Ramnarine, Browne not surprised by NGC loss

FORMER government ministers Kevin Ramnarine and Mariano Browne were not surprised by the National Gas Company (NGC) recording a loss of $2.1 billion at the end of last year.

NGC chairman Conrad Enill spoke about the loss in his report attached to the company's summary consolidated financial statements for the year ended December 31, 2020, published in a newspaper advertisement on Thursday.

Ramnarine said, "Market conditions in 2020 were not favourable to the NGC."

He said low ammonia and methanol prices in the sub US$200 per tonne range prevailed for most of last year "and would have impacted the price it (NGC) realises, for most of the natural gas it sells is indexed to ammonia and methanol prices."

Apart from that, Ramnarine said, "I expect that the quantum of natural gas sales would have fallen. So they had less gas to sell and that gas realised a lower price.

"NGC's weighted cost of acquisition of natural gas in 2020 would have been much higher than it was, say, in 2014. This would have led to margin compression in 2020."

Referring to some exceptional items which Enill mentioned cost $4.2 billion, were specific to 2020, contributed to the loss and unlikely to affect the NGC in the future, Ramnarine said, "I would wait for the annual report to be published to better understand these numbers."

He said with methanol and ammonia prices recovering this year, this should help the NGC.

Ramnarine was optimistic that with increased natural gas production in 2022, NGC's overall sales volumes will increase.

He recalled in 2013 efforts were made to widen the NGC's asset and revenue base with the acquisition of Total's shares in Blocks 2c and Block 3a. Ramnarine was happy to see the NGC continues to benefit from that decision.

Browne said, "It just simply points out that the difficulty in the energy sector are not simply related to covid. There are other issues which are not yet dealt with."

One of those issues, he continued, is the price of gas sold to NGC by upstream producers and the price of gas that NGC supplies to the petrochemical sector. He also said petrochemical plants that were closed during the pandemic would also have affected NGC'S revenue.

But he said, "NGC will continue to be a stable entity, in so far as approximately 60 per cent of gas still goes towards LNG (liquefied natural gas) and they have long-term contracts in that regard."

He agreed with Ramnarine that clarity must be provided on the exceptional items which Enill mentioned.

"NGC's future requires it to reposition itself and requires a great deal more negotiation, with regard to where (gas) prices are going to go."

He said international energy developments and the NGC's ability to enter into long-term contracts with the petrochemical sector, will also influence its way forward.

In a subsequent statement, NGC said it made considerable achievements despite the loss and challenges posed by the covid19 pandemic.

NGC said, "A number of targeted interventions – both reactive and pre-emptive – have laid the foundation for recovery and transformation in the near to medium term."

On the loss at the end of last year, compared to a profit of $482 million in 2019, NGC said, "Included in this loss are provisions for exceptional items at a total cost of $4.2 billion that are specific to 2020 and should not impact the organisation to this extent in future years."

These items were not explained either in the statement or in Enill's report, which was attached to NGC's 2020 summary consolidated financial statements.

Achievements last year listed by the NGC:

• Developing the Ruby Field (where NGC's wholly owned subsidiary has a 31.54 per cent interest)

• Completing the acquisition of Twin Eagle Liquids Marketing LLC, US by Phoenix Park Gas Processors Ltd

• Gas sales contract with Primera Oil & Gas (Touchstone) for the purchase of all gas from the onshore Ortoire Block

• Advancing digital transformation initiatives in several areas of the NGC group's operations

• Live launch of National Energy’s ttEngage Online Investor Platform

• Integrating the green agenda in support of the Paris Agreement and national climate action targets Progressing its memorandum of understanding with Ghana through executing a contract to design, build and commission a pressure regulator skid in Takoradi, Western Ghana.