Home' Trinidad and Tobago Guardian : February 1st 2018 Contents view BG3
Thursday, February 1, 2018
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Who blinks first?
he public stand-off
and the National Gas
Company came as
a surprise to many
casual observers of the energy sec-
tor. Truthfully, those within the
sector have grown all too familiar
with the current gas curtailment
situation gripping the downstream
segment of the industry.
Perhaps what makes this saga
so interesting—beyond its sheer
abruptness—is the fact that the two
companies seem to be locked in a
game of “chicken” over what hap-
Stalemates between state enter-
prises and private sector compa-
nies always provide good theatre,
and this one hasn’t disappointed.
There are, however, some funda-
mental, if not perplexing issues that
require deeper exploration.
To start with, CNC, as a down-
stream ammonia producer would
have, for years, operated in an en-
vironment with historically cheap
gas at its disposal.
The company would have reaped
significant financial benefits as a
result and remitted to the state its
fair share. Those days are obviously
The era of cheap gas in T&T has
effectively come to an end, as sig-
nalled by NGC chairman Gerry
Brooks, and the reality is that
downstream companies operating
in the country will eventually have
to adjust to this “new normal”, if
they haven’t already. The absolute
worst case scenario for the country
would obviously be if they choose
to deploy their capital elsewhere.
But what makes this a bit of a
conundrum is that from CNC’s
perspective, the company doesn’t
appear to be making price its sole
bone of contention with NGC. In
fact, the company’s CEO has said
that his company is willing and
able to pay above what its Ameri-
can competitors currently pay for
So if price—which is often the
sticking point in many negotia-
tions—isn’t the singular issue, then
Contract negotiations will al-
ways operate within a confidential
framework but CNC’s CEO’s words
point to something thought-pro-
voking when he said that his com-
pany could not accept NGC’s “final
offer”—not price, but offer.
Further, his call for “NGC to be
transparent and stop hiding be-
hind vague statements that don’t
have any basis in reality” strikes
one as quite instructive. Pardon
the suspicion but, as the saying
goes, there seems to be more in
the mortar than the pestle. As
both companies head to arbitra-
tion in the UK, more is likely to be
revealed in due time.
With regard to NGC, to say that
it finds itself caught between the
proverbial “rock and a hard place”
would be an understatement.
Company president Mark Lo-
quan himself signalled late last
year at an Energy Chamber func-
tion that he expected 2018 to “be
challenging” with gas shortfalls
likely to remain.
In an environment where gas
supply is reduced, having to pay
more for the diminished com-
modity from upstreamers would
certainly present its own financial
challenges to the gas aggregator.
Couple this with the fact that the
company has been making provi-
sions in its financial statements for
litigation by companies for whom
it has not been able to supply its
contractually agreed upon gas,
and one gets a reasonably clear
sense of the bind the company
finds itself in.
Even the prime minister when
asked in Parliament about whether
an independent audit should be
conducted into NGC’s gas sup-
ply, he said such an audit would
be of interest to all to determine
whether “NGC should be in busi-
ness at all.”
he State’s concern is
obvious. From the
spective, NGC prof-
its have become an
tant source of fiscal revenue.
The question that surfaces,
therefore, is whether the NGC
model is still a competitive one?
Incidences such as the MHTL
shutdown last year and now CNC’s
scenario make this question wor-
thy of serious contemplation by
those with responsibility for over-
sight of T&T’s patronage.
Is it that as successive gas supply
contracts come up for renegotia-
tion with the downstream players
that the country should expect
more stand-offs such as these?
Certainly as the “gas middle-
man”, NGC’s entire role in the
value chain might perhaps require
sober reflection—something that
only tough times usually calls for.
What is also a cause for con-
cern would be the sustainability
of future or yet-to-be-completed
downstream projects that require
currently scarce and progressively
more expensive gas.
The natural gas to chemical
plant in La Brea which is expected
to initially use 100 million stand-
ard cubic feet of gas per day once
up and running (NGC has a 20 per
cent interest in the project) comes
to mind immediately. It will be
interesting to see how these situ-
ations resolve themselves in the
future and whether they have any
impact on the perception of T&T
as an attractive market for petro-
For the time being, however, as
NGC and CNC duke it out for what
each party believes it is entitled to,
the question of who blinks first re-
The era of cheap gas in T&T has effectively come to an end... and the reality is that downstream companies
operating in the country will eventually have to adjust to this “new normal”, if they haven’t already.
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