A bpTT natural gas forecast for 2021.

The decision by State-owned National Gas Company (NGC) to take responsibility for the operations of Atlantic LNG’s Train 1, including spending hundreds of millions of dollars for its Turnaround (TAR) and finding the gas to run the plant, has been described by industry insiders as a major gamble that is likely to lead to bad outcomes for the NGC and taxpayers of T&T.

Already the state-owned company is reporting hundreds of millions of dollars in losses and its chairman Conrad Enill has admitted that those losses are expected to continue for the rest of the calendar year. In addition, the NGC’s accounts for the last financial year showed that the company was burning cash with money being taken out of the business, leaving even less for investment.

The Sunday Guardian has confirmed from multiple sources that the NGC, which owns only ten per cent of Atlantic’s Train 1, agreed to spend the $300 million to do a refurbishment of the plant Turnaround because bpTT and Royal Dutch Shell which own 80 per cent of the plant were not prepared to spend money on it when they do not have gas to supply. Sources said the NGC’s decisions was to fulfil a mandate from the Government that the plant must not be shut down because it would be a major embarrassment to the Keith Rowley administration which has crowed about re-negotiating the Train 1 contract and forcing the players to leave more money in the hands of the State. Without the NGC’s move, the much-touted Train 1 windfall would have lasted for under a year.

On Friday Energy Minister Franklin Khan told the Parliament that the partners had agreed to the TAR, but did not give details.

He said, “Madam Speaker, Atlantic Train One will not be shutting down in January 2021. Train One will continue to operate in 2021 and will be part of wider negotiations which have been taking place among the Atlantic LNG shareholders to form one unitised facility encompassing all four trains.”

Khan admitted that his confidence in the continuation of Train 1 comes even though the NGC does not at this stage have the gas for it.

“So we are in some sensitive negotiations, let me make that point, with upstreamers to supply gas to Train One,” he said.

Sunday Guardian has been told for Train 1 to even operate it would require no less than 250 million standard cubic feet of gas per day (mmscf/d) otherwise the compressors will not kick in. This at a time when gas production is already low.

‘bpTT does not have enough natural gas to supply Train 1’

Crucial to understanding the Government’s dilemma is the role of bpTT, which for the last 21 years provided 100 per cent of the gas for Train 1. The company has made it clear that it does not now have the gas and has not provisioned for it.

A confidential bpTT document which the Sunday Guardian has obtained a copy of shows that not only has bpTT not allocated a molecule of natural gas for Train 1, it is expecting a catastrophic fall in its production.

The document shows the company expecting an average of 1.371 billion standard cubic feet of natural gas per day. Compare this to March this year when the company was producing over 2 billion standard cubic feet per day and averaged up to September this year 1.8 billion standard cubic feet per day.

In response to questions from the Sunday Guardian, bpTT refused to be drawn on the Train 1 issue but admitted that next year its production will be down. The company said the COVID-19 pandemic had negatively impacted its projects which were to be completed in 2021 and would now be finished in mid-2022.

“In terms of production, 2020 and 2021 have been impacted by the disappointing results from our infill drilling programmes at the beginning of 2019. Following the results of the infill drilling programme in 2019, we sought to mitigate production declines by increasing our focus on well work and system optimisation to maximise production from our existing fields. These measures had the desired effect in 2019 and 2020 of slowing the rate of natural field declines. We will continue our focus on well work and system optimisation into 2021 however, our outlook for next year has been impacted negatively by COVID-19,” bpTT said.

It said the virus has impacted the schedule for the Cassia Compression project, the start-up of which has been delayed from 2021 into 2022.

bpTT added, “The combined effect of natural field declines and the delay in the Cassia Compression project means that our production outlook for 2021 will be lower than 2020.”

In response to questions from the Sunday Guardian, bpTT said it anticipates that in 2022 production volumes will improve with the start-up of the Cassia Compression and Matapal projects.

“We expect that both of these projects will be online in the first half of 2022 and those volumes will be put towards fulfilling our existing contractual obligations for Trains 2, 3, 4 and NGC,” the statement added.

‘The bigger conundrum is related to natural gas production’

Former energy minister Kevin Ramnarine reminded that bpTT does not have enough gas to supply Train 1.

He said, “Train 1 has a minimum rate at which it can run and that is around 250 million cubic feet of natural gas per day. So, even if the Turnaround (TAR) happens, and even if, as the minister says, the Train will be kept in “operations-ready mode” for 2021 and 2022, then where is the natural gas coming from? If NGC sources some natural gas, it will mean that they have to shift supply away from Point Lisas to keep Train 1 liquifying natural gas. The question that begs an answer is what exactly did the NGC commit to do to keep Train 1 in “operations-ready mode”?

“The bigger conundrum in which we find ourselves is related to natural gas production. As a country, we are now producing natural gas at levels under three billion cubic feet/day­—rates last seen in 2005. You can unitise Atlantic’s commercial architecture as much as you want, but at the end of the day you need the requisite volumes of natural gas to make Liquefied Natural Gas.”

Sunday Guardian also has a Cabinet note which shows that bpTT’s production has declined significantly from May to September and all the upstream operators except for BHP are producing at significantly lower rates than last year.

Several players in the downstream sector said they fear that this move by the NGC would mean that if methanol and ammonia prices recover next year and the plants that at mothballed want to restart, they will have no gas for it.

Sunday Guardian has been told by sources in the industry that the move by the NGC is a gamble that the idled plants will not restart and if they have to, then they will be forced to short those petrochemical plants on the estate.

Chairman of the NGC Conrad Enill was called on ten occasions between Friday and up to last night but never answered the phone nor returned the called. Energy Minister Khan was called on six occasions and he too did not respond nor did NGC’s President Mark Loquan.