Cur­tis Williams

Lead Ed­i­tor Busi­ness

cur­tis.williams@guardian.co.tt

Doc­u­ments show gov­ern­ment has giv­en up on Train 1

Qui­et­ly agrees to three train fa­cil­i­ty

All the while telling the coun­try it is still in ne­go­ti­a­tions

The Kei­th Row­ley ad­min­is­tra­tion has qui­et­ly walked away from any hope of sal­vaging At­lantic LNG Train 1 and has in­stead signed an agree­ment with Roy­al Dutch Shell, the Na­tion­al Gas Com­pa­ny and bpTT to uni­tise trains two, three and four in­to a sin­gle train.

The gov­ern­ment had an­nounced the plan to have a sin­gle LNG train fa­cil­i­ty and that it had signed a Heads of Agree­ment (HOA) with the multi­na­tion­als and the state-owned com­pa­ny, but it has nev­er told the coun­try the terms of the agree­ment.

The Busi­ness Guardian has how­ev­er re­ceived a copy of the HOA and it shows that the gov­ern­ment has agreed to the three-train fa­cil­i­ty.

In the HOA, the gov­ern­ment iden­ti­fied one of its main ob­jec­tive as be­ing, “the sus­tained op­er­a­tion of the uni­tised fa­cil­i­ty as a three train fa­cil­i­ty.”

T&T has four LNG trains.

The Busi­ness Guardian has al­so learnt that in the process Chi­nese in­vestors in Train 1 are out and NGC’s share­hold­ing in the re­struc­tured en­ti­ty will not be af­fect­ed by the clo­sure of Train 1. This was con­firmed to the NGC by bpTT and Shell, the two ma­jor share­hold­ers in At­lantic LNG.

In an­nounc­ing the sign­ing of the HOA a re­lease from the Min­istry of En­er­gy said, “The At­lantic LNG fa­cil­i­ty com­pris­es four (4) LNG Trains, each with dif­fer­ent share­hold­er struc­tures and com­mer­cial arrange­ments. It was agreed that the At­lantic LNG fa­cil­i­ties would be man­aged more ef­fi­cient­ly if brought un­der the frame­work of a sin­gle own­er­ship struc­ture.” Giv­ing the im­pres­sion that the re­struc­tur­ing in­volved all four trains when it knew ful­ly this was not on the ta­ble.

In the HOA gov­ern­ment said it want­ed fair and eq­ui­table up­stream re­turns and to en­sure that val­ue ac­crues to T&T.

The agree­ment reads: “The AL­NG re­struc­tur­ing project shall in­volve the con­sol­i­da­tion of three At­lantic LNG joint ven­tures in­to a uni­tised fa­cil­i­ty held by one joint ven­ture with a com­mon own­er­ship (the Uni­tised AL­NG) and the com­mer­cial frame­work for gas sup­ply, gas pro­cess­ing, LNG and NGL off­take. The mem­bers shall, and shall work with their af­fil­i­ates to re­struc­ture the three At­lantic LNG joint ven­tures to achieve a com­mon own­er­ship struc­ture in the Uni­tised AL­NG. The part­ners ac­knowl­edge that the fi­nal eq­ui­ty struc­ture of the Uni­tised AL­NG will be ne­go­ti­at­ed as part of the De­fin­i­tive Re­struc­tur­ing Agree­ments.”

The HOA is ef­fec­tive­ly the fi­nal nail in the Train 1 saga which has seen more than a quar­ter bil­lion of tax­pay­ers dol­lars wast­ed by the NGC in a failed at­tempt to re­vive the fa­cil­i­ty. Train 1 has been shut now for more than a year and the NGC’s ef­fort re­sult­ed in di­rec­tors of the com­pa­ny seek­ing to be pro­tect­ed from be­ing held li­able for the loss­es by seek­ing an in­dem­ni­ty from cor­po­ra­tion sole for loss of the mon­ey.

Fur­ther, the gov­ern­ment led by the Prime Min­is­ter Dr Kei­th Row­ley and the Min­is­ter of En­er­gy Stu­art Young, have con­sis­tent­ly said Train 1 is not yet dead and was sub­ject to ne­go­ti­a­tions. The HOA now shows that both Row­ley and Young are aware that Train 1 is no more.

This means that the coun­try has lost a quar­ter of its LNG ca­pac­i­ty and will now have to live in the long term with low­er LNG ex­ports even though the re­turns per mol­e­cule of nat­ur­al gas could be bet­ter de­pend­ing on the out­come of the fi­nal ne­go­ti­a­tions.

Ac­cord­ing to the HOA the AL­NG Re­struc­tur­ing Project shall be un­der­tak­en with ap­pro­pri­ate con­sid­er­a­tion giv­en to the terms and con­di­tions of ex­ist­ing com­mer­cial agree­ments for the At­lantic Fa­cil­i­ty.

It talks about cre­at­ing a uni­tised fa­cil­i­ty with the new li­cense com­ing in­to ef­fect up­on the ex­piry or joint­ly agreed ter­mi­na­tion of the ex­ist­ing liq­ue­fac­tion li­cense for the At­lantic fa­cil­i­ty.

But the HOA does not pro­vide any in­for­ma­tion on how long that li­cense should be for, sug­gest­ing that the mem­bers will have to pro­vide in­for­ma­tion to help the Min­is­ter de­ter­mine its du­ra­tion.

The HOA read, “Mem­bers agree to pro­vide any avail­able in­for­ma­tion as may be rea­son­ably re­quest­ed by the GORTT to as­sist in its de­ter­mi­na­tion of the length of the new sin­gle liq­ue­fac­tion li­cense to be is­sued.

The agree­ment al­so spelt out what would be gov­ern­ment’s rights in the re­struc­tur­ing.

The rel­e­vant De­fin­i­tive Re­struc­tur­ing Agree­ment to which the GORTT is a par­ty (for ex­am­ple, the liq­ue­fac­tion li­cense for the uni­tised fa­cil­i­ty) shall pro­vide GORTT with ac­cess to in­for­ma­tion re­gard­ing the com­mer­cial arrange­ments and op­er­a­tion of the uni­tised fa­cil­i­ty suf­fi­cient to en­sure that the GORTT can mon­i­tor and en­force the terms of the De­fin­i­tive Re­struc­tur­ing Agree­ment which it is a par­ty.

This term is seen as par­tic­u­lar­ly im­por­tant in light of the fact that T&T lost tens of bil­lion of US dol­lars in rev­enue as the multi­na­tion­als fetched sig­nif­i­cant­ly high­er prices for LNG than it paid in net-back pric­ing to the gov­ern­ment through a sys­tem of trans­fer pric­ing.

Nei­ther bpTT nor Roy­al Dutch Shell have ac­knowl­edged wrong-do­ing but have paid a cou­ple bil­lion TT dol­lars to the gov­ern­ment in good faith. A frac­tion of what it is be­lieved they earned from the prac­tice.

On­ly on Tues­day, Prime Min­is­ter ad­mit­ted that the coun­try lost bil­lions of US dol­lars in po­ten­tial rev­enue from LNG ex­ports and said the Gov­ern­ment has been hav­ing di­a­logue with com­pa­nies to en­sure a more eq­ui­table shar­ing of LNG rev­enues.

“We now have an op­por­tu­ni­ty to cor­rect this in­equal­i­ty con­se­quent on the pend­ing ex­pi­ra­tion of LNG li­cens­es and plans to re­struc­ture the LNG busi­ness in T&T.

“It is in sit­u­a­tions like this that the val­ue of the mem­ber­ship of T&T in the GECF takes on added sig­nif­i­cance. The ex­pe­ri­ence of the fo­rum which pos­sess­es 70 per cent of the world’s proven gas re­serves, 44 per cent of its mar­ket­ed pro­duc­tion, 52 per cent of pipeline, and 51 per cent of LNG ex­ports in the world is for­mi­da­ble and can be of im­mea­sur­able ben­e­fit to mem­bers,” Row­ley ex­plained.

The HOA agree­ment al­so pro­vid­ed for:

1) Up­on the im­ple­men­ta­tion of the AL­NG re­struc­tur­ing project the GORTT shall have the right to re­quest and re­ceive in­for­ma­tion and pe­ri­od­ic re­ports con­cern­ing the op­er­a­tion of the uni­tised the fa­cil­i­ty to de­ter­mined through the rel­e­vant de­fin­i­tive re­struc­tur­ing agree­ments re­gard­ing the cur­rent and planned util­i­sa­tion of the uni­tised fa­cil­i­ty and any pro­ject­ed ex­pen­di­ture in or­der to main­tain a line of sight re­gard­ing the uni­ti­sa­tion and sus­tain­abil­i­ty of the uni­tised fa­cil­i­ty.

The agree­ment not­ed that the Uni­tised AL­NG shall take no mar­ket price risk with the al­lo­ca­tion of such a risk to be the sub­ject of ne­go­ti­a­tion tak­ing in­to con­sid­er­a­tion and re­flect­ing the prin­ci­ples set forth in the HOA as be­tween a PE, it’s up­stream gas sup­pli­er(s)and LNG and NGC off­tak­ers.

“It be­ing recog­nised that noth­ing in the arrange­ment shall af­fect GORTT rights un­der pro­duc­tion shar­ing con­tracts and or up­stream li­cens­es un­less oth­er­wise agreed by the GoRTT and the rel­e­vant up­stream gas sup­pli­ers, does it af­fect any ex­ist­ing ap­provals un­der such pro­duc­tion shar­ing con­tracts,” the agree­ment reads.

It al­so leaves the mar­ket open to the pos­si­bil­i­ty of oth­er par­ties sup­ply­ing gas in­to At­lantic.

It said “the par­ties agree that the on­go­ing fi­nan­cial an op­er­a­tional vi­a­bil­i­ty of the uni­tised fa­cil­i­ty shall de­pend on the dis­cov­ery and de­vel­op­ment of ad­di­tion­al gas re­serves and en­hanced de­vel­op­ment and pro­duc­tion from ex­ist­ing re­serves as such and re­spect of the de­vel­op­ments by third par­ties that PEs shall use com­mer­cial­ly rea­son­able ef­forts to ne­go­ti­ate terms that fa­cil­i­tates ac­cess by third par­ty gas sup­pli­ers in the uni­tised fa­cil­i­ty on rea­son­able terms.”

To be con­tin­ued