PORT OF SPAIN, Trinidad, Prime Minister Dr. Keith Rowley Tuesday welcomed the signing of the heads of agreement (HOA) with ALNG shareholders on the restructuring of Atlantic LNG, saying it is a testimony to the good faith by all parties.
The Atlantic LNG Company of Trinidad and Tobago is a liquefied natural gas (LNG) producing company operating a liquefied natural gas plant in Point Fortin, in southwest Trinidad. It operates four liquefaction units (trains). Train 4, with a 5.2 million tonnes per year production capacity, is among the world’s largest LNG trains in operation.
“These negotiations have been taking place at a time where the global energy market is in a crisis brought on by the lingering effects of the COVID-19 pandemic, geopolitics, including the war in Europe, and the global movement towards a low carbon economy,” Rowley said.
He told the ceremony that given the magnitude of this exercise and the fact that such restructuring is novel in the energy sector meant that the negotiations were complex.
“The original schedule also did not cater for complications associated with the bilateral commercial negotiations between the government and Shell and BPTT pursuant to competition law. As a consequence, the original projected date of June 30, 2022, for the execution of Definitive Agreements was always very ambitious and, unfortunately, could not be met.
“Notwithstanding, we have made significant headway, as the government and the ALNG shareholders, after months of difficult negotiations, have come to an agreement on positions regarding substantial issues such as the term and conditions of the license, participation in the new entity, the new shareholding of Atlantic LNG, the commitment to gas supplies for the Trains, third party access and other critical commercial arrangements.”
Rowley said that in connection with these objectives, the parties have agreed to amend and restate the original HOA dated January 25, this year, with agreed terms of the Definitive Restructuring Agreements in the substantive issues which have been built on the government principles and the commercial construct forged by the parties.
“ It is the intention that these substantial issues and other issues under negotiation, on conclusion of settling complex and extensive legal documents, will be represented by binding Definitive Restructuring Agreements which are projected to be executed by March 31, 2023,” Rowley said.
The Atlantic LNG project was started by Cabot LNG (now Suez) in 1992. In 1993, Cabot LNG, National Gas Company of Trinidad and Tobago, Amoco, and British Gas plc signed the Memorandum of Understanding and launched a feasibility study of the project.
The Atlantic LNG company was formed in July 1995. Construction of the first train started in 1996, and the train was officially opened on March 13, 1999.
Rowley said the process for the new HOA commenced in 2018 when the government initiated discussions with the country’s major gas producers, BP Trinidad and Tobago LLC and Shell Trinidad and Tobago Limited, on gas-related issues.
He said one major objective of the negotiations with BPTT and Shell was an agreement by the parties to restructure Atlantic LNG.
Rowley said in January this year, the government and Atlantic LNG shareholders signed the HOA that outlined the governing principles referred to as the Government Principles that will form the basis of the Definitive Restructuring Agreements for the restructuring of Atlantic LNG.
“The HOA represented a commitment by all parties to commit to entering into good faith negotiations regarding the restructuring of the Atlantic Facility into a unitized model with a common ownership structure, a commercial framework for gas supply and offtake, and transitioning of the Atlantic Facility into a single Unitized Facility.
“This has never been done before. These negotiations and agreements are unprecedented; this has not happened anywhere in the world before.
Rowley said in parallel with the negotiations with ALNG shareholders; the government entered into negotiations with BPTT and Shell separately on commercial issues in order not to breach any competition law.
“After many hours of negotiations over many months, the government has separately agreed in principle on certain commercial issues regarding the ALNG Restructuring Project with BPTT and Shell, which will be reflected in the relevant Definitive Restructuring Agreements on the finalization of the restructuring legal documents projected to be completed by March 31, 2023”.
Prime Minister Rowley said the commitment of the ALNG shareholders to the restructuring process and, ultimately, the execution of Definitive Agreements is a clear testimony of the confidence of BPTT and Shell in the domestic energy sector.
But he acknowledged that this confidence did not come about by chance but through the deliberate engagement by the government at the highest levels working with upstream companies operating in the domestic energy sector.
“Given the importance of the domestic energy sector to the economy of Trinidad and Tobago, our approach has been to engage the decision-makers at their Board Rooms, whether in Houston, Melbourne, London, or The Hague. This strategy has now been shown to be successful.”
Rowley said that the strategy has been effective as upstream investment has been significant, averaging approximately US$1.54 billion per annum for a total investment of US$7.7 billion for the period 2017 to 2021.
He said the preliminary figures for the period 2022 to 2026 indicate an upstream investment in excess of five billion US dollars.
“Our major gas producer BPTT is projected to expend some US$2.4 billion over the period 2022 to 2025. Government has facilitated the company continuing upstream activity with the grant of 10-year license extensions to its South East Coast exploration and production licenses.”
He said in consideration of the extension of these licenses and the settlement of outstanding legacy issues, the state benefitted in the sum of one billion TT dollars (One TT dollar=US$0.16 cents), and it is projected that the country will benefit by an additional US$250 million by September 2024 due to the modernization of the exploration and production licenses.
Rowley said Shell, the other upstream producer, has also sought to consolidate its upstream capacity, and the government granted extensions to the year 2030 to the year 2035 and that in consideration of the extension of the licenses and settlement of outstanding legacy issues, the state has to date benefitted in the sum of over four billion TT dollars.
“The consolidation and expansion of resources by BPTT and Shell serve to optimize the capacity available for the production of LNG and to satisfy domestic requirements. Notwithstanding the welcome continued active participation of BPTT and Shell, we have agreed that there is an opportunity for other third-party gas producers to participate for the first time in our LNG facilities either through the affiliate of one of the shareholders or as a participant in its own right. “
Rowley said given the value that can be derived from LNG; it is an incentive for all upstream producers to intensify their efforts to maximize their natural gas production.
“This is a major and progressive move that will benefit us in Trinidad and Tobago as, for the first time, it allows third-party access to Atlantic LNG,” he added.
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