be growth in 2018.
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