(Trinidad Guardian, 23.Feb.2022) — 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
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By Curtis William
