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Govt to review LNG agreements

Thursday, January 21, 2016

Government plans to review all marketing agreements related to liquified natural gas (LNG) and new negotiated agreements will be structured to ensure commercial arrangements are equitable. 

That’s the word from Energy Minister Nicole Olivierre, who said she was concerned that current contractual arrangements were not working in the best interest of the country.

In her contribution to the T&T Energy Conference, which ended yesterday at the Hyatt Regency in Port-of-Spain, the minister said LNG accounted for 55 per cent of the country’s natural gas utilisation, so the state of that industry was of critical importance.

“With many of our commercial pricing arrangements tied to a US destination, this country is realising netbacks well below the market price applicable to the true destination of our cargoes. The only conclusion that can be drawn is that the contractual arrangements of LNG are not now working in the best interest of Trinidad and Tobago,” she said.

Olivierre wondered about the previous arrangement where the upside was to be shared 50/50 between the LNG partners and Government.

“Is it that the LNG partners are now diverting cargoes to the South American market in a transfer pricing arrangement to avoid sharing the upside?” she asked.

The minister said the 2018 expiration of Train 1 LNG contracts is an opportunity “to begin to recalibrate the domestic LNG industry” into one that brings greater benefits to T&T.

“The state also has the option of entering into its own marketing arrangements for the minister’s share of gas under the existing production sharing contracts. This is an option that the Ministry of Energy and Energy Industries intends to vigorously pursued along with the NGC.”

Olivierre said the natural gas market, like crude oil, was facing many challenges and there had been a pronounced downward revision of future natural gas price expectations.

“All available evidence suggest that the current oversupply of gas is more than just a temporary phenomenon,” she said.

Noting that the United States was resuming exportation of natural gas, the minister said while markets in Europe and Asia were currently being targeted, she was not discounting the possibility of markets in the Atlantic basin eventually being pursued.

“We therefore must recalibrate our LNG business model in T&T with emphasis on reducing costs, increasing productivity and optimising revenue to the country. This will require the accommodation and co-operation of all the stakeholders in the local LNG value chain,” she said.


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