Joint Letter to MEEI-Final Dec 23 2020-1

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The major downstream petrochemical companies have accused the National Gas Company (NGC) of a conflict of interest, putting hundreds of millions of dollars and 30,000 jobs at risk.

“Not only is the sector’s significant current contribution to the national economy at risk, in the form of hundreds of millions of dollars per year of direct revenue, over 25 per cent of country Forex, 1,500-plus highly skilled direct employees; not including thousands of other permanent employees, as well as over 30,000; more in the services and support sectors; this decision also imperils the future growth of the sector,” a letter signed by five Chief Executive Officers of Point Lisas Petrochemical companies read.

In a strongly worded letter to the Minister of Energy and Energy Industries Franklin Khan, a copy of which Guardian Media has obtained, the Chief Executive Officers of 24 plants said they are deeply disturbed by the revelation that the NGC is to take over control of the operations of Atlantic LNG’s Train 1.

It referred to two Business Guardian articles of Sunday, December 6 (NGC takes $300million gamble on Train 1) and Thursday 17th December (‘Train 1 or not … NGC promises to meet contracted gas to

downstream”) and called for an urgent meeting with the Minister of Energy to fix the issue.

The letter read: “We are therefore deeply concerned by the NGC’s reported multimillion-dollar investment to maintain the operability of Train 1. This will substantially deepen the NGC’s role in the LNG industry and could create incentives to prioritize gas supply to its own investments, to the detriment of its clients. In effect, this appears to us as an unambiguous conflict of interest to the NGC’s primary mandate, making the NGC a competitor to its own customers in the Downstream. Furthermore, this decision comes in a period where the supply of economical gas is already under severe strain- and likely to remain so throughout 2021.”

Reached yesterday Energy Minister Franklin Khan said he has a meeting carded with the five CEOs and has promised to say more after.

“The letter was sent to me so I don’t know how you have a copy of it, but that’s the world now, there is nothing that is a secret. But you have the letter and you can see it is the CEOs of the top Petrochemical companies so it’s important and I will be meeting with them at noon today after which I will speak,” Khan told Guardian Media.

Chairman of the NGC Conrad Enill said the company would not be part of the meeting even though it was aware of the letter.

Asked about the NGC getting deeper involved in Atlantic he simply said the NGC has to implement government policy.

Enill, however, insisted that the NGC could not contractually short the downstream companies in favour of its interest in Atlantic since the contracts are binding and have minimum supply clauses with significant penalties for failure to meet those gas commitments.

The CEOs reminded Khan that as leaders of the largest Downstream petrochemical producers in Trinidad and Tobago they represent 24 plants, more than 30,000 direct and indirect employees and invested capital of over US$8billion and had noted with grave concern the recent reports regarding Atlantic’s Train 1 liquefied natural gas (LNG) processing facility.

“We are writing to request urgent clarification on gas supply implications for the National Gas Company’s (NGC) other customers in the Downstream,” the letter read.

According to the leading CEOs, the NGC’s primary role is the aggregation, purchase, sale, transmission and distribution of natural gas to the Downstream industries, alongside its investments in Downstream and Upstream production. In this position, the NGC enjoys a monopoly on gas supply to the Downstream sector, supported by its unique confidential gas pricing and allocation model.

It said while the NGC has committed to fulfilling its existing contractual obligations, this does not address the requirements of Downstream producers already operating with lower contractual volumes following several years of gas curtailments.

“These arrangements were a painful compromise, on the undertaking from the NGC that these producers would receive any additional gas volumes that subsequently became available. Nor does it address the requirements of Downstream producers in the progress of negotiating contract renewals.

The letter continued: “With the additional requirements of Train 1 of at least 250 mmscf/d and below-forecast Upstream production, what does this mean for the adequate supply of affordable gas to the Downstream producers? Also, given, that this volume represents the equivalent of supply to five (5) petrochemical plants employing 5 times the number of people we are concerned about the overall impact on the wider economy. In addition, such a large share of natural gas production allocated to a single commodity could increase the exposure risk for the country in the future.”

It said this is already a critical juncture for the Downstream sector. The impact of the pandemic on global commodity markets, layered on existing high gas prices and diminished global competitiveness, has created an existential threat for Trinidad and Tobago’s Downstream the CEOs noted.

They insisted that the Downstream could once again become an economic powerhouse for the country, with the right conditions and enabling environment and warned this appears to be a move in the opposite direction.