T&T Pa­tri­ot­ic

The ex­e­cu­tion of do­mes­tic nat­ur­al gas sup­ply con­tracts since the end of sig­nif­i­cant long-term agree­ments has been a ma­jor na­tion­al event. Re­call the fan­fare of the an­nounce­ments in 2017 and 2018 of the Na­tion­al Gas Com­pa­ny of T&T (NGC) en­ter­ing new nat­ur­al gas sup­ply con­tracts with EOG and Shell and bpTT re­spec­tive­ly. Those up­stream agree­ments en­abled NGC to en­ter re­newed gas sup­ply con­tracts with all its ma­jor down­stream petro­chem­i­cal cus­tomers.

A sim­i­lar process fol­lowed for Shell and bpTT in Sep­tem­ber 2023 and be­tween NGC and its down­stream cus­tomers in No­vem­ber and De­cem­ber 2023. It is not clear if NGC’s 2023 up­stream agree­ments have a term of three or five years. What is clear is that the down­stream nat­ur­al gas sup­ply be­tween NGC were two-to-three-year con­tracts, which are all up for re­new­al in 2026.

The big is­sues fac­ing the down­stream petro­chem­i­cal in­dus­try in T&Tare the re­li­a­bil­i­ty/avail­abil­i­ty of nat­ur­al gas sup­ply and the cost com­pet­i­tive­ness of pro­duc­ing in this coun­try aris­ing pri­mar­i­ly from the price of nat­ur­al gas (most sig­nif­i­cant pro­duc­tion cost) and mar­ket de­vel­op­ments of tar­iffs in the US mar­ket and car­bon bor­der ad­just­ment mech­a­nism (CBAM) in Eu­rope.

Re­gard­ing the dri­vers for nat­ur­al gas sup­ply re­li­a­bil­i­ty and avail­abil­i­ty, some re­lief is ex­pect­ed in 2027 with the start of pro­duc­tion of the Man­a­tee gas pro­duc­tion which is ex­pect­ed to in­crease pro­duc­tion by about 600 mil­lion stan­dard cu­bic feet per day (MM­scfd).

It must be stat­ed that gas pro­duc­tion rates ex­pe­ri­ence an an­nu­al de­cline, which can be as much as 10 per cent per year. All the oth­er re­cent first gas an­nounce­ments from bpTT and EOG, for ex­am­ple, helped off­set the de­cline of their ex­ist­ing pro­duc­tion.

Rys­tad En­er­gy pro­duced a very good out­look of the T&T gas in­dus­try which was pre­sent­ed at the En­er­gy Cham­ber En­er­gy Con­fer­ence in 2023. The chart be­low chart be­low was de­vel­oped by Rys­tad in 2017 and every­thing re­lat­ed to Ca­lyp­so and Venezuela Plat­for­ma Deltana needs to be shift­ed to the right by at least 5 years. What is note­wor­thy is that Man­a­tee pro­vides short and at most medi­um-term re­lief. What is ex­treme­ly crit­i­cal for the long-term sus­tain­abil­i­ty of the nat­ur­al gas sec­tor is the de­vel­op­ment of the deep­wa­ter Ca­lyp­so field (Wood­side/bpTT).

Oth­er sup­ply sources, which in­clude the Drag­on field and ex­ist­ing pro­duc­er op­por­tu­ni­ties, and the Venezue­lan Platafor­ma Deltana field, of which Man­a­tee is a part, on the T&T side of the bor­der.

Rys­tad 2017 view of T&T’s gas sup­ply out­look

Re­cent events at Cana­di­an fer­tilis­er gi­ant Nu­trien in Trinidad and To­ba­go sug­gest that they had reached a tip­ping point and the dis­pute over the port fees was last un­bear­able ad­di­tion to their cost in an en­vi­ron­ment where they are strug­gling with not be­ing able to run all their plants at op­ti­mum lev­els.

Nu­trien made it clear that nat­ur­al gas sup­ply is al­so an is­sue for the com­pa­ny, when it out­lined in an Oc­to­ber 21, news re­lease, “This shut­down is in re­sponse to port ac­cess re­stric­tions im­posed by Trinidad and To­ba­go’s Na­tion­al En­er­gy Cor­po­ra­tion (NEC) and a lack of re­li­able and eco­nom­ic nat­ur­al gas sup­ply that has re­duced the free cash flow con­tri­bu­tion of the Trinidad Ni­tro­gen op­er­a­tions over an ex­tend­ed pe­ri­od of time.”

Hav­ing rel­a­tive­ly short two to three year down­stream nat­ur­al gas sup­ply agree­ments al­so cre­ates an­oth­er sig­nif­i­cant chal­lenge for the down­stream petro­chem­i­cal pro­duc­ers whose process plants re­quire ma­jor main­te­nance every three to four years, the cost of which is usu­al­ly more than US$40 mil­lion. How does one take such a de­ci­sion to make that ex­pen­di­ture with on­ly a two-to-three year nat­ur­al gas sup­ply agree­ment?

We are now in No­vem­ber and as­sum­ing that the NGC nat­ur­al gas sup­ply agree­ments with the up­stream sup­pli­ers are in­deed five years or longer, then it is rea­son­able to ex­pect that there will al­ready be a sched­ule for NGC ne­go­ti­at­ing meet­ings with down­stream com­pa­nies. Those ne­go­ti­a­tions would be for new or re­newed sup­ply con­tracts which like­ly ex­pire in the third or fourth quar­ters of 2026.

The down­stream com­pa­nies will be ex­treme­ly price sen­si­tive and will be ex­pect­ing a firmer NGC com­mit­ment on avail­abil­i­ty/re­li­a­bil­i­ty of sup­ply. NGC may be con­strained based on the terms agreed in their up­stream sup­ply con­tracts.

This leaves the NGC prof­it mar­gin as a gas mer­chant as a pos­si­ble area that may have to yield to en­able deals to be achieved. Ex­pect long dif­fi­cult ne­go­ti­a­tions. Notwith­stand­ing the rocky start of the new NGC Board and the ex­o­dus of ex­pe­ri­enced se­nior man­agers it is crit­i­cal that they get to work with alacrity on this very im­por­tant ac­tion. The fu­ture of the down­stream in­dus­try de­pends on the out­come of these up­com­ing ne­go­ti­a­tions.

T&T Pa­tri­ot­ic is in­volved in T&T’s petro­chem­i­cal in­dus­try and prefers to re­main anony­mous be­cause of the sen­si­tiv­i­ty of his po­si­tion.