Home' Trinidad and Tobago Guardian : December 5th 2013 Contents BG8 | ENERGY
BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 2013 • WEEK ONE
Although the tables eventually turned, and
demand exceeded supply in the years that fol-
lowed, in 2009 and 2010, the National Gas
Company of T&T (NGC) incurred a US$11.6
million liability as a result of the cancellation
of downstream projects that no longer needed the gas the
NGC had contracted to buy for them.
This is according to a response from Energy and Energy
Affairs Minister Kevin Ramnarine in the Senate on November
26.Ramnarine was responding to a question in the Upper House
by Independent Senator David Small, who asked for "an update
on the take-or-pay exposure (financial and gas volume) of the
NGC as a result of the cancellation of downstream projects
including Alutrint and Essar." That was part A of the question.
Part B queried "the strategy being utilized by the NGC to mit-
igate against the financial and operational aspects of this take-
Take-or-pay is a provision, written into a contract, whereby
one party has the obligation of either taking delivery of goods
or paying a specified amount often referred to as a penalty.
It is commonly used in gas and cement contracts.
Ramnarine said in the Senate: "Between May 2007 and
October 2010 the NGC signed three gas purchase contracts
for the supply of 550 million standard cubic feet of natural
gas per day (mmscf/d). This natural gas supply was predicated
on the anticipated incremental demand from four downstream
projects. These four downstream projects were Alutrint, Essar,
Lyondell Basell Gas to polypropylene complex, and MHTL
AUM1 Complex. These projects---these four downstream proj-
ects---had a total demand of 512 million standard cubic feet
of natural gas per day. Of these four projects only one was
realised. This was the MHTL AUM1 project.
"As a consequence the NGC was faced with a situation
where supply exceeded demand. The take-or-pay liability of
the NGC, as a consequence of that situation, is to date US$11.6
million. It should be noted, however, that over the past three
years---from 2011 to 2013---the NGC has faced the opposite
situation to take-or-pay, as upstream suppliers have curtailed
natural gas supply as a result of platform downtime associated
with maintenance and asset integrity related works." That
concludes the answer to part A, he said.
Answering part B, he said, the "NGC has instituted gas
banking arrangements to defer any unused gas and thus elim-
inate exposure or minimise exposure. The natural gas
supply/demand balance is reviewed on a daily basis by the
NGC and Ministry of Energy and Energy Affairs, and there
has been a high degree of co-operation and collaboration with
upstream suppliers and downstream and midstream customers
to manage the nation s supply/demand balance for natural
Small then asked for more details on the gas banking. Ram-
narine said the "gas banking" is an arrangement which was
instituted with some of those suppliers whose gas the NGC
was not able to take, and that arrangement is that the companies
would bank the gas on behalf of the NGC until it is ready for
the gas at a later date. The situation only obtained, as you
may know, in the year 2009 and 2010. From 2011, we had a
reversal of that situation, where instead of being in a place
where supply exceeded demand, demand exceeded supply. So
there would be no need for gas banking, of course, in a situation
where demand outstrips supply," he said.
Asked if there was a time period within which the NGC
had to take the banked gas, or if the gas is banked indefinitely
until the NGC could take it, Ramnarine said: "I do not have
the information to that question right now."
Opposition People s National Movement (PNM) Senator
Faris al-Rawi asked if the gas banking arrangement was
similar to the "gas cushion arrangement" which suppliers,
such as BP, BG and others, have traditionally held by way
of their contracts with the state. Some of these contracts
are due to expire by 2018, al-Rawi said.
Ramnarine said it is not similar to that arrangement,
adding that it would "take a while to explain the difference
between the two arrangements, but they are not the same."
When al-Rawi asked if the US$11.6 million is "closed off,"
Ramnarine reiterated that the figure is "to date" and is
US$11.6 million "and that was for the period 2009 to 2010...
arising out of gas which the (upstream) companies were
prepared to deliver, but for which the NGC was not prepared
to take because there was no commensurate demand."
Al-Rawi then asked if there were "any mitigation steps
in relation to that gas which was available but not utilised?
Was there any way to mitigate that effect?" Before Ramnarine
could answer, Leader of government business in the Senate
Ganga Singh asked al-Rawi to explain what he meant by
that. Al-Rawi said: "Some form of other arrangement with
the suppliers that could have mitigated that point."
Ramnarine responded: "What we have sought to do in
the last three years which I could report on---the last three
years---is a tremendous exercise of alignment between supply
and demand. What we have sought to do because demand
has outstripped supply over the last three years, and we
have had a situation where we have had curtailments as a
consequence of demand outstripping supply, is that we have
sought to optimise the shutdown schedules at Point Lisas
and better align those shutdowns at Point Lisas with shut-
downs upstream. So you would note in the month of Sep-
tember of this year, we had a lot of shutdowns upstream
and downstream. That is one of the mitigating strategies
that we used to minimise that imbalance between supply
NGC incurs US$11.6m liability
for gas no longer needed
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