The Trinidad and Tobago government is threatening to market its share of its natural gas and not leave it up to the partners of Atlantic LNG (ALNG).
Minister of Energy and Energy Industries Nicole Olivierre told attendees at the Trinidad & Tobago Energy Conference, held last month in Port of Spain, that the arrangements for marketing LNG were no longer working for the Caribbean twin-island nation.
“With many of our commercial pricing arrangements tied to a US destination, this country is realizing netbacks well below the actual market price applicable to the true destination of our cargoes,” Olivierre said. “The only conclusion that can be drawn is that the contractual arrangements for the marketing of LNG are not now working in the best interest of Trinidad and Tobago.”
Olivierre went further to question whether there was maliciousness on the part of the LNG partners to deliberately use transfer pricing arrangements to cut out Trinidad and Tobago from sharing in the higher revenues earned from cargo diversion.
“I am therefore forced to inquire—what has happened to the previous arrangement where the upside was to be shared 50-50 between the LNG partners and the government of Trinidad and Tobago for cargo diversions? Is it that the LNG partners are now diverting cargoes to the South American market in a transfer pricing arrangement to avoid sharing the upside?” the minister asked.
Trinidad and Tobago was once the dominant player in the US LNG market accounting for 70% of all LNG imported into the US. But following the shale revolution in the US, the island nation’s LNG producers moved out of the US market and diversified their cargoes to places where they could fetch higher prices.
The difference in the higher prices are then split 50-50 between the companies. BP Trinidad & Tobago (BPTT), the country’s largest gas producer and the largest shareholder in ALNG, distanced itself from any suggestion that it has been undercutting the country’s revenues by selling LNG to markets that are not attracting the best prices and therefore denying the country to share in the upside of the LNG trade.
In a strongly worded response to questions from the Business Guardian, the company said its sales of LNG were in keeping with not just the contractual arrangements with Trinidad and Tobago but also in keeping with the spirit of that agreement.
It wrote, “We believe that BP’s marketing of LNG cargos is fully aligned with the spirit of the agreements with the government of Trinidad and Tobago.”
The company added, “BP’s LNG shipments from Trinidad and Tobago are part of the company’s global LNG portfolio, which is managed carefully to ensure compliance with our local and global gas contractual commitments and in so doing we continue to generate value for the company and Trinidad and Tobago. However we would not comment on any specific commercial arrangements.”
Olivierre said as a consequence all existing LNG marketing arrangements are to be reviewed and new negotiated agreements structured to ensure that the commercial arrangements are equitable.
She also linked the negotiations for a gas supply agreement for ALNG Train 1 with greater benefits going to the state from LNG sales.
She said, “The 2018 expiration of the Train 1 contract is certainly an opportunity for us to begin to recalibrate the domestic LNG industry into one that brings greater benefit to the state. The state also has to option of entering into its own marketing arrangements for the minister’s share of gas under the existing production-sharing contracts. This is an option that the Ministry of Energy and Energy Industries intends to vigorously pursue along with the NGC.”
