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NGL down by $0.49 to $20.50

Economists cautious on Dragon deal
Wednesday, December 7, 2016
NGC’s Chairman Gerry Brooks, left, and director Andrew Jupiter make their way to an aircraft at Simón Bolívar International Airport in Caracas, Venezuela for their flight back to T&T following Monday’s signing of an historic energy deal. Photo by:Roberto Codallo

Rosemarie Sant

Even as an agreement signed Monday brings prospects of a gas supply from Venezuela's Dragon Field closer to reality, a former energy minister and economists are urging caution on the deal.

Economist and head of Bourse Securities Subhas Ramkhelawan said the deal is "a good test case for further agreements between Trinidad and Tobago and Venezuela" but economist Indeera Sageewan-Alli expressed concern that the Venzuelan government is unstable with a reputation for "changing its mind and decisions at the drop of a coin."

Sageewan-Alli added Venezuela is currently going through "a difficult economic situation and is grabbing at straws, but if something happens to change their fortunes then they will not give Trinidad and Tobago the time of day."

She said: "We're being hopeful it will pan out. It is good to have hope but a country's future needs to be positioned on a very solid footing. I do not feel at this point in time we can celebrate or bring out the champagne.

"Venezuela does not hold to the same democratic principles like countries like ours. They may not feel they have to honour the agreement."

That concern was shared by former energy minister Kevin Ramnarine, who told the T&T Guardian: "Venezuela is in the midst of an economic meltdown. We putting our energy security in the hands of a country that has a different view to ours. There are a lot of political risks from which we should be protected."

While Ramnarine acknowledged that the agreement "is a step in the right direction", he said the political risk should not be ignored.

"Currently, Ukraine buys gas from Russia and if the Russians are unhappy they turn off the gas. There is political risk. There are technical and political risks that need to be sorted out."

The former minister said Government needs to tell the country the details of the agreement.

"Who is paying for the pipeline, is it PDVSA NGC or Shell? At what price are we buying the gas? Is the gas going to Atlantic or Pt Lisas? Shell has an interest in Atlantic. Government needs to say where the gas is going," he said.

Ramnarine also has questions about the metering of the gas and where the meter will be placed?

"When is the gas going to come to Trinidad? We hearing one year, we hearing two years, what is the timeline? The devil is really in the details," he said.

Sageewan-Alli said while the deal sounds good and if it pans out it would "redound to the benefit of the country", T&T should not put bets on it.

"Even though an agreement is being signed, agreements can be broken," she said.

She is optimistic, however, that the negotiations were conducted in the best interest of the country.

There have been reports that as part of the agreement, NGC will have to foot the bill for building 17 kilometres of pipelines for this country to access the gas from the Dragon Field, at a cost of between US$40 million to US$60 million.

That is just about $400 million to bring the gas from the Dragon Field to the BG platform on Trinidad's north coast.

Ramkhelawan said one thing that has to be determined is whether the BG line has the capacity to transport its own gas as well as gas from the Dragon Field.

He said gas from the Dragon Field "would be a good fillip in terms of the gas supply for this country " but cautioned that "it does not solve the long term problem" as Government needs to look at the next 8-10 years.

"We do have a number of blocks that have been given out for exploration, but will that supplement, given low oil production, and what will incentivise people to go out and explore?" he asked.

T&T has an annual gas demand of 4.2 billion standard cubic feet.