Thousands of jobs may be lost if the National Gas Company (NGC) goes ahead with its plan to significantly increase natural gas prices to manufacturers.
The State Enterprise is already demanding that the manufacturing sector pay 13 per cent more for natural gas this year, moving to as high as a 100 per cent increase by 2023.
The Sunday Guardian has learnt that at present manufacturers pay between US $2 to US $2.50 per million British Thermal Unit (mmbtu) and the NGC wants this price to escalate over time to US $4 per mmbtu.
The NGC has been embroiled in difficult negotiations with all its customers as it tries to significantly increase prices because of its new deal with the oil and gas majors that have seen significant price increases for the aggregator.
The deal which was brokered by Prime Minister Dr Keith Rowley means that the NGC has to pass on price hikes to its customers, many of whom say they cannot pay the new prices.
This has already led to the loss of scores of high-paying jobs and tens of millions of dollars to the Treasury, the closure of an ammonia plant, and the planned shutdown of a methanol plant in a week.
Several manufacturers spoke to the Sunday Guardian on condition of anonymity for fear of being targeted. They insisted that the one competitive advantage they have is being taken away from them by the NGC and they will have no choice but to pack up and leave because they will not be able to compete.
They pointed to the fact that many companies have already moved to Jamaica and South America where labour laws are less restrictive, productivity higher and the ease of doing business better, as T&T becomes increasingly unattractive to do business.
Jobs have already been lost as a result of the challenges facing the sector.
TTMA: Members worried
President of the T&T Manufacturers Association (TTMA) Franka Costelloe confirmed to the Sunday Guardian that her members are extremely worried by the proposed price increase which has been made retroactively to 2019.
“We are exceptionally concerned about the impact, about the cost impact, about our ability to maintain competitiveness, specifically in the export market, and our ability to remain competitive in attracting inward investments for new manufactures and for international investors to stay in Trinidad and to expand their factories,” Costelloe said in a candid interview.
Costelloe explained that while she did not know the exact numbers, since each manufacturer has individual contracts with the NGC if what she has been told is correct, it could lead to massive layoffs.
“If we start to reduce our competitiveness in the manufacturing market, you start to talk about unemployment, you start to talk about investors pulling out.
“I wouldn't be surprised that you could anticipate the closedown of some of those major factories if there is a 100 per cent increase of major expense items.”
The TTMA president said natural gas was T&T’s competitive advantage over other CARICOM states, and also some South American countries, and for a lot of international investors and local manufacturers who have a substantial size and use natural gas.
She said the sector was already faced with a significant number of taxes that are working to increase the cost of doing business and decrease the ease of doing business.
She argued: “It is the one thing that we have, it’s not done as yet, so it’s a matter of negotiations between NGC and the individual members, and the TTMA is meeting with the office of the Ministry of Energy to discuss it. So, we’ll see if we get some headway.”
Companies to be hit hard
Among the hardest-hit companies will be:
•Trinidad Cement Limited
•Associated Brands Limited
•Several companies that fall under the ANSA McAL group including Carib, Carib Glassworks, Abel etc. ANSA McAL is the parent company of Guardian Media Limited.
“Yes, you are absolutely correct, those are the bigger companies that are going to be grossly affected by any price increase. You listed them all out. It’s a significant portion of their expense line item.
"This is a big deal, a game-changer for them, but it’s negligent to NGC, it’s .5 per ecnt of NGC’s natural gas sales volume. And that’s where we are going to be discussing with the office of the Ministry of Energy because we have to support the manufacturing community to create a sustainable environment in Trinidad. We have to be able to maintain these jobs. The manufacturing sector employs 50,000 people in this country,” Costello said.
'This is a national issue'
Costello told the Sunday Guardian that all 150 manufacturers combine make up less than .05 per cent of the NGC’s sales and surely the company was putting an entire industry at risk for a small percentage of its business.
Asked why the NGC should subsidise private sector companies, the TTMA president said, “Why do I go to the Minister of Energy? I go to the Minister of Energy to highlight the plight of the manufactures in this decision and this is a national issue. This is not just an NGC issue or a manufacturers issue, this is a national issue.
“I agree that every state-owned company, like any company, should be not be running at a deficit, not running at break-even, and state companies subsidising to its own peril definitely should not be a strategy.
"We support companies to always run at a profitable state, it’s nothing different than what we would say for the NGC. But at the same time, this is a group that constitutes less than one per cent of volume sales and is made up of 150 members and this can have a massive impact on the entire nation.
"If we start to reduce our competitiveness in the manufacturing market, you start to talk about unemployment, you start to talk about investors pulling out. We’re talking about subsidising .52 per cent for NGC’s existence.”
Questions to Enill
The following questions were sent to the NGC Chairman Conrad Enill.
1) Has the NGC indicated to manufactures that the price they pay for natural gas will be increased effective 2019?
2) What percentage of total gas sales by the NGC is sold to manufacturers?
3) Why the need for double-digit price increases at this time?
4) Is the NGC concerned by the potential impact of this on the sector and jobs?
Enill suggested that the questions be sent to the Head of Corporate Communications at the NGC Lisa Burkett.
NGC: We will continue to negotiate in good faith, we will not conduct negotiations via the media
In a response, Burkett said "NGC has been in discussions with the LIC sector for over 18 months and is still in discussions with them. We all recognise that there is a changing energy landscape, not just in Trinidad and Tobago, but also globally.
"We are in active negotiations at this point and would not conduct negotiations via the media.
"NGC acknowledges the importance of the LIC sector and has approached its negotiations in that context. We will continue to negotiate in good faith."