On Mon­day, en­er­gy gi­ant BP is­sued a stern re­sponse to a state­ment made by En­er­gy Min­is­ter Kevin Ram­nar­ine in the Sen­ate last week that US$120 mil­lion would have ac­crued to Na­tion­al Gas Com­pa­ny (NGC) be­tween 2009 and 2012 if the state-owned com­pa­ny had tak­en con­trol of the mar­ket­ing of nat­ur­al gas from At­lantic LNG Train IV, which was com­mis­sioned at the end of 2005.

Un­der the terms of the agree­ments that es­tab­lished Train IV, NGC is en­ti­tled to sell 11.11 per cent of At­lantic's an­nu­al pro­duc­tion, which is rat­ed at 5.2 mil­lion tonnes per an­num. The LNG mar­ket­ing arm of BP mar­ket­ed NGC's eq­ui­ty gas up to Au­gust 2012, when NGC ex­er­cised its right un­der the con­tract to end the re­la­tion­ship and as­sume the mar­ket­ing re­spon­si­bil­i­ty it­self. In the Sen­ate,

Ram­nar­ine said that that first car­go re­sult­ed in NGC get­ting a price of US$9.25 per MMB­tu, where­as the com­pa­ra­ble price un­der the BP con­tract would have been US$1.60 per MMB­tu, ac­cord­ing to the min­is­ter. BP-which is T&T's largest sin­gle pri­vate sec­tor rev­enue earn­er pro­duc­ing ap­prox­i­mate­ly 420,000 bar­rels of oil equiv­a­lent a day-dis­agrees with the min­is­ter's po­si­tion: Con­trac­tu­al oblig­a­tions lim­it how much in­for­ma­tion BP can dis­close on its LNG con­tracts. How­ev­er what we can say is that the im­pli­ca­tions of im­pro­pri­ety in BP LNG sales re­port­ed in re­cent me­dia ar­ti­cles are in­cor­rect.

In the lead up to the fi­nal in­vest­ment de­ci­sion and even­tu­al con­struc­tion of At­lantic LNG Train 4 (AL­NG T4), the joint ven­ture part­ners which in­clud­ed BP and the Gov­ern­ment of the Re­pub­lic of Trinidad and To­ba­go mu­tu­al­ly agreed the arrange­ments need­ed to en­able the de­vel­op­ment of the project. This led to the suc­cess­ful start up of AL­NG T4 in De­cem­ber 2005.

BP's in­tent in 2005 when we en­tered in­to a mar­ket­ing arrange­ment with the Na­tion­al Gas Com­pa­ny (NGC) was al­ways to en­sure that the LNG car­goes got a fair mar­ket price based on the pre­vail­ing mar­ket con­di­tions as well as to en­sure that we sup­port­ed the NGC in build­ing its own LNG trad­ing ca­pa­bil­i­ties to be able to take over the mar­ket­ing of their car­goes at some point in the fu­ture.

Mar­ket con­di­tions have since changed con­sid­er­ably and BP is un­der­stand­ing of the gov­ern­ment's de­sire to mar­ket its car­goes in the spot mar­ket which is cur­rent­ly at­tract­ing high­er prices. In 2005, BP and the NGC en­tered in­to gas sup­ply and LNG mar­ket­ing arrange­ments to al­low NGC's par­tic­i­pa­tion in the LNG val­ue chain.

To en­able NGC to pro­duce its share of LNG in the AL­NG T4 liq­ue­fac­tion fa­cil­i­ty, BP pro­vid­ed a pro­por­tion of the sup­ply of gas need­ed di­rect­ly and fa­cil­i­tat­ed the re­main­der through a com­mer­cial swap arrange­ment. In ad­di­tion, to en­able NGC's par­tic­i­pa­tion in the off­shore LNG val­ue chain, BP pro­vid­ed firm long term mar­ket­ing off­take con­tracts and train­ing op­por­tu­ni­ties for NGC per­son­nel to build their ca­pa­bil­i­ty in an­tic­i­pa­tion of NGC mar­ket­ing its own LNG at a fu­ture date.

The un­prece­dent­ed col­lapse of Hen­ry Hub in­dexed gas prices in the base mar­kets for AL­NG T4 from Ju­ly of 2008, less than 2 years af­ter start-up, has re­sult­ed in re­duced net­back prices to a sig­nif­i­cant por­tion of LNG car­goes from Trinidad and To­ba­go in­clud­ing those mar­ket­ed on be­half of NGC from AL­NG T4 by BP. This was large­ly due to the suc­cess of shale gas ex­plo­ration and pro­duc­tion in the Unit­ed States. At­tempts by BP to re­struc­ture the con­tract with NGC were not suc­cess­ful and NGC elect­ed to ter­mi- BP speaks out nate the con­tract with BP and to be­gin mar­ket­ing the car­goes on their own in the LNG spot mar­ket since Au­gust 2012. We are aware that es­ti­mates of the val­ue that could have ac­crued to the NGC had this con­tract not been in place dur­ing the pe­ri­od 2009- 12 have been quot­ed by the me­dia fol­low­ing the bud­get de­bates in the Sen­ate. We would like to point out that this fig­ure is open to a lot of sub­jec­tiv­i­ty in the un­der­pin­ning as­sump­tions which we do not share.

Fur­ther, we do not wish to de­bate the mer­its of spot ver­sus term con­tract arrange­ments as his­to­ry tends to prove most price pre­dic­tions wrong. BP con­tin­ues to ho­n­our the many agree­ments that com­prise the AL­NG T4 project which in­clude the long term arrange­ments for sup­ply of gas in­to AL­NG T4 to NGC. BP wish­es NGC suc­cess and con­tin­ues to sup­port the com­pa­ny in its LNG mar­ket­ing as­pi­ra­tions.