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Thursday, July 24, 2025

NGC margins crushed by low commodity prices says Energy Minister

by

Renuka Singh
1680 days ago
20201216

En­er­gy min­is­ter Franklin Khan re­vealed that there was a dra­mat­ic drop in the prof­it mar­gins at the State-owned Na­tion­al Gas Com­pa­ny.

Ques­tioned dur­ing the oral ques­tion seg­ment in Sen­ate yes­ter­day by Op­po­si­tion Sen­a­tor Wade Mark about the NGC’s prof­itabil­i­ty, Khan con­firmed that NGC’s mar­gins dipped from 22 per cent in 2018 to a mere 7 per cent in 2019.

“Na­tion­al Gas Com­pa­ny fi­nan­cial per­for­mance for its fi­nan­cial year 2019 was ad­verse­ly im­pact­ed by falling prices for petro­chem­i­cals and nat­ur­al gas. These com­modi­ties ac­count for al­most 75 per cent of NGC’s rev­enue,” Khan said.

Khan said that the com­bi­na­tion of low­er mar­ket prices and in­creased cost re­sult­ed in the “com­pres­sion of gross mar­gins from 22 per cent in 2018 to 7 per cent in 2019 and thus the low­er prof­itabil­i­ty”.

He said that the com­pa­ny was al­so af­fect­ed by the glob­al con­trac­tion trig­gered by the COVID-19 pan­dem­ic.

“The fi­nan­cial per­for­mance of the com­pa­ny is fur­ther im­pact­ed by COVID-19, as prices of com­modi­ties in par­tic­u­lar methanol, am­mo­nia, LNG and crude oil im­pact­ed on prof­itabil­i­ty and liq­uid­i­ty in the com­pa­ny re­mained de­pressed through­out 2020.

NGC strat­e­gy to­wards im­prov­ing prof­itabil­i­ty in­volves val­ue cre­ation and op­ti­mi­sa­tion with­in its op­er­a­tion,” he said.

Khan said that the com­pa­ny en­sure the re­duc­tion in project over­runs to re­duce loss­es

“The com­pa­ny is al­so en­hanc­ing the val­ue of its op­er­a­tion across the en­tire val­ue chain and with­in NGC to dri­ve syn­er­gies and op­ti­mi­sa­tion,” he said.

When pressed fur­ther by Mark, Khan ac­cused the Op­po­si­tion of “miss­ing the point”.

“We have com­modi­ties that we sell. Oil, gas, petro­chem­i­cals in par­tic­u­lar, methanol and am­mo­nia. Once the mar­kets for these com­modi­ties re­main de­pressed, there will be a chal­lenge,” he said.

“We are price tak­ers, we do not set the price,” Khan thun­dered.

He said that even though NGC was get­ting in­volved in the gas val­ue chain, it was still at the mer­cy of the mar­ket.

“All we have to hope that as a na­tion, the glob­al econ­o­my starts to re­bound and it starts to re­bound as soon as pos­si­ble,” he said.

Khan said that was why the COVID-19 vac­cine was so im­por­tant.

“We have to get mar­ket for our prod­ucts and mar­ket that of­fer at­trac­tive prices and at­trac­tive prices are based on sup­ply and de­mand. It has noth­ing to do with what we are do­ing here,” Khan said.

Op­po­si­tion sen­a­tor Anil Roberts al­so asked about the up­stream mar­ket deals that were hashed out by the Gov­ern­ment in Hous­ton last year with EOG Re­sources.

“NGC is an ag­gre­ga­tor and prices are based on what we call a ‘price curve’. There is a base price and you get a high­er price based on com­mod­i­ty pric­ing. It is not based on up­stream,” he said.

Khan said that when prices for methanol and am­mo­nia are high, “every­body is laugh­ing to­wards the bank”.

“We are in a de­pressed mar­ket and we just have to hope that the glob­al econ­o­my picks back up, “ he said.


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