Atlantic LNG Ltd.'s planned Train 4 expansion could be in trouble after Trinidad and Tobago Prime Minister Patrick Manning threatened to ban the LNG expansion unless participants in that joint venture improve their offer to the government.
Speaking at the recent opening of a new headquarters in Port of Spain for BG Group's local operation, the prime minister said his government is so "dissatisfied with the latest offer for LNG expansion (that) it was reconsidering if it wanted any further expansion."
He said, "We have come to the conclusion that, if it is that Trinidad and Tobago is not satisfied with the returns it gets from LNG expansion, then there will be no LNG expansion in Trinidad and Tobago. The bottom line for us is the development of our people and for a fair rate of return from our natural resources."
There was evident concern among BG executives, including BG International Vice-Pres. Martin Houston, who had flown in from London for the opening. Houston and BG Trinidad & Tobago Ltd. Pres. Peter Dranfield met with Manning for more than 15 min following his speech. Dranfield later declined to comment specifically on Manning's statement, although he said, "We will work out things; there is no need to fight."
Locked in negotiations
The Manning administration has been locked in negotiations with Atlantic LNG's shareholders (BPTT 34%, BG 26%, National Gas Co. of Trinidad & Tobago Ltd. 10%, Belgium's Tractebel SA 10%, and Spain's Repsol-YPF SA 20%) for a $1.1 billion expansion (OGJ Online, Aug. 29, 2002).
In his speech, Manning was adamant that his government must receive an acceptable rate of return for its natural gas. He said, "While on the one hand we ensure that the companies are able to make a comfortable return on investment, Trinidad and Tobago as a country must also be satisfied with the return we get as a result of the production and exportation of our natural gas resources."
The prime minister's announcement raised alarms among Atlantic LNG shareholders, who subsequently attempted to get negotiations back on track.
BPTT Executive Chairman Robert Riley later issued a statement expressing confidence that a compromise could be reached.
Costs disputed
Highly placed sources in the Ministry of Energy said that at the heart of the dispute are estimates of the cost of the project. Ministry officials have accused the LNG partners of significantly increasing the cost of the project, which would lead to a loss of government revenue. Under the country's present legislative framework, some construction costs would be written off by the government: The higher the cost, the greater the write-off.
Under the project agreement, Trinidad and Tobago collects a netback price for its gas based on the Henry Hub spot market price for US gas, minus the costs of liquefaction, shipping, and regasification cost, plus the cost of pipeline transportation to the complex. Lifting costs also are subtracted from the wellhead price, and 55% of any remaining profit from that gas goes to the government.
Another dispute
Trinidad and Tobago also is being pressured by its state-owned oil company, Petroleum Co. of Trinidad & Tobago Ltd. (Petrotrin), to withhold agreement to the LNG expansion unless the company collects more than $60 million from Atlantic LNG. OGJ obtained a copy of a confidential document sent to the government's negotiating team by Petrotrin's management in which the state firm demanded that its subsidiary Trinmar Ltd.'s base be relocated if Train 4 is authorized. Trinmar's offshore production operations are serviced from a compound next to Atlantic LNG operations, and they share the same harbor channel.
Petrotrin officials claim expansion of the LNG train will increase vessel traffic in the harbor with a corresponding reduction in safety. Therefore, they want to relocate Trinmar's base either to the existing La Brea Industrial Development Co. site or to a new site to be constructed south of Port Fortin.
