With the annual T&T Energy Conference starting today, Economist Gregory McGuire believes the issue of natural gas shortages, its competitiveness and a new formula for natural gas pricing for petrochemicals must be front and centre.
In an interview yesterday with Guardian Media McGuire said while he does not expect the conference to deal with the price of natural gas it is a major issue facing the sector that he hopes the value chain study being done by Gas Strategies finds a solution to.
He explained, “It is one of the issues that the value chain study is seeking to address because ultimately, what’s going to happen is somebody is going to have to concoct a regime of market related prices, which is what operates in LNG. LNG is a net back formula, and so how do we figure out how to net back a formula for the petchems because negotiations and pointing fingers at the NGC or pointing fingers at the upstream those things are not going to carry us very far. So ultimately a net back formula will have to be found for the petrochemicals.”
He said issues like the future of Train 1 which has been shut down since last year are important but to him it is a larger question of the distribution of natural gas that the country has to consider and he hoped some of it could be discussed at the conference.
“The bigger question is gas distribution. How do you distribute between downstream and LNG? I don’t expect the issue of gas pricing to come up at the conference bearing in mind the agenda. But it is an issue. The pricing thing is real, we do have a problem,” the Energy Economist noted.
He argued that government had no power to reduce gas prices and said once a net back formula could be found then the market will dictate the future.
What he said government had some power in was the issue of putting out acreage for bid rounds to ensure the sector can grow.
He said as with anywhere in the hydrocarbon business, long term survival and long term sustainability depend on availability of reserves.
“So for me, your E&P activity is always a priority. Whatever needs to happen to facilitate the search for new reserves cannot ever be postponed, pushed back, delayed whatever. You have to do it,” McGuire insisted.
He noted that with oil one can explore and export but with gas a market has to exist or you have to be confident that there is going to be a market for the gas before you explore. McGuire said such a condition exists in T&T.
“That condition exists in so far as a nation we continue to see the long term challenge in terms of availability of supplies which is going to be the biggest constraint on any growth of the business going forward,” McGuire posited.
He said notwithstanding what is happening in the US re Shale Gas the search has to continue for new resources in T&T and it must be priority.
“Form the government side it must be what is being done to stimulate upstream activity, from the companies side which projects have been approved, which projects they have sanctions for, or what they are going for new sanction and also from the government side would be where is the new hot spot with respect to leases and bid rounds.”
He said the success of Touchstone will generate some more interest in the land fields and hopes the new bid round will include land acreage.
On the issue of energy transition from fossil fuels to renewables McGuire insisted energy transition means different things to different countries and from an oil and gas producer standpoint it is different to an oil and gas importer.
He pointed to the example of Barbados and its focus on renewable energy particularly solar water heaters.
“Energy transition requires some serious thought. Yes the driver might be the general trend in the world to reduce carbon emissions but even while we do that we need to understand that this resource remains our biggest foreign exchange earner.”
The Energy Economist used the example of Guyana and asked what is the country to do with its recent massive oil discoveries other than produce it and perhaps even faster than it would normally been done to beat the energy transition window.
“We need to pursue renewables to allow us to free up hydrocarbons for export but also we need ensure that energy transition happens in areas like power generation,” McGuire said.
The conference starts today with Prime Minister Dr Keith Rowley as the keynote speaker. But we will also hear from the Prime Minister of Jamaica and the Presidents of Guyana and Suriname.