Is something fundamentally wrong with the National Gas Company’s (NGC) style of negotiations?
The question is being asked because since the appointment of the current board there has been unease among multinational companies about the pace, tone and tenor of negotiations with the NGC.
There are at least three incidents in the public domain that raise questions about the country’s flagship energy company.
One is the protracted negotiations with bpTT and EOG Resources for which no solution seemed in sight before Prime Minister Dr Keith Rowley went to Houston and brokered a solution among the three companies. While these negotiations were ongoing, billions of US dollars in investment were being withheld from T&T by BP and EOG.
Then there was the unprecedented turning off of natural gas to the Methanol Holding plant—which is still shut down with workers unemployed—as well as the CNC ammonia plant, because the NGC was unable to reach an agreement with these companies.
Another matter of concern is the recently signed Nutrien deal which was reached after two years of negotiation. By the parties own admission, settlement required the intervention of Prime Minister Rowley.
Managing director of Nutrien Ian Welch, a former schoolmate of the Prime Minister, said at the signing ceremony: “We must thank our Prime Minister, Dr Keith Rowley, Stuart Young and Franklin Khan for the pivotal role each has played in bringing these negotiations to a successful conclusion. They helped to create an enabling environment for our effective collaboration. Whenever we appeared to be stalled, they, individually and together, did what was necessary to keep us moving in the right direction, for the benefit of all stakeholders.”
What Wekch did not say, and what many executives in the downstream sector will admit privately, is that they find the NGC’s style of negotiating is to make unrealistic demands and its starting position is never based on the reality of today’s economics. Adding that this makes it difficult to come to a win-win situation.
President of the NGC Mark Loquan, responding to complaints about the company’s style of negotiations, said: “I would disagree quite a lot with that because I think we know that we are in a difficult situation. I think it does require us listening to the customers and it does require the downstreamers to understand the changes in the landscape.
So if we approach the negotiation in such a way that there is mutual respect, where we are interested in the long term we can get results as today has proven.”
On the issue of the Nutrien negotiations—which took two years to complete and required the intervention of Dr Rowley and other senior government officials—he said: “There are some things I can say and some things I cannot say. The approach to me has been very professional.”
There is no doubt that the landscape has changed. The NGC is buying more expensive gas from upstream producers, has reduced volumes and is entering into shorter term contracts.
The company is also facing lawsuits from downstream companies for shorting them on gas with no recourse to suppliers because the contracts negotiated do not include penalties to upstream producers for shorting the NGC gas. In addition, petrochemical companies are facing additional competition from shale gas in the United States.
The NGC also has to try to get the greatest value for the people of T&T and, just like the downstream companies, that are trying to maximise their profits by making the best margins, it has a fiduciary responsibility to get the most for this country.
However, there must be a middle ground, a place where capital feels welcomed and where there is reasonableness. With several gas contracts coming to an end next year, time will tell if the NGC’s approach is more harmful than good.