THE National Gas Company (NGC) needs to remain a key part of this country's natural gas value chain, but it may have to be more flexible in terms of how it deals with its customers – and the Government will also have to be flexible with how it sees the gas value chain. This is the opinion of former energy minister Kevin Ramnarine.
At a signing ceremony for the NGC/Shell term sheet at the Hyatt Regency, Port of Spain on June 24, Prime Minister Dr Keith Rowley and Energy Minister Franklin Khan were among those declaring the NGC has a permanent place in TT's energy business model.
Ramnarine agreed with this position observing in a Business Day interview, "The NGC model has been good for TT, giving us the most profitable company in the Caribbean."
However, the question, which he said has being asked for some time, is whether the NGC's role needs to be reviewed. He indicated the Gaffney Cline Gas Master Plan of 2001 argued for the NGC's removal from the value chain, while in contrast, the Poten and Partners Gas Master Plan in 2015 made the opposite argument. While there are pros and cons, Ramnarine believes "it has more advantages than disadvantages." One advantage, he said, is that by NGC playing the role of natural gas aggregator, it reduces supply risks to its customers. NGC also takes the risk of operating a pipeline network.
"I think if we were to remove the NGC from the gas value chain and allow upstream to sell natural gas to where they want, we will not have a Pt Lisas in the future," said Ramnarine. "It's no secret the upstreamers have a preference for the LNG (liquefied natural gas) business."
To properly address the complex question of NGC's future role, Ramnarine said it is necessary to have a gas master plan done every five years because "the world is changing very fast." As an example, he said the Poten and Partners plan said the best value for TT's natural gas was in ammonia production. "In the current scenario of low prices, that no longer applies." Ramnarine said a possible answer could be finding a middle path and to "try new approaches such as auctioning tranches of natural gas."
He recalled that between 2011 and 2015, great strides were made in changing NGC's structure "when we (under the People's Partnership) vertically integrated by acquiring Total's stake in the Angostura field and acquiring Conoco Phillips' shares in Phoenix Park Gas Processors Ltd." Ramnarine also recalled that self marketing of LNG was done in 2012 and "that was a success." He said Dr Terrence Farrell's opinion on the future of NGC "adds to the conversation of the future of the natural gas sector, and he lamented this conversation "has been severely contaminated by the politics."
At a forum last month at the National Academy for the Performing Arts in Port of Spain, Farrell said NGC should not be the monopoly provider of natural gas to the downstream petrochemical sector. He felt the company should give up some of its revenue to sustain and build the sector. Farrell referred to the Gaffney Cline and Associates and the Poten and Partners gas master plans to support his argument.
However, the Prime Minister has warned that removing NGC from this model is tantamount to “committing harakiri (Japanese ritual suicide)” to TT’s energy sector. “We are all in this together. The NGC equals the people of TT, end of story.” He explained the investment that TT made in the NGC was not different from the investments which upstream and downstream energy companies made in their operations. “We are not in this for joke,” Rowley said.
Referring to the key role played by NGC in meetings with Shell, BP, BHP and EOG Resources in the Hague, London and Houston over the last month, the Prime Minister declared, “This signing today is a bright light in a period which looked gloomy and our future is now in good hands.” He explained that TT has to ensure that its relationships with upstream and downstream energy companies are sustainable. Should this not happen, Rowley said investors “will pick and leave as they have done before.” Rowley said the gas curtailment issues which TT faced in 2014 and 2015 had to do with building relationships with players who can find the multi-million year old gas which still exists in this country’s energy province.
At the signing ceremony Khan also declared NGC was here to stay.
“Nobody is going to squeeze the NGC out of the gas value chain.” He said the signing of the term sheet with Shell meant that gas contracts have been signed with all major companies operating in TT. Since upstream producers are demanding higher prices for their gas, Khan said, “As a consequence, the gas prices to the downstream petrochemical plants in Pt Lisas and elsewhere would have to increase.” He said the NGC has significantly reduced its margins and been engaging its downstream customers on strategies aimed at optimal utilisation of natural gas. Government, he said, is prepared to partner with “industry in practical and innovative ways to facilitate its growth and sustainability.”
Nutrien and N2000 have “taken on board new pricing arrangements," Khan said, and expressed confidence that companies whose contracts expire in December will “come to agreement with NGC for a new gas supply contract.”
Khan observed the NGC marks its 44th year in the gas business this year. He said, "From its humble origin as a mid-stream energy company involved in the purchasing, transmission and sale of natural gas; the NGC, has evolved into a mega-company, with assets exceeding $43 billion." He said the company's activities also include the marketing of LNG, the expansion of the utilisation of CNG as a transportation fuel, the development of Port and Industrial Estates and upstream gas and oil production.
Apart from having a major role in the development/sustenance of gas-based industries in the domestic energy sector, Khan said, "NGC also has a major role to play in securing of supplies of gas from cross border fields and Venezuelan gas."
Outgoing NGC chairman Gerry Brooks said the company’s dedication is reflected by the uplift of gas production from 3.2 to 3.8 billion cubic feet. Brooks said today there is better gas coordination in the energy sector and minimisation of disruptions and outages. NGC president Mark Loquan said the company “has proven itself and continues to prove itself worthy as a key economic partner generating greater value for the country.” Outgoing Shell vice president and country chairman Derek Hudson said the agreement was a positive step for the people of TT and Shell. Rowley praised Brooks and Hudson for their service to TT.