Last week, we shared information on benchmark prices in three key natural gas markets internationally and some of the factors which impact the price of gas internationally and the potential for impacts in T&T.
Within T&T, there are no published benchmark gas prices, but it is possible from published data in the annual reports and other regulatory filings to get an indication of average realised gas prices.
These average realised gas prices are a combination of differently priced contracts under which natural gas is sold by the producer. This will typically include tranches of gas sold at a low price to NGC for onward sale to T&TEC for electricity generation, gas sold under contract to NGC for onward sale to downstream petrochemical producers and gas sold through various LNG marketing contracts (minus transport and liquefaction costs). While the specifics of each sales contract are commercially confidential, companies publish an average price arising for the mix of each of the sales contracts.
One of the major gas producers, EOG Resources, publishes their average Trinidad & Tobago realised gas price. The two biggest T&T producers, bpTT and Shell, publish South American average realised prices, which would be significantly influenced by the T&T price, especially in the case of bpTT where almost all of their Latin American gas production is in T&T. The South American gas price reported by bpTT and Shell can therefore be regarded as broadly indicative of their T&T prices.
The realised gas prices reported by these three producers generally mirror the international gas prices, but with some disparity between the prices received by some operators. EOG Resources sells directly to the National Gas Company (NGC), while Shell and bpTT sell gas to both NGC and internationally through LNG. This difference would likely account for the significant increase in average wellhead prices received by bpTT and Shell, when European and Asian LNG prices surged after the Russian invasion of Ukraine in 2022.
The realised gas price obtained by the major producers is very important for the Government and people of Trinidad & Tobago, as it determines the amount of taxes and royalties received by the state for each unit of gas produced. The revenue from the upstream gas producers is the most important source of tax revenue for the government. Higher prices also help to attract the upstream capital needed to sustain gas production. On the flip side, however, high domestic gas prices can make it difficult for downstream producers to profitably stay in business.
