Young: UNC 'bad deals' hurt energy sector

Energy Minister Stuart Young said UNC bad deals cost TT’s energy sector billions of dollars in claims and lost revenue, but the PNM negotiated with stakeholders and facilitated the turnaround of the energy sector.

Speaking during the budget debate on Monday, a week after Finance Minister Colm Imbert laid the proposed budget in Parliament, Young chronicled a list of bad deals made by the then People’s Partnership Government.

Young said because of TT’s century-long history of producing oil and gas, reserves in its territories have become mature, but up to 2010, proper planning resulted in production increasing.

“In 2006 we were producing 3.8 bcf/day (billion cubic standard feet/day). In 2008 we went to four bcf/day. In 2009, 4.2bcf/day,” Young said. “All of that production was a result of decisions taken in advance – at least five years in advance.”

He said the country’s best year for natural-gas production was in 2010, when the People’s Partnership took office, but following that, gas declined, from 4.3 bcf/day in 2010 to 3.8 bcf/day in 2015.

In the oil-production sector Young said TT produced 114,000 barrels of oil a day in 2008. By 2010 it fell to 98,000 barrels. In 2012 it went down further to 81,000 barrels and in 2015 it declined further to 78,000 barrels per day.

Young said the government of the day should have had foresight to begin negotiations to develop the sector, but did not.

“It is an indisputable fact that not a single upstream gas-supply contract was negotiated in that period of 2010-2015. The incentives that you hear so often spoken by someone who says he is a former minister of energy did not negotiate a single gas-supply contract.”

He said the National Gas Company, from 2010-2015, did not receive its supply of natural gas from upstream suppliers. As a result it was forced to curtail supply to downstream suppliers. Young said there were no attempts to have discussions or renegotiate deals with NGC and downstream suppliers, but about $14 billion “disappeared” from NGC’s coffers.

“When these curtailments started in 2010 and peaked in 2014-2015, the result was claims being made to NGC for a failure to supply during that period. This is an indisputable fact.”

He said the total value of the claims against NGC was US$1.8 billion/TT$8.85 billion.

Young said the then PP government had options to renew certain contracts, but ignored them.

“There was a contract with our largest upstream gas supplier that was due to expire in December 2018. Under that gas-supply contract, there was a contractual timeline that (from) January 1, 2014, you had two years to meet and negotiate an extension of the gas-supply contract.

"They did not do it. The UNC failed to negotiate gas-supply contracts for TT where the contract required them to meet, but they have the audacity to ask TT why we are in this position.”

He also spoke of another “base” gas-supply contract that was not renewed on its expiry in December 2015 which resulted in a loss of 250 mscf/day (standard cubic feet) of gas.

He said government lost more than 1.2 bcf/day (billion standard cubic feet/day) in production because of its refusal to renew contracts.

He said the one contract that was negotiated by the PP Government led to its losing claims.

“It was negotiated at a time when you were seeing a curtailment of gas. So if you know you have less gas to sell to the existing plants, you would go now and put priority on a new plant to give it gas, as opposed to those who have been there for us for decades. We lost claims as a result of that one contract.”

He added that the PP Government also changed gas allocation policy to a Greenfield gas policy that meant, in a situation where there was limited gas, NGC would supply gas on an availability basis to newer plants and give older plants, already contracted to receive gas, less gas or no gas at all.

“It led to the only loss NGC ever made in its 2020 annual report because we had to provision TT$2.1 billion as losses as a result of this one contract that they did.”

Young said the PNM government did not sit idly by in the face of declining production, but through negotiating with several stakeholders upstream and downstream, was able to reverse damage done by the previous government. He said as a result there were signs of a turnaround in the energy sector.

He said thanks to the intervention of the government TT had renegotiated the claims by petrochemical stakeholders in the downstream, resulting in the PNM Government saving US$1.1 billion.

He added that that while there were no gas-supply contracts in the previous administration, Government negotiated 31 upstream contracts and 115 downstream contracts.

Young said Government also renegotiated LNG contracts with better terms for TT. With regard to NGC, Government signed an EPC (Engineering, Procurement and Construction) contract. He said this, along with the restructuring of Atlantic LNG, opened opportunities for deepwater and cross-border gas production. He added that a new formula for the value of TT gas resulted in a $6 billion recovery of revenue.

He added that the finalisation of several projects, including the Cascadura project, Cassia C project and others, will serve to secure gas supplies.

Young said because of the direct intervention of government, in some cases a personal visit from the Prime Minister to energy stakeholders, several projects came on stream.

“Osprey with EOG, the finalisation of the truck project with BHP, the Iguana project with De Novo, the Dolphin development with Shell, the Ruby Development with BHP, were all a result of direct intervention by the Government,” he said. “And there are more.”

Pointe-a-Pierre MP David Lee did not deny claims of mismanagement under the PP, but said the government continues to blame the UNC for its shortcomings.

Lee said, quoting from a report from a JSC on state enterprises which was laid in July 2016, companies were aware of upcoming negotiations.

“What the management was saying in 2016 is they knew that hard negotiation on expired contracts were due over the next five years.

"Who was in government? This administration. They are the ones responsible for renegotiating contracts, not the PP Government.”

He added that contracts and deals which Young complained about were signed during the PNM’s tenure before the PP Government took office.

“If he finds those terms and conditions were strenuous and against the country, they were the ones that originally negotiated those contracts,” he said.