PORT OF SPAIN, Trinidad, CMC – The Trinidad and Tobago government Friday defended the new unitized commercial structure for Atlantic LNG that allows the state-owned National Gas Company of Trinidad and Tobago (NGC) to obtain a more significant 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) in additional revenue as a result of the new accord.
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 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 member population to ask themselves, “What would be our position in an era of declining volumes production, falling market prices, what would have been our position had this TT$11 billion not 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 as it goes 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 before 2015, when his government came into office, the then government said it was due primarily to the need to maintain 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 also indicating the need to give incentives to the oil companies.
Rowley said his administration also had to negotiate various claims made against NGC for not meeting its obligations under the previous contracts, totaling US$1.3 billion.
“So we had to sit down and negotiate this. Today, I can tell you…(we) arranged 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 percent stake in the new commercial structure for Atlantic LNG, one year after the government signed new contracts about 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 “commercial access in a way that was never done before, which is to allow us to operate a Venezuelan field to get gas commercially….both for the petro-chemical and LNG business.
“Unfortunately, hurdles came in the way due to the relationship between Washington and Venezuela, but we successfully negotiated that unique arrangement between Trinidad and Tobago and Venezuela.”
“That is still in the pipeline, alive and well as we cross the many hurdles.”
He told reporters the agreement signed in London would 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 would allow for an intensified focus on Atlantic’s operational efficiency and reliability.
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 North America is “awash with gas.
“But in Europe and Asia, the price is high, and of course, those who market gas know 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, joint in the United States. When you average it out, we have a better revenue stream.
“And that is why even as our volumes are reported to have gone down, the government acted 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 we faced because what were the alternatives in the absence of these successes? 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 boost your economy with lending, free education from cradle to university, free health care, subsidizing water, subsidizing electricity, subsidizing gasoline.
“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 favor of renewable energy.
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