The Gov­ern­ment is ex­pect­ed to de­cide by the end of the year if it will phase out the use of Su­per gaso­line as a fu­el in T&T and on­ly al­low the use of Pre­mi­um gaso­line.

En­er­gy Min­is­ter Franklin Khan has ad­mit­ted that the mat­ter has gone to the Cab­i­net but said no fi­nal de­ci­sion has been tak­en.

In a wide-rang­ing in­ter­view with Guardian Me­dia's Lead Ed­i­tor Busi­ness Cur­tis Williams, Khan said, "That op­tion has been pre­sent­ed to me here, as the Min­is­ter of En­er­gy, and no de­ci­sion has been tak­en on that as yet."

Asked if it had gone to the Cab­i­net al­ready, Khan said, "Yes, it went to the Cab­i­net. The Cab­i­net has not tak­en a de­ci­sion on it. It re­served its de­ci­sion to the lib­er­al­i­sa­tion of the price."

Asked if it is fair to say the Cab­i­net will de­cide once it sees how the lib­er­al­i­sa­tion of the fu­els mar­ket works, Khan sim­ply added, "Yes, that is fair to say."

If the Gov­ern­ment de­cides on phas­ing out Su­per gaso­line it is like­ly to have a sig­nif­i­cant im­pact on mo­torists, the vast ma­jor­i­ty of whom use Su­per gaso­line be­cause it is less ex­pen­sive than Pre­mi­um.

It could po­ten­tial­ly have the knock-on ef­fect of high­er taxi fares and cause in­fla­tion­ary pres­sure.

In the in­ter­view which took place at Khan's wa­ter­front of­fice, ex­act­ly a week af­ter a no-con­fi­dence mo­tion was brought against him in the Low­er House of the Par­lia­ment, the min­is­ter tried to de­fend his per­for­mance and that of the Gov­ern­ment.

Khan ad­mit­ted that nat­ur­al gas pro­duc­tion was a ma­jor chal­lenge fac­ing the coun­try and that this year would be bad. But he posit­ed that bet­ter days are com­ing.

"You know, I use my favourite phrase 'walk­ing up the down es­ca­la­tor'...The strug­gle, so to speak, has been to hold on to that plateau. And when you try­ing to hold on to that plateau, you have lit­tle room for er­ror. So you have to con­tin­ue to find the 1 tcf fields, and most im­por­tant­ly your in­vest­ment pro­file must be con­stant be­cause even though you find the field and you don't de­vel­op it in time you will be faced with a de­cline...So right now we hop­ing to av­er­age about 3.2 bcf/d for this year, with a push, and then we will ramp up in the next three to four years."

Khan ad­mit­ted that the prob­lem start­ed dur­ing the Patrick Man­ning ad­min­is­tra­tion and is now be­ing re­flect­ed to­day.

"So what had hap­pened there was a gap from around 2007 mov­ing on, where the in­vest­ment lev­els weren't at the rate they were sup­posed to be. The UNC did in fact at­tempt to use fis­cal in­cen­tives to ar­rest that."

Iron­i­cal­ly, Chair­man of the Na­tion­al Gas Com­pa­ny Con­rad Enill was En­er­gy Min­is­ter dur­ing the 2007/2010 pe­ri­od.

Q&A with Khan

(Ed­i­tor's note: The fol­low­ing is an abridged ver­sion of Cur­tis Williams' in­ter­view with Min­is­ter Khan. More will fol­low in this week's Busi­ness Guardian.)

Q. Is there any thought to phas­ing out Su­per gaso­line, as my sources have in­di­cat­ed to me, and on­ly mak­ing Pre­mi­um gaso­line avail­able?

A. Well, that op­tion is on the ta­ble but no de­ci­sion has been tak­en.

When is a de­ci­sion to be tak­en?

Well, am (pause). We don't want to dis­rupt the mar­ket in that sig­nif­i­cant way. The first phase is a price lib­er­al­i­sa­tion which will hap­pen with­in a month, six weeks. I am not sure of the ex­act time-line for the Fi­nance Bill, and then the tak­ing away of the fixed re­tail mar­gin, so the re­tail op­er­a­tors of the ser­vice sta­tions could set their own mar­gins. The whole­sale mar­gins will re­main fixed for Unipet and NP and the re­tail mar­gin will be mar­ket-dri­ven. The prices will be post­ed once per month by the Min­istry of En­er­gy and the gas sta­tions do not have the op­tion to vary their prices over that month. Then the next month we post up a price and you do your mark up.

Right, but in terms of the fu­el lib­er­al­i­sa­tion, I un­der­stand that by the end of the year a de­ci­sion has to be tak­en as to whether or not Su­per gaso­line is phased out?

That op­tion has been pre­sent­ed to me here, as the Min­is­ter of En­er­gy, and no de­ci­sion has been tak­en on that as yet.

But has it not gone to the Cab­i­net al­ready? I am told it is with the Cab­i­net?

Yes, it went to the Cab­i­net. The Cab­i­net has not tak­en a de­ci­sion on it. It re­served its de­ci­sion to the lib­er­al­i­sa­tion of the price.

So is it fair to say the Cab­i­net will de­cide once it sees how the lib­er­al­i­sa­tion works?

Yes, that is fair to say.

SOLV­ING THE NAT­UR­AL GAS SHORT­AGE

Why has the coun­try not been able to solve the prob­lem of the short­age of nat­ur­al gas?

The core rea­son for that, Cur­tis, is a sub-sur­face rea­son. Give me five min­utes for me to walk you through the his­tor­i­cal chronol­o­gy of this gas in­dus­try. In the ear­ly 70s when Pan Amer­i­can Oil went off­shore on the East Coast, that lat­er be­came Amo­co, they found three oil fields, Teak, Poui and Samaan. That sent the coun­try to the top of the pack in terms of oil pro­duc­tion...here you were go­ing in­to a new basin, find three huge oil fields. Trinidad's pro­duc­tion peaked at 270,000 bar­rels of oil per day in 1977. Af­ter that they said the sky was the lim­it be­cause you now in­to a new basin and you were see­ing so many struc­tures fur­ther off­shore, you said every­thing else would be good news. It was good news, but the on­ly dif­fer­ence was in­stead of oil they found, it was gas. In any basin, based on seis­mic, you drill the large struc­tures first. So in the his­tor­i­cal evo­lu­tion of a basin, the large fields are found first and then you look for sub­tle traps and small­er fields. There was a time when this coun­try's re­serves to pro­duc­tion ra­tio was 30 years. That's when we got in­to the mon­eti­sa­tion of gas. We built Point Lisas and when gas was still in sur­plus, so to speak, we went in­to LNG. But there isn't an un­lim­it­ed sup­ply of ge­o­log­i­cal provinces to ex­plore. So in the Colum­bus Basin, I will be the first as a ge­ol­o­gist to ad­mit, that we are in the ma­ture phase of the basin. So the very like­li­hood is we are go­ing to con­tin­ue to find more and more small fields...We go on the pro­duc­tion side, there is some­thing called nat­ur­al de­cline. Gas fields de­cline at be­tween 12 to 15 per cent per an­num.

PRO­JECT­ED NAT­UR­AL GAS PRO­DUC­TION FOR THE NEXT FIVE YEARS

What does the coun­try's nat­ur­al gas pro­duc­tion pro­file look like for the next few years?

This is the state of play. In 2021 we have Mat­a­pal com­ing on stream. That is bpTT 300 mm­scf/d (mil­lion stan­dard cu­bic feet per day). Shell/Bar­racu­da ap­prox­i­mate­ly mm­scf/d and BHP Ru­by which is a small­er gas field which is a big­ger oil field of about 100 mm­scf/d.

In 2022 the Cas­sia C Com­pres­sion plat­form project will come on stream. That will be giv­ing us around 300 mm­scf/d. Now Cas­sia C was sup­posed to be a 2021 project, there was a COVID is­sue in Mex­i­co. Col­ib­ri, which is the North Coast part of Shell, will be com­ing on in 2022 al­so.

Touch­stone we hope could give us about 150 mm­scf/d on land, now the on-land gas is good be­cause it comes in­to pro­duc­tion much faster than off­shore and then, all things be­ing equal, we could get gas to buy at a cheap­er price on­shore be­cause the de­vel­op­ment costs are less.

And then com­ing to 2025 we have Man­a­tee, and as I speak we are fi­nal­is­ing the Pro­duc­tion Shar­ing Con­tract with Shell and Shell is work­ing on a de­vel­op­ment mod­el as to the type of in­fra­struc­ture they have to put down. I'm telling you this for the first time prob­a­bly, we are al­so look­ing at prob­a­bly build­ing some ca­pac­i­ty that in the event, when the Venezue­lans de­cide to de­vel­op Lo­ran, prob­a­bly post 2025, they may look at the op­tion of mon­etis­ing that gas across the bor­der in T&T.

These are projects that are sanc­tioned, there is very lit­tle risk out­side of eco­nom­ic, price and mar­ket risks. But in terms of ge­o­log­i­cal risk, the risks are very lim­it­ed and all the tech­ni­cal work is in place."

AT­LANTIC LNG AND ITS FU­TURE

LNG has proven to be a chal­lenge. How is the Gov­ern­ment deal­ing with that?

The an­swer to that is in the re­struc­tur­ing of At­lantic. Be­cause At­lantic's is­sue is you have four trains with dif­fer­ences in share­hold­ing in each train and dif­fer­ent com­mer­cial arrange­ments in each train, so At­lantic as a plant can­not op­er­ate ef­fi­cient­ly. So if you have a shut­down on Train 2, it is not an easy ex­er­cise to just re-route gas in­to trains three and four, you know. So when we uni­tise the plant, the dis­cus­sions that are cur­rent­ly tak­ing place, is that there will be a uni­tised share­hold­ing so there will be no dif­fer­ences now in Trains 1, 2, 3 and 4. In fact, that ter­mi­nol­o­gy will come out of the mar­ket com­plete­ly and the plant will be run­ning at 50 per cent to 80 per cent ef­fi­cien­cy. What I am told is that in terms of the ef­fi­cien­cy of an LNG plant, ei­ther it runs at 50 per cent or 100 per cent. In oth­er words, if the plant is run­ning at 70 per cent it is just as in­ef­fi­cient as if it is run­ning at 30 per cent...So the share­hold­ers of At­lantic have agreed to that, so we think the uni­ti­sa­tion of At­lantic, even though there will still be a deficit in name­plate ca­pac­i­ty, the plant could be run ef­fi­cient­ly and prof­itably.

Is Train 1 op­er­at­ing now?

No, the TAR (turn­around) has fin­ished and there are cer­tain en­gi­neer­ing is­sues to sort out.

When do you ex­pect Train 1 to be back up?

Train 1 should be back in the mid­dle of April.

What will the share­hold­ing of Train 1 look like?

We haven't crossed that bridge as yet. But dur­ing the time of the TAR, if NGC has an arrange­ment that if they can source sur­plus gas they can run it through the plant and off­take it.

Who paid for the TAR?

The NGC. By ex­ten­sion the Gov­ern­ment. We took a strate­gic de­ci­sion, we con­sid­er it risk cap­i­tal be­cause we want to have the op­tion of hav­ing a train 1. Be­cause if we did not do this TAR we could have kissed Train 1 good­bye for­ev­er.

What is the cost of the TAR?

I am not sure but the fig­ure could be made avail­able. I am not sure. It's about...Look, let me not quote a fig­ure.

Peo­ple in the in­dus­try es­ti­mate it at about US $50 mil­lion.

I don't think it's that amount.

You think it is less?

Yes, it is less.

Even if you have more gas by 2026, the is­sue is the price. Look at how many ne­go­ti­a­tions you are in­volved in that can't seem to come to an end. I un­der­stand, for ex­am­ple, the M5000 plant that you talk about, that ne­go­ti­a­tion is yet to be com­plet­ed. What's the state of those things and the is­sue of high gas prices?

We are at the core of the ne­go­ti­a­tions now and just wait and see.

Does that mean an agree­ment is im­mi­nent in the M5000 ne­go­ti­a­tions?

Yes.

Yes, but you still have not an­swered my ques­tion about the price for nat­ur­al gas in T&T. It's one thing to have deep-wa­ter gas, the price is an­oth­er thing, won't you say? Can the down­stream­ers get a com­pet­i­tive gas price?

I am very op­ti­mistic and I will tell you why. It is deep-wa­ter yes, the de­vel­op­ment cost will be much more ex­pen­sive than shal­low wa­ter, but the vol­umes are sig­nif­i­cant­ly high­er. So it boils down to your unit cost. And I am cau­tious­ly op­ti­mistic that the unit cost to de­vel­op deep-wa­ter could be com­pet­i­tive.

But again, it has to do with the mar­ket, how the val­ue chain looks, what type of com­mer­cial arrange­ment BHP wants to get in­to and all these dis­cus­sions are on the verge of com­menc­ing or some have al­ready com­menced.

DON'T KILL THE GOOSE THAT LAYS THE GOLD­EN EGG

There is al­so an is­sue of the Gov­ern­ment's take. For ex­am­ple, its in­crease in roy­al­ties on nat­ur­al gas to 12.5 per cent. Do you think a down­ward ad­just­ment in roy­al­ties could make up­stream gas more com­pet­i­tive and al­low the State to re­cov­er the lost rev­enue in tax­es on prof­its?

Yes and no. The PPT on deep-wa­ter is not 50 per cent. It's 35 per cent. That is a con­ces­sion that was made when the Blocks went out. So it gives the deep-wa­ter a fair chance of be­com­ing com­mer­cial. We have to un­der­stand some­thing as a gov­ern­ment, mol­e­cules in the ground are of no val­ue to the coun­try. So you can't play hard­ball. How­ev­er, be­cause it is a de­plet­ing as­set you can­not give it away ei­ther. So the two par­ties have to come to­geth­er and see. You are an in­vestor, you need a fair rate of re­turn on your in­vest­ment. A gov­ern­ment could say all right, if you don't in­vest your mon­ey the gas can­not come out of the ground and the Gov­ern­ment has no mon­ey to go and bring it out. So both par­ties have to ad­just be­cause you can­not come here and get ex­or­bi­tant prof­its at the ex­tent of the state. But the state can­not kill the goose that lays the gold­en egg ei­ther. So it is a bal­anc­ing act and these last round of ne­go­ti­a­tions over the last two to three years that we have been in­volved in, that is the tem­plate un­der which we work.

So you are say­ing the Gov­ern­ment has been more flex­i­ble?

Yes, we have been more flex­i­ble and when we look at the num­bers we will know what de­ci­sions to make and that is the point I want to make now. Dur­ing the ne­go­ti­a­tions, we had Poten as our con­sul­tants. We have a new gen­er­a­tion of tech­nocrats in the min­istry here. We had White and Case as our con­sul­tant. We now have Gas Strate­gies. Be­cause when you sit around the ta­ble with these multi­na­tion­als they come armed and well pre­pared. You know that, Cur­tis. So I am say­ing for the first time in the his­to­ry of this coun­try we have a gov­ern­ment team that is go­ing in al­most monos/manos with them you know. Be­cause we have the back­ing. We have fi­nan­cial mod­els now that we run­ning. Gas strate­gies are build­ing nu­mer­ic mod­els for us to know what will be the out­comes. Be­cause in the past we were mak­ing sub­jec­tive judg­ments. Now we mak­ing mod­el judg­ments based on nu­mer­ics. I al­ways tell them in these ne­go­ti­a­tions, we went to the same uni­ver­si­ties as you all did and some of our peo­ple here went to the best oil and gas in­sti­tu­tions glob­al­ly.

If the Gov­ern­ment has to make a con­ces­sion for the in­dus­try to be prof­itable and sur­vive we will so do.