Minister of Energy and Energy Industries Stuart Young has said the funding provided by National Gas Company (NGC) for the Atlantic LNG train one was for "turnaround costs" and not to upgrade the train.
Young was speaking in the Senate on Tuesday.
Responding to questions posed by Opposition Senator Wade Mark regarding the driving factors that informed NGCs decision to upgrade train one, Stuart said the funding was to ensure the train was in a state of readiness and safe to operate and accept gas for processing.
“Per the terms of its supply contracts with upstream suppliers, NGC has an obligation to take gas or pay for the product it does not take, known as a take or pay contract.”
He said NGC was potentially faced with upstream gas supply commitments which exceeded guaranteed downstream demand given possible plant shutdowns and sustained reduced industrial activity due to the covid19 pandemic.
“In addition, at the end of 2020 NGC was still in commercial negotiations with several large consumers as they were seeking contract terms that were uneconomical (long term). Therefore, NGC had no firm contractual obligations to several of the large downstream plants in the petrochemical (petchem) sector.”
Stuart said given the drastic decline in commodity prices in 2020 due to the pandemic and fears of a second and third wave of the virus and its impact on industrial demand, several downstream plants could have made the decision to shut down operations temporarily rather than purchase gas, which, he said, would have resulted in continuing losses for NGC.
“There existed the possibility for NGC to monetise volumes not taken by the petchem plants to train one LNG production. In fact, one of the companies opted to shut down two of its plants in April 2021.
“In so much as the company would have been built for its upstream commitments it made commercial sense to find an alternative use for the volumes not taken up by the downstream petchem industry. This would yield incremental revenue for NGC and maximise the commercialisation of Trinidad and Tobago's natural gas resources.”
He said if train one closed in 2021, it would have adversely impacted negotiations between the government and shareholders, placing TT in a disadvantageous position in the long term.
Stuart also said NGC only remitted US$32.3 million (TT$219 million) to Altantic for train one in 2020 expenditure and there was no upgrade.
He said NGC suffered a loss on its financial accounts for the first time ever and out of that loss, over $2 billion had to be written off by NGC because of the only energy transaction negotiated by the UNC between 2010 and 2015.
Stuart also said the NGC remitted $224 million for train one in the 2021 expenditure, including turnaround costs, and not $440 million. “Unfortunately, the actual cost continues to be grossly misrepresented by the UNC,” said Young.
“While NGC stands by its decisions, which were made after due diligence and analysis of the best information available at the time, it must be recognised that other strategic considerations surrounding train one which impacted the wider Atlantic unitisation discussions – which to date are ongoing between government and international oil companies and which are outside the control of the NGC board – can have impacted the future of the train and the entire Atlantic facility.
“It is accepted business practice that board members be indemnified for the decisions taken in good faith after appropriate due diligence.”
He said the shareholders of train one continue to be in discussions to the future of all Atlantic LNG's operations which would include the sharing of costs, income, cargoes and other related items going forward.