BP PLC and Royal Dutch Shell PLC may no longer be allowed to sell natural gas directly to Atlanic LNG (ALNG) and will have to transport its gas to ALNG via Trinidad and Tobago’s National Gas Co. (NGC), according to the recommendations contained in the Caribbean twin-island nation’s Natural Gas Master Plan (NGMP).
The plan was produced by Poten & Partners and has recommended that at the expiry of the existing contracts, any future gas supply should be routed through NGC to provide an efficient route for the island’s government to maximize its take from the LNG value chain.
This is likely to be a major sticking point in upcoming negotiations as Shell and BP—the two largest owners of ALNG’s Train 1—sell gas directly to ALNG, thereby bypassing NGC. A change as proposed by Poten & Partners is likely to impact their bottom line although it is also likely to result in more revenue for NGC and, by extension, the Trinidad and Tobago government.
Poten & Partners rationalized its view by saying that such an expanded role would not compromise the ability of the sector to provide more attractive prices to upstream in order to support new developments, as NGC would be able to provide LNG-linked pricing to upstream suppliers if this was deemed necessary to support new upstream developments. It could also provide gas pricing to upstream linked to a basket of LNG, methanol, and ammonia prices.
“Rather than maintaining the status quo of direct gas supply contracting between upstream and ALNG, Poten’s view is that, on expiry of the existing LNG contracts, NGC’s wholesale role should be expanded to include ALNG, i.e. for new gas supply to ALNG NGC would buy gas from upstream and sell it to or toll it through ALNG,” the NGMP read. It added, “NGC would also continue this wholesale role for supply to methanol and ammonia.”
In the NGMP, Poten said NGC should do the following:
• Continue to act as the monopoly buyer of gas from upstream, gas transporter and wholesale supplier of gas to the methanol and ammonia industries.
• Expand this role to include gas supply to LNG on expiry of the existing gas supply and LNG sales contracts.
• Be forced to divest its noncore assets, e.g. upstream production.
• Be forced to automatically dividend back surplus funds to the Trinidad and Tobago government.
• Provide the necessary analysis and recommendations to the Trinidad and Tobago government on future downstream gas allocations, with it making any final decisions.
In terms of LNG marketing, Poten’s view is that continuing with the negotiated contracts model is unlikely to provide the best value for the island nation.
Trinidad and Tobago has appointed former Credit Suisse Banker Wendell Mottley to lead its team to negotiate a new gas contract with the owners of ALNG Train 1.
ALNG’s gas contract comes to an end in 2018 and the government and ALNG’s shareholders are due to commence negotiation for a new contract.
The government’s team will include Mottley, technocrats from the Ministries of Energy, Finance, the attorney general, NGC, and Poten & Partners consultants.