CRISIS of T&T’s gas monetisation model

The Daily Express of September 16, 2104 and the Newsday of the same date reported on the contribution of Mr Austin Jack Warner, MP for Chaguanas West to the 2015 Budget debate. In both newspaper reports Mr Warner read from two letters allegedly sent from the Polnt Lisas Energy Association (PLEA) to the Minister of Energy dealing with the curtailment of the supply of gas feedstock to Point Lisas users. The primary issue is the supply of gas to Point Lisas end users which is below the level of supply necessary to maximise profits from operating the plants that use gas as feedstock. This curtailment continues up to today. The reality is that PLEA is a customer of NGC but NGC is not in the upstream business of gas exploration and production. NGC is enjoying a monopoly created by legislation not by hard reality on the ground. The largest single supplier of gas to NGC is BPTT and the capability of the other gas producers to fill the supply hole created when BPTT gas supply falls short of demand is questionable at best. In response to the shale gas revolution in the US BPTT has now to change its strategic imperative in order to maximise profits in this new environment. Four LNG trains were placed in T&T on the premise that the US would have been an energy importing market with an insatiable appetite for carbon based energy which it could not satisfy from indigenous resources. Today shale gas and shale oil/tight oil produced in the US has destroyed that myth and a whole new US energy market is under construction with the US gearing to be a world energy exporter. The US gas market no longer yields the profits it once did for the shareholders of Atlantic. LNG cannot compete with US produced pipeline gas and investments are pouring in to extend pipelines into urban areas previously by-passed. More and more LNG loads from T&T must now be sold under arbitrage or on short term supply contracts. The prices are higher than those under long term contracts but now you must produce and store a larger portion of production and that has a cost to it. Exports to Latin America and Asia are all ruled by short term/fixed term supply contracts. The gravest threat looming on the horizon is US LNG exports especially to Latin America. BPTT has to respond to this reality within the parameters set by a globalised energy company with a potent threat hovering over its head as a result of the US Gulf of Mexico oil spill. BPTT has then to maximise the profits earned through the sale of its gas to end users as PLEA in T&T especially since the cost of producing gas in T&T continues to rise given the depletion of the large gas pools within its shallow acreages. Today in the new dispensation the NGC middleman is now a fetter on the drive to profit maximisation. At present the price NGC pays to BPTT for the gas supply BPTT has no financial incentive to be the swing shift producer of gas for end users. BPTT will only supply what it has been contracted to supply. BPTT is no longer supplying cushion gas. BPTT also wants an increase in the price of gas paid by NGC when the supply contract is renewed given the changed cost structure it must operate/deal with. The days when BPTT could have actually subsidise the NGC are then over, kaput. Shale gas in the house. BPTT is then calling for the right to sell the gas it produces directly to end users. Whither the NGC? These revelations in the public domain since 2010 have been buttressed by a programme of infrastructure refurbishing especially of offshore production infrastructure by both BPTT and BG which forced the fall in gas production which continues. The present government has responded by giving incentives to stimulate exploration and production, the gas baby grant, but the substantive issue of the demand for a new paradigm/model remains shrouded in silence on the part of the political players. The gas curtailment continues raising questions of the viability of gas feedstock industries in T&T viewed through the reality of US shale gas. The Sunshine newspaper dated September 19, 2014 published copies of the alleged letters of PLEA to the Minister of Energy. One letter dated October 3, 2011 indicated that PLEA called for the producers of gas to sell gas directly to end users bypassing the NGC. This alleged letter from PLEA therefore supports the position of BPTT. In the quest for re-election the question arises of to rule what? My book “The geo-politics of LNG in Trinidad and Tobago and Venezuela in the 21st century” gives further detail on this issue.

Trinidad and Tobago Guardian of September 22, 2014 on page A20 published an article titled: “BPTT: Gas curtailment due to pause in investment” in which BPTT states that the present gas curtailment since 2010 was not the primary result of maintenance of infrastructure by the major gas suppliers but the “result of a pause in new investment in recent years by upstream producers including BPTT.” Furthermore this pause is the product of an “unfavourable investment climate”. The primary question then is what does BPTT want in order to move from an unfavourable to a favourable investment climate? In the article BPTT states that “commercial and structural issues” have to be addressed to change the present lack of investment. BPTT states that an energy policy must now focus on “the right structural and commercial terms to ensure it attracts the level of investment necessary to bring those resources into production”. BPTT wants then a new gas monetisation model driven by a current, relevant paradigm ever mindful of the shale gas revolution. Contrary to the propaganda Juniper does not signal the return to business as usual. Juniper is a 1TCF field with the gas assigned to Atlantic with a time frame of production in 2017. The open wound remains untreated and the viability of those that use gas feedstock is up in the air.

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