T&T completes new Atlantic LNG deal
NGC hopes to boost revnues from 10% stake
by
Asha Javeed
8 hours ago
20231206
Prime Minister Dr Keith Rowley and Minister of Energy and Energy Industries Stuart Young hold a commemorative plaque after the signing of the commemorative document in London yesterday. Also in picture, at left, are bpTT president David Campbell and NGC president Mark Loquan.
OFFICE OF THE PRIME MINISTER
Asha Javeed
Lead Editor Investigations
asha.javeed@guardian.co.ttThe National Gas Company (NGC) now has a 10 per cent stake in a landmark agreement for a new commercial structure for Atlantic LNG, which was signed in London yesterday.
One year ago, the Government inked new agreements with regard to the restructuring Atlantic LNG with bpTT, Shell and the NGC, which changed the commercial structure of T&T’s liquified natural gas entity - Atlantic LNG - for the first time in 27 years.
Yesterday’s signing culminates five years of negotiations between the parties and opens the door for greater revenue to be derived by the state from the Atlantic LNG trains.
For the Government and country, it means an increase in potential revenue, as Energy Minister Stuart Young had said Government stands to benefit financially from the restructuring. For the NGC, who remits taxes and dividends to the State, it means a greater stake in LNG business.
Quantifying the potential revenue, however, will depend on the global demand for LNG and T&T’s ability to keep supplying the three trains with natural gas. Presently, the Government is in negotiations with Venezuela to commercialise the Dragon Gas field, which would add longevity to the life of the trains and secure T&T’s energy future. As it stands, T&T is the seventh largest global producer of LNG.
For Shell and BPTT, the deal is sign of their commitment to continue investing in T&T.
Negotiations began in 2018 and were expected to be executed by March 31 but were only concluded last week.
In remarks following the signing in London yesterday, Prime Minister Dr Keith Rowley explained that it was a long journey since he had made the case to BPTT and Shell that the country was not getting enough revenue from the contracts first negotiated when the trains were set up, and asked them to re-negotiate.
“It was a fit of madness to think we could have done this but as I read it, I realised it was doable and we did it,” Rowley said.
He thanked all those involved in the restructuring process.
It is unprecedented for energy companies to open fixed contracts to re-negotiate with a government to give a country a greater stake in a business deal.
As such, Rowley counted it as a major win for the Government in terms of its ability to negotiate and expressed certainty that just like other countries have used the Atlantic Trains template, T&T will use the template in future negotiations.
As part of negotiations with energy companies over the past five years, the State has earned an additional $15 billion in revenues.
The latest agreements were signed by Young on behalf of the State.
Young began restructuring negotiations in 2018 in his capacity as Minister in the Office of the Prime Minister and concluded as Minister of Energy.
In a media statement yesterday, BP said the new structure will also facilitate a market-reflective pricing mechanism that provides fair value from the sale of LNG for both T&T and the shareholders and will allow for an intensified focus on the operational efficiency and reliability of Atlantic.
BP said for investors, it will provide the certainty required for sanctioning the next wave of upstream gas projects.
bpTT president David Campbell said, “bp welcomes the new structure for Atlantic LNG which has come as a result of close collaboration with
all stakeholders. The new structure will benefit both the Government of Trinidad and Tobago, as well as Atlantic’s shareholders. For bp, the new structure sets a strong foundation for future investment in T&T’s energy industry, including the deepwater.”
He thanks PM Rowley and Young for their personal stewardship of the complex negotiations.
Meanwhile, the NGC said it is excited by the future prospects of the new shareholding arrangement and is prepared to leverage its current participating interest in Atlantic LNG to generate maximum value for the country.
“The landmark commercial arrangement for the facility signals the country’s pursuit of excellence on a global scale, in an effort to maximise all opportunities for bolstering the sustainable development of Trinidad and Tobago’s LNG and energy sectors,” NGC said.
“The company reaffirms its commitment to seek avenues to optimise the performance of this arm of its business. NGC has strengthened its resilience in the face of a transitioning energy future and will continue to act in the best interest of the citizens of Trinidad and Tobago.”
Shareholding structure
The shareholders of Atlantic LNG are now bpTT, Shell and the NGC.
The China Investment Corporation (CIC), which had an equity interest in ALNG Train One, exited last year.
Before, the existing shareholder arrangements in ALNG’s four trains were:
Train One: Shell – 46 per cent; BP – 34 per cent; NGC – 10 per cent; CIC – 10 per cent.
Train Two: Shell – 57.5 per cent; BP – 42.5 per cent.
Train Three: Shell – 57.5 per cent, BP – 42.5 per cent.
Train Four: Shell – 51.11 per cent, BP – 37.78 per cent, NGC – 11.11 per cent
Since last year’s agreement, rather than separate shareholder arrangements which previously existed for the four trains, the three shareholders now operate as a unitised entity for the three operational trains.
In delivering the feature address in November 2022, Prime Minister Dr Keith Rowley had said that the new ALNG structure will see a greater involvement by the State in the supply and marketing of LNG.
To this end, there will be more involvement by the Minister of Energy and the NGC.
“Until now, all marketing of the minister’s share of natural gas in Production Sharing Contracts was undertaken by the operator, on behalf of the minister (GOTT). In the recently executed Manatee Field PSC with Shell, the minister will be taking a more active role in the marketing of natural gas to be produced from that field,” Rowley had sadi then.
“NGC, which will have a new and increased shareholding in the new Atlantic LNG structure, will benefit from this variation in the marketing of the minister’s share of production. This shift in policy enables the State to play a more in-depth role in the commercial arrangements for the marketing of LNG which will be consistent with the actions of most gas exporting countries.”
Dr Rowley had noted that T&T will benefit from increased revenues from the new negotiations.
He explained that in the Amended and Restated HOA, the parties had agreed in principle to formulae which are market reflective and are patterned on the Train 1 FOB Pricing Formula.
“From inception in 2018, the Train 1 FOB price maintained on average a US$2.0 per mmbtu differential over Henry Hub. However, by the commencement of fiscal 2022, this differential had increased to US$6.0 per mmbtu and rose as high as US$16.0 per mmbtu in fiscal 2022. The combination of improved global energy prices, new marketing arrangements for LNG and measures introduced by this Government, as well as contracts negotiated in our downstream Petchem sector, have resulted in energy revenue for fiscal 2022 of over $29.0 billion compared to an average of $10.0 billion for the preceding five-year period. Whilst higher commodity prices are part of the basis for this increased revenue, it is also directly related to the better terms that have been negotiated since 2017,” he had said.
“The restructuring of Atlantic LNG has given us the opportunity to reinvent the LNG Business in Trinidad and Tobago.
“If we are to make this project a success, we need to bring these upstream projects on stream and accessible to the Restructured ALNG Facility. As a Government, we are prepared to intervene if necessary but hope that the parties will take an accommodating stance without jeopardising their commercial interests. We have shown that we are a strategic and proactive Government in the energy sector and I assure all of our stakeholders that we will continue to work with you to ensure that we remain a leading and competitive province.”
New Atlantic LNG deal timeline
2018 - The Government initiated discussions with the country’s major gas producers BP Trinidad and Tobago LLC and Shell Trinidad and Tobago Limited on gas related issues. One major objective of the negotiations with BPTT and Shell was an agreement by the parties to restructure Atlantic LNG.
2019 - In March, the shareholders of Atlantic LNG signed a letter of intent to discuss the restructuring of Atlantic LNG.
2020 - In April 2020, the shareholders submitted a proposal to Government to commence negotiations on a Heads of Agreement which was to be followed by definitive agreements. Following intensive negotiations agreement was reached on a Heads of Agreement (HOA).
2022 - On January 25, 2022, the Government and Atlantic LNG Shareholders signed the HOA that outlined the governing principles referred to as the Government Principles that form the basis of the Definitive Restructuring Agreements for the restructuring of Atlantic LNG. The HOA represented a commitment by all parties to commit to enter into good faith negotiations regarding the restructuring of the Atlantic facility into a unitised model with a common ownership structure, a commercial framework for gas supply and offtake, and transitioning of the Atlantic Facility into a single Unitised Facility.
December 2022 - Parties agreed to amend and restate the original HOA dated January 25, 2022, with agreed terms of the Definitive Restructuring Agreements in the substantive issues which were built on the Government Principles and the Commercial Construct was forged by the parties.
December 5, 2023- New Restructuring Agreement finalised.
