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Atlantic confident about LNG's future
Atlantic is admitting that “unprecedented levels of gas shortfalls throughout 2015 and lower LNG prices have resulted in a significant decline in revenues,” but the company is saying it remains confident in the long-term outlook for the LNG business.
Responding to questions from the GML Enterprise Desk, Atlantic’s media communications manager, Billson Hainsley, said: “This country has a world-class LNG facility and a strong international reputation for being one of the safest, most reliable LNG producers globally.”
In the past year, there has been a decline in LNG production as a result of a decline in natural gas production. Atlantic said it is now “encouraged that discussions between the governments of Venezuela and T&T to commercialise the Loran/Manatee gas field have been progressing.”
The fields are said to contain 10 trillion cubic feet of natural gas. Hainsley added: “With infrastructure already in place, and in close proximity, the quickest and most economical way to develop these reserves—to the mutual benefit of both countries—is via Trinidad.”
As part of the commercialisation of the fields, he said: “Atlantic would be pleased to offer an LNG opportunity through its facilities.”
In late October 2015, the Business Guardian reported exclusively that the Venezuelan government had agreed to send some of its portion of the natural gas in the Loran/Manatee cross-border field to T&T to be processed as liquefied natural gas (LNG).
Prime Minister Dr Keith Rowley told the country in late December in his State of the Economy address that his Government had extensive discussions with the authorities in Caracas about “producing gas from the Loran/Manatee field which straddles our common border.”
Dr Rowley said he had received an invitation from President Maduro to visit Caracas “in the context of the discussions which have been taking place through our technical teams. I propose to join him as soon as the technical work had advanced a little further so that specific commitments can be made and executed.”
Atlantic is the sixth largest LNG exporter in the world. It was incorporated in 1995 to develop a natural gas liquefaction plant in Point Fortin. The first train of the plant came into production in 1999 with the first shipment going to Boston in May 1999. Over the ensuing years, the company expanded. By 2005, the fourth train came into production. Atlantic now has a stated production capacity of 15 million metric tonnes per annum.
The United States once accounted for 80 per cent of LNG exports but, today, it is selling its own hydrocarbons. Cheniere Energy Incorporation was expected to begin production of LNG this month at the Sabine Pass Terminal in Louisiana. This LNG would be exported to Lithuania and Western Europe.
But Hainsley said while the US decision to permit LNG exports “will result in an increase in the global supply of LNG, it will not have a material impact on T&T’s Atlantic exports.”
He explained: “Atlantic’s LNG volumes are sold under long-term contracts and this, coupled with Atlantic’s significantly lower development costs, will allow our volumes to continue to compete favourably in global markets against other LNG supply sources, including from the US.”
He noted that the Atlantic LNG trains were built at “a fraction of the cost of new LNG facilities coming on stream, on average, five to seven times cheaper than the new plants being built.” As a result, “Trinidad’s LNG has a strong competitive advantage against many LNG sources.”
Currently, the company’s commercial contracts contain a high degree of destination flexibility and Hainsley said they work diligently with LNG buyers to “identify opportunities to place its cargoes in the highest priced markets available, to maximise revenues.”
Since 2008, Hainsley said the amount of Atlantic LNG volumes being sold to South America has increased from one per cent to 51 per cent, taking advantage of the comparative better prices in South America.
Atlantic, he said, remains confident that “demand and prices will pick up from current low levels.” That confidence is strengthened because “gas is increasingly the fossil fuel of choice—being cleaner than coal and oil—which is important given the need for improved worldwide stewardship.”
This growth in the relative importance of gas in the energy mix, according to Hainsley, will continue to support global LNG demand, which is projected to grow by around five per cent per annum over the next decade.
In addition, Atlantic is of the view that many of the proposed new LNG supply projects will be delayed or cancelled in today’s price environment.
T&T, in addition to having built its plants at a fraction of the cost of new LNG facilities coming on stream, is also viewed as having a world-class facility, strong experience in LNG.
According to Hainsley, Atlantic boasts is an “excellent safety record having exceeded 30 million man hours without a lost time incident.
“This country also boasts an exceptionally high reliability rates averaging over 98 per cent.
Hainsley said this helps to promote Trinidad’s status in the energy business internationally.
Former energy minister Kevin Ramnarine told the GML Enterprise Desk that “T&T remains a competitive player in the industry.”
Ramnarine added, “While there had been some erosion of our competitive position due to the abundance of shale gas in the USA, and the fact that we have been running short of natural gas by about 10 per cent in the last five years, generally, we remain competitive.”
He agreed that T&T’s LNG industry would remain more competitive, given that liquefaction costs are among the lowest in the world and the four trains in Point Fortin are very efficient and reliable compared to what obtains elsewhere.
Ramnarine is, however, concerned that once Cheniere Energy begins exporting from its Louisiana USA terminal, it would increase the global supply of LNG which may depress prices.
But Hainsley said, “Current projections of forecasted market prices in the different regions do not indicate that prices will be significantly impacted by the introduction of the US LNG capacity.” Adding, “the commodity pricing is cyclical and will recover from current low levels.”
Hainsley said while Atlantic must “respond appropriately to changing dynamics, it is also important not to overreact to a sudden sharp downturn.” He said LNG is a long-term business—40 years plus—and Atlantic continues to invest in the LNG business for the longer term.
What is important, Hainsley said, is that “global reputation is maintained and that T&T does not become an unreliable LNG exporter like some other countries have.”