TT Gov’t defends new unitised agreement with gas companies
PORT OF SPAIN, Trinidad:
The Trinidad and Tobago government on Friday defended the new unitised commercial structure for Atlantic LNG that allows the state-owned National Gas Company of Trinidad and Tobago (NGC) to obtain a greater share in the revenue derived from the sale of LNG on the global market.
Prime Minister Dr. Keith Rowley, who led a delegation for talks in London earlier this month involving NGC, Shell and bp, said Trinidad and Tobago is expected to receive an estimated TT$11 billion (One TT dollar=US$.0.16 cents) derived from government initiatives coming out of the 2018 energy forum that included re-negotiating the agreement with the international gas companies.
Rowley said that had Trinidad and Tobago failed to reach an agreement over the renegotiation of the “unprecedented agreement will provide for the long-term sustainability of the Trinidad and Tobago’s gas sector and a higher level of certainty which is crucial for future investment”, it could have meant the country going to the International Monetary Fund (IMF) for assistance in the future.
Rowley said he was disappointed when he heard a former energy minister describe “our recent accomplishment as no big thing”.
He wanted the members of population to ask themselves “what would be our position in an era of declining volumes production, declining market prices, what would have been our position had this TT$11 billion not (be) coming to us into our revenue area.
“What would have been the decisions in Trinidad and Tobago and I am not just talking about TT$11 billion, I am talking about the multiplier effect of that as it makes its way through the economy.”
Rowley said that the contracts that had existed before, if the NGC did not provide gas to the international companies “as per the contracts those contracts had an arrangement where claims could have been made against NGC”.
He said when the country went into the curtailment of gas prior to 2015, when his government came into office, the then government said it was due primarily to the need to maintenance issues and very temporary.
“So we took comfort in that, those who did not know better. But what was happening, while the situation was not maintenance, it was a genuine decline from our fields,” he said with the government then also indicating the need to give incentives to the oil companies.
Rowley said his administration had to also negotiate various claims made against NGC for not meeting its obligations under the previous contracts, totalling US$1.3 billion.
“So we had to sit down and negotiate this. Today I could tell you…(we) negotiated away virtually all of these claims to get the industry back into health.
As a result of the agreement, the NGC now has a 10 per cent stake in the new commercial structure for Atlantic LNG, one year after the government signed new agreements with regard to the restructuring of Atlantic LNG with bpTT, Shell and the NGC, changing the commercial structure of Atlantic LNG- for the first time in 27 years.
Rowley told reporters that as part of the efforts to ensure gas supplies to the Atlantic project, the government had earlier been successful in working out a “commercial access in a way that was never done before, which is to allow us to commercially operate a Venezuelan field to get gas….both for the petro-chemical and LNG business.
“Unfortunately hurdles came in the way of that as a result of the relationship between Washington and Venezuela , but between Trinidad and Tobago and Venezuela we did successfully negotiate that unique arrangement.
“That is still in the pipeline, alive and well as we cross the very many hurdles.”
He told reporters the agreement signed in London will also facilitate a market-reflective pricing mechanism that provides fair value from the sale of LNG for both Trinidad and Tobago and the shareholders and will allow for an intensified focus on the operational efficiency and reliability of Atlantic.
He said that the agreement allows for the sale of gas on the worldwide market, rather than only in the United States, which has the “lowest prices for gas” because the North American country is “awash with gas”.
“But in Europe and Asia, the price is high and of course those who market gas knows that Shell is the largest marketer of gas in the world. Shell is our partner …and so we negotiated an arrangement where revenue streams will come to us now, not from the virtually permanently low Henry Rob reference, but from a basket of market prices, high in Japan, high in Korea, high in Europe, low in the United States and when you average it out we end up with a better revenue stream.
“And that is why even as our volumes are reported to have gone down, the government acted in this way successfully, you did not see an equivalent collapse in the revenue in Trinidad and Tobago”.
Rowley insisted that had his administration not taken measures to deal with the low returns from the energy sector on coming to power in 2018, “it would have been a good chance that Trinidad and Tobago would have ended up at the IMF.
“But certainly we would have ended up with a huge currency devaluation. Those were the options that we were facing, because in the absence of these successes what were the alternatives, how do we maintain the expenses that we had become accustomed to,” he said, telling reporters that his administration had always insisted on prescribing “our own medicine and we will take it.
“Nobody is going to lend you money as a lender of last resort and allow you to continue to do the following things while you booster your economy with lending, free education from cradle to university, free health care, subsidising water, subsidising electricity, subsidising gasolene.
“If we ever find ourselves on an IMF street, the quality of life of everybody in this country is threatened because a lot of what the government carries on its payroll will not be permitted in any significant way,” Rowley said, acknowledging the threat also to the gas and oil industry by some segments of the international community in favour of renewable energy.
CMC