Having spent hundreds of millions of dollars on what now appears to be an ill-advised attempt to save Atlantic LNG Train 1, State Owned National Gas Company (NGC) unilaterally walked away from its agreement to fund the maintenance of Atlantic LNG in the process creating a crisis for the rest of the shareholders.
To understand how it came to this we must go back to December 3, 2020, when documents obtained by the Sunday Business Guardian show that on the said day bpTT wrote to the NGC advising the state-owned company that it (bpTT) would not be delivering its full daily contracted quantities (DCQ) for contract year 2021. bpTT further advised NGC in that very December 3, 2020 email, that NGC should take this into consideration before making any decision to invest in Train 1.
Guardian Media has a plethora of documents and based on multiple sourcing, can confirm that the NGC—led by its president Mark Loquan—was convinced that it could procure the required gas for Train 1 and advised the Board and the Keith Rowley government to pursue the unilateral funding of the Train 1 Turnaround (upgrade) and to fund the maintenance of the Train 1 operations.
Train 1 is owned by Atlantic Trinidad Limited (Atlantic) which also owns the entire facility at Point Fortin where all 4 trains operate. Therefore as the owner of the facilities, Atlantic covers the shared cost to maintain and operate the entire facility which is used by all 4 trains. This shared cost is paid for by the Train 1 shareholders who get production payments from the other trains. The budgets cost for train 1 for the period August to December 2021 is US$45.3 million out of which US$18.7 million is shared cost. Therefore, this split turns out to be approximately US$27 million for train 1 specific cost and US$18 million for shared cost.
Prime Minister Dr Keith Rowley
OFFICE OF THE PRIME MINISTER
Guardian Media perused a series of documents but could not locate if a detailed business case and volume analysis were made to the Board of Directors by the NGC management of where the gas would come from. But sources in the government in a position to know, told the Sunday Business Guardian that on several occasions Loquan insisted he had site of gas that could be used to support the Train initiative.
From as early as February 2021 the NGC knew that that its deal was in trouble and that to breakeven in the train 1 required pouring even more money into the company and its commissioning based on the December to February turnaround.
“Failure to execute such Agreements today will lead to a material delay in the commissioning of Train 1 to April 2021 given that ALNG has now commenced a turnaround on Train 3 and given the COVID restrictions are limited in terms of the number of persons that can be on their facilities and would therefore be unable to carry simultaneous operations between Train 1 start up and Train 3 turnaround. Such delay would prejudice NGC in that the breakeven offtake LNG price would move from (price given)” the letter to Finance Minister from NGC Chairman Conrad Enill read.
The Sunday Business Guardian has taken an editorial decision to withhold the NGC’s commercially sensitive information because it is immaterial to the story and could damage the state enterprise.
This is the same letter of February 25, 2021, in which the NGC asked the Minister of Finance to indemnify it, its subsidiary company NGC LNG and the directors personally .
Enill said, “We also previously discussed your commitment to indemnify the NGC company and Directors for any claims or losses stemming from the Train 1 rescue package ($168M). Our request is to extend that indemnity to cover ALNG funding for the April 1, 2021 to December 31, 2021. NGC is also required to indemnify its subsidiary NGC LNG which holds the 10 per cent interest in Train 1.”
We now know that Prime Minister Dr Keith Rowley was himself supportive of the indemnification move that effectively seeks to protect the directors of the NGC from legal jeopardy.
Rowley told a news conference in Tobago that he supported the unprecedented move and that the situation is complex and asked the country to trust that his administration is acting in the best interest of the country.
The need for the funding was so urgent yet NGC refused to terminate the funding agreement and allowed itself to be exposed to cash calls from Atlantic when NGC had the option to terminate by 2 days notice without cause. NGC continued to leave itself open to cash calls and in fact refused to not only terminate the funding agreements but also did not pay its June and July cash calls in the sum of US$6 million.
NGC President, Mark Loquan
That led to a series of emails between Atlantic’s president and Loquan calling on the NGC to pay its debt but the State enterprise did not and on August 3, Atlantic’s CEO Ronald Adams wrote to NGC saying its deal has been terminated.
Adams wrote, “Pursuant to Clause 4 of the Agreement ALNG 1 therefore hereby notifies NGC LNG of the termination of the Agreement effective August 5, 2021.”
The following questions were sent to NGCs president Mark Loquan:
1. ↓Did you as part of the NGC Board seek an indemnification from the Minister of Finance and the Government for the Atlantic Rescue package? If so, why?
2. ↓Was there a fear that the US $24.7 million and the subsequent US $40 million were at risk of being lost? If so did you as a director feel you had a fiduciary responsibility to not pursue the investment because of its risk to shareholders?
3. ↓Were you written to on August 5 by Atlantic LNG indicating that the funding agreement and the gas sales agreement for Train 1 between Atlantic and LNG had been terminated?
4. ↓Did you advise the Board that the NGC could go ahead with the investment in Train 1 because you were of the view the gas could be found?
5. ↓In retrospect was that bad advice ?
Loquan did not directly respond but Lisa Burkette, the company’s Corporate Communication Manager wrote Guardian Media and said the following:
“Upon review of your questions, one must appreciate that they relate not only to the decisions made regarding Train 1. In fact, they speak to wider conversations on the status of the entire Atlantic facility with particular interest in the issue of unitisation, its future business model, etc.
The discussions surrounding these issues are ongoing among the stakeholders of Atlantic, which include NGC, other shareholders and the GORTT. Such discussions are at a critical and sensitive juncture and NGC must act responsibly and exercise prudence to avoid making any premature announcements on what are complex matters with far-reaching impact. NGC must also maintain fidelity to the agreed parameters of confidentiality on this issue, and as such we are precluded from disclosing any information at this time.”
While Burkett is insisting that discussions are ongoing and at a sensitive stage, statements similar to what Energy Minister Stuart Young and Prime Minister Dr Keith Rowley have in the past told the country, both internal NGC documents and a letter from the president of Atlantic LNG to Loquan paint a completely different picture.
Since the termination of the funding agreements Atlantic does not have any funds to pay its monthly operational cost. Under the shareholders agreement (SA), it is therefore left for the 4 shareholders (BP, Shell, NGC and Summer Soca) to inject money via capital contributions.
However, before any resolution for capital injection into the company can be approved, the SA require 100% approval from all shareholders. Subsequent to the termination of the funding agreements, Summer Soca (the Chinese) has indicated that given that train 1 is closed and therefore can no longer generate income, they (Summer Soca) have no business case to inject any further sums into train 1 and would therefore no longer approve any resolution for capital injection by the shareholders into train 1.
Therefore, all attempts by Atlantic and the other shareholders to have resolutions for capital injection into the company to fund its monthly costs have been defeated with the result being that Atlantic is quickly running out of money. Since the capital injection resolution cannot be passed there is no contractual obligation on Summer Soca to inject funds into Atlantic. The Sunday Business Guardian has documents that show shareholders are of the view that train 1 is effectively closed and this is further supported by the fact that Atlantic has already installed blinds on the train.
Summer Soca has said it is not putting any money into train 1. BP and Shell has said that it is not paying any money towards shared cost as closure of train 1 is imminent. Given the posturing of NGC and Government, both BP and Shell advised that they would only fund its share of one third of the train 1 specific cost and that they require granularity and certainty on train 1 closure and decoupling and decommissioning cost. Therefore the shareholders were asked to fund their respective shares of US$9 million (1/3 of the US$27 million train 1 specific cost). Summer Soca never approved the resolution for this sum which under the Atlantic SA required 100% shareholder approval. The resolution was therefore defeated.