Renegotiated gas contracts save T&T in face of declining Int'l prices - Energy Minister

Renegotiated gas contracts save T&T in face of declining Int’l prices – Energy Minister

May 10, 2024 ExxonMobil, News, Oil & Gas

Kaieteur News – With the Trinidad and Tobago (T&T) economy heavily dependent on its hydrocarbons (oil and gas) industry, the Energy and Energy Industries Minister, Stuart R. Young, this past week praised the foresight of the administration, in renegotiating its contracts with its oil and gas producers, for which the country is now reaping major benefits.

Energy and Energy Industries Minister, Stuart R. Young

This, in light of the global decline in international prices paid. Addressing members of the media as well as that country’s oil and gas producers, the Minister in responding to questions after presenting the latest audits for the country’s gas reserves exhorted, “what I can tell the citizens, that fortunately this government had the foresight and the confidence to go to our gas producers, our major gas producers and to negotiate better gas pricing for us in particular on the LNG (Liquified Natural Gas) side.”

With the price of liquified resource as little as US$2 on the world market per cubit feet of gas, the Minister reported that coming out of the renegotiated deals with its oil and gas producers, saying “we got a basket of prices; what that means for example where the price is two dollars for gas, we are getting four sometimes.”

Crediting the renegotiated deals, Minister Young told the T&T nation “…we are getting upwards of 40 percent of world markets prices.”

He prefaced his position by pointing out that, “natural gas prices are globally set prices, you have a number of different indices.” To this end, he reminded was adamant “right now what you are seeing globally the trend has been unfortunately a low gas price.”

Referencing the benefits of the renegotiated contracts he explained “what that means for you T&T is for example today where the (Henry Hobbs) price is two dollars for gas we are getting around four dollars, sometimes upwards of that, so you are seeing on occasions 40 percent upwards higher pricing of gas.”

What this audit does is that it shows us what our current reserve situation is; and went on to explain that at present the country is confident in some 11 trillion cubic feet of associated gas, in proven reserves. This he said would, based on the past two year’s trend of production in that country, the reserves would allow for production in that country for just another decade or so.

According to the energy minister, there is still potentially enough more gas that once, proven would allow for production to continue for another twenty years.

The T&T government had back in 2016 embarked on renegotiating its agreements with the shareholders of LNG exporter Atlantic because the state is getting short-changed, energy minister Nicole Olivierre, the then Energy Minister said.

“With many of our commercial pricing arrangements tied to a US destination, this country is realizing netbacks well below the actual market price applicable to the true destination of our cargoes.” Olivierre said at the time.

“The only conclusion that can be drawn is that the contractual arrangements for the marketing of LNG are not now working in the best interest of Trinidad and Tobago,” she said. “I am therefore forced to inquire: What has happened to the arrangement where the upside was to be shared 50/50 between the LNG partners and the government for cargo diversion? Is it that the LNG partners are now diverting cargoes to the South American market in a transfer pricing arrangement to avoid sharing the upside?”

To this end, she at the time announced “all LNG marketing agreements are to be reviewed and new negotiated agreements structured to ensure that the commercial arrangements are “equitable,” she said.

The government´s call for renegotiations were at the time made amid persistent natural gas supply curtailments that negatively impacted LNG production in that country.

Meanwhile in Guyana, despite promises of a renegotiation of the 2016 Production Sharing Agreement (PSA) described by both governments’ as lopsided, the government has opted to preserve the status quo, to instead opt for better contract management.

Criticizing this approach, at his party’s most recent press engagement, Alliance for Change Leader, Khemraj Ramjattan, had lamented that failure renegotiate the agreements made with the oil companies locally, Guyana will continue to lose more than it is gaining.

According to Ramjattan, “It is obvious that the country is losing more and that is why we indicated that there ought to be a renegotiation and because of the conduct and utterances whilst they were in opposition that the contract is rotten, that they will renegotiate it- that is the PPP and Jagdeo and all of them- they have now found sanctity of contract to halt all the nonsense that they then said.”

Guyana has been repeatedly warned by international energy institutes that the country may never see the promised annual revenues from its oil sector, as the ‘one-sided’ oil contract gives ExxonMobil and its partners the benefit, leaving Guyana and its people out of their fair share of the wealth.

The contract allows Exxon to deduct 75 percent of the resources each month to cover expenses to develop oil and gas projects. The costs that are not covered each month go over to the following month. Presently, Guyana only receives a meagre two percent royalty, as agreed to in the 2016 PSA. This has been described as one of the lowest rates in the World. Royalty is a percentage of total production on any commodity, paid to the owner of the resources and are free and clear from any costs whatsoever. Notably, the country also does not receive taxes from Exxon and its sub-contractors.