Cur­tis Williams

Lead Ed­i­tor Busi­ness

cur­tis.williams@guardian.co.tt

In an as­ton­ish­ing ad­mis­sion, the chair­man of the Na­tion­al Gas Com­pa­ny Con­rad Enill has told a ra­dio talk-show pro­gramme that the NGC was re­ly­ing on gas con­tract­ed to the down­stream petro­chem­i­cal sec­tor in its ef­fort to restart Train 1 but the mar­ket changed and the down­stream com­pa­nies de­mand­ed their gas, mak­ing its plan in­op­er­a­ble and the quar­ter bil­lion in­vest­ment in restart­ing Train 1 un­nec­es­sary.

He al­so ad­mit­ted that the rea­son the Board want­ed an in­dem­ni­ty from the gov­ern­ment is be­cause it knew that the suc­cess or fail­ure of the deal was not in its hands and the Board was ef­fec­tive­ly putting the suc­cess of al­most $440 mil­lion in hands of the gov­ern­ment and the mul­ti-na­tion­als and did not want to take the fall if it failed.

In the in­ter­view that was con­duct­ed on I95 Enill said, “If you look at what the con­di­tions were at that point in time, the NGC found it­self in a sit­u­a­tion where most of these down­stream com­pa­nies were not tak­ing the gas al­lo­cat­ed to them. So we had a sit­u­a­tion where we had gas, we had to pay for gas and the down­stream­ers were ba­si­cal­ly say­ing lis­ten, on the ba­sis of the cost that is avail­able to us, we pre­fer to shut our plants down, at least for some time. And in those cir­cum­stances, we had a sit­u­a­tion where the NGC faced a sig­nif­i­cant amount of loss­es.”

To un­der­stand the is­sue more close­ly the NGC has what is called take or pay con­tracts with the gas pro­duc­ers like bpTT, Roy­al Dutch Shell, BHP and EOG. This means the NGC has to take the con­tract­ed gas and if it can’t, it has to still pay for it. How­ev­er the NGC sells that gas to the petro­chem­i­cal com­pa­nies and tra­di­tion­al­ly has had no such agree­ment. This means the NGC has to take the gas it has con­tract­ed from the up­stream com­pa­nies and then sell it on­to the petro­chem­i­cal com­pa­nies, but if they don’t take it, then the NGC is left hold­ing the bag.

Enill went on fur­ther to ex­plain what the sit­u­a­tion was like in De­cem­ber 2020, “We looked at the sit­u­a­tion where we had gas, do­mes­tic gas, and yes Cur­tis is cor­rect, BP wrote us and said to us, lis­ten we have some short­ages, we think it is go­ing to be about a month or so, we un­der­stood that was nor­mal and we could deal with that. So we were work­ing on the ba­sis that we had gas, and we had no tak­ers. We had planned a Train 1 main­te­nance of which the NGC would pay some por­tion be­cause we are part own­ers in Train 1.”

He added, “At­lantic came to us and said, we need you to make a de­ci­sion be­cause by Jan­u­ary 12th, 2021 if you do not com­mit to the main­te­nance on this plant, the next op­por­tu­ni­ty that you have is in a No­vem­ber of 2021, be­cause im­me­di­ate­ly, as soon as your plant is main­tained, we have to do shut downs on two and then three in the nor­mal course of things......

“We found our­selves in a sit­u­a­tion there­fore where, NGC took the de­ci­sion that we are go­ing to sup­port the main­te­nance of the plant al­though the oth­ers (BPTT, Shell, the Chi­nese in­vestors) de­cid­ed that they were not go­ing to so do, be­cause we un­der­stood that we had gas that was avail­able for do­mes­tic (use) which we were ne­go­ti­at­ing, which if it had been con­vert­ed to LNG would have at least giv­en us some rev­enue. That was in De­cem­ber.

When the plant was fin­ished there was a safe­ty is­sue and the safe­ty is­sue had to do with some process is­sue and they told us that the plant could not be op­er­a­tional. By that time the mar­ket had changed sig­nif­i­cant­ly and the mar­ket had moved in such a way that the gas that would have been avail­able, would have been re­quired by the down­stream pro­duc­ers.....

We com­mit­ted to the down­stream pro­duc­ers that once they want­ed the gas, the gas would have been avail­able to them. So we moved the gas back in­to that fa­cil­i­ty. And the chal­lenge the NGC had with hav­ing gas, hav­ing to pay for the gas, and hav­ing no op­por­tu­ni­ty for con­vert­ing it to rev­enue was re­solved. In those cir­cum­stances there­fore the in­vest­ment in keep­ing Train1 op­er­a­tional to use the gas for LNG, was no longer re­quired be­cause thea gas was back in­to the down­stream­ers and the com­pa­ny had been re­stored to the rev­enue po­si­tion that it was look­ing for.”

One must re­mem­ber that last year sev­er­al plants were shut down as the im­pact of Covid19, low in­ter­na­tion­al com­mod­i­ty prices and rel­a­tive­ly high nat­ur­al gas prices in T&T meant the petro­chem­i­cal com­pa­nies at Pt Lisas could not com­pete glob­al­ly and some could not car­ry the loss­es, so they shut their plants tem­porar­i­ly.

Fur­ther the NGC was in ne­go­ti­a­tions with down­stream petro­chem­i­cal plants that were seek­ing new con­tracts. It meant that at the end of 2020 the NGC had ex­cess gas but ap­peared not to pre­dict that as the world emerged from lock­downs things would im­prove and the Point Lisas plants would want their gas. How­ev­er sim­ply look­ing at the ma­jor busi­ness and en­er­gy plat­forms one would have seen from as ear­ly as No­vem­ber 2020 there were pre­dic­tions of a re­bound and be­fore the NGC de­ci­sion to in­vest quar­ter bil­lion on Train 1 was made there were al­ready pos­i­tive signs of im­proved petro­chem­i­cal prices.

The NGC Chair­man then ex­plained that the com­pa­ny was the on­ly one to in­vest in the Train 1 Turn­around.

He said, “The is­sue around Train 1,2 3 and 4, and Cur­tis is it cor­rect about gas for Train 1, we have not said no, but what we have said is that the gov­ern­ment in recog­ni­tion of that con­tin­ued to have dis­cus­sions around the fu­ture own­er­ship struc­ture of the Train 1 fa­cil­i­ty. And to the ex­tent that those dis­cus­sions are con­tin­u­ing and those dis­cus­sions are on­go­ing, there is no de­ci­sion on what that is go­ing to be, be­cause the is­sue about no gas go­ing to Train 1 is one is­sue, but there are oth­er is­sues around de­com­mis­sion­ing, there are oth­er is­sues around how the fa­cil­i­ty is go­ing to work, there are con­trac­tu­al is­sues be­tween all the par­ties and there­fore, those are mat­ters that are on­go­ing. In the cir­cum­stances, NGC al­so is in the mar­ket for sell­ing LNG prod­ucts.... The de­ci­sion that we made was al­ways based on gov­ern­ment’s ap­proval and ne­go­ti­a­tions with the par­ties which we un­der­stood.”

In mak­ing the de­ci­sion Enill in­sist­ed that it (the Board) was not in con­trol of the out­come and there­fore felt it should be ab­solved if it fails.

“We told the gov­ern­ment that be­cause we are not as a Board in con­trol of those de­ci­sions that have to be made for this to be suc­cess­ful, should these de­ci­sions not go ac­cord­ing to our plan we would wish to be in­dem­ni­fied be­cause we do not on this oc­ca­sion have any in­flu­ence in those de­ci­sions, those are de­ci­sions out­side of our con­trol, and there­fore we think that this is an op­por­tu­ni­ty for us to use the gas that we have, not to con­tin­ue at loss­es.”

He added, “But it is based on that con­di­tion, the gov­ern­ment and we pro­ceed­ed. When we did the eco­nom­ics, and Cur­tis is right, we looked at the ad­di­tion­al cost for the year, we looked at the LNG mar­ket and the mar­gins that we would have made and the car­goes that we would have con­tract­ed on a third par­ty ba­sis, we felt that eco­nom­i­cal­ly, for the year at least, it made sense, con­di­tions changed, that did not oc­cur and here we are to­day talk­ing about is­sues where in some in­stances some of the in­for­ma­tion is avail­able, while some is not ava­ial­ble.”

He said if the coun­try is suc­cess­ful there should be more gas in two years, and if it does not then de­ci­sions will have to be made but not­ed that un­like oil, nat­ur­al gas re­quires pro­cess­ing ca­pa­bil­i­ties and Train 1 pro­vid­ed that op­por­tu­ni­ty.