Four trains too far?
By Raffique Shah
May 29, 2019
Consider the following: in 2019, when the 20-year contract for Train 1 of the Atlantic LNG plant expired and a new contract was negotiated, supposedly giving the people of Trinidad and Tobago a fairer share of the profits, the principal shareholder of the Train, BPTT, cast doubt over its future viability based on an unreliable supply of natural gas occasioned by two (or four?) "dry holes" in the energy giant's infill drilling programme offshore T&T.
And this: last week: when tenders for six shallow water blocks were opened, the only bid came jointly from BPTT and Shell. The Dutch transnational, which, like BP (British), had a presence in this country since the early 1900s, but which, again, like BP, pulled out of T&T in the 1970s, returning in 2014 as one of the big players in the local gas sector, having acquired Repsol's production assets and its stakes in ALNG's four trains.
"With the completion of the combination of BG Group and Royal Dutch Shell in February 2016, Shell assumed a major upstream position (in T&T) where gas is supplied to both the petrochemical and LNG sectors and a majority interest in Atlantic LNG across the four-train facility," the company trumpets on its website. "Our equity in the Atlantic LNG plant ranges from 46% to 57.5% in each of four trains at the Point Fortin facility."
As I mentioned at the beginning of this article, the Government said it had secured a better deal for the nation in the new contract for Train 1. We have to take their utterances as the truth since citizens are not privy to the details of such documents.
New contracts for the other three trains, in which BPTT and Shell are the joint-majority shareholders will need to be completed by 2022 (Train 2), 2023 (Train 3) and 2026 (Train 4).
Is the dovetailing of these events that impact the country's economy in a significant way (dry holes, uncertainty over Train 1, lone joint bid for shallow water blocks) coincidental?
Like Sherlock Holmes, I do not believe in coincidences. To put it as best I can in colloquial language, there must be more in the mortar than the pestle. Put crudely, I suspect we the citizenry have been royally screwed by the transnational corporations that all but control our hydrocarbons, by the bureaucrats and technocrats who negotiated the initial contracts on our behalf, and by the politicians who signed off on them, only to come 20 years later, and heaven-knows how many billions of dollars poorer, to howl bloody murder.
When Train 1 was commissioned in 1999 with a capacity of 3.3 million tonnes (MT) of LNG per annum, it was the 21st liquefaction plant in the world, and T&T the 10th country involved in the burgeoning global natural gas trade that amounted to 40 MT per annum. One million tonnes of LNG equals approximately 48 billion cubic feet (bcf) of natural gas.
The most important among the countries that entered the LNG business at the time, from the perspective of their clear intentions to muscle into the market with their huge proved gas reserves were Algeria (2 trains, 16MT), Indonesia (4 trains, 13.9MT), Malaysia (2, 18MT), Qatar (4, 12.8MT) and Australia (3, 7.5MT).
By the time ALNG's Trains 2 and 3 came on stream in 2002/2003, adding 7MT to our annual output, nine new trains had been commissioned, boosting global production by 30MT per annum. Notably, Nigeria and Oman had entered the business, and Qatar was clearly seeking to become the world's leading LNG producer.
When Train 4 (5.2MT) was commissioned in 2006, taking T&T to fifth spot among exporters, the LNG market was becoming crowded and our competitors were formidable in terms of their reserves and competitiveness.
Fast-forward to 2017 when T&T's proved reserves were estimated at 15.6 trillion cubic feet (tcf), or 10 years' supply based on utilisation. The petrochemical and other plants at Point Lisas, and electricity generation, required just under two billion cubic feet of gas daily (bcf/d) while ALNG's requirements for optimum operations required approximately 2.2 bcf/d).
On the global LNG market in 2017, we came up against Qatar (879 tcf reserves, annual LNG capacity 78MT), Australia (128tcf/66MT), Malaysia (96tcf/29MT), Indonesia (102tcf/26MT), Algeria (153tcf/25MT), Nigeria (183tcf/22MT), and for the first time, the USA with 308tcf and 19MT, relegating T&T to 8th spot (15.6tcf/15.5MT).
The future of ALNG will be impacted by 27 liquefaction plants currently under construction, 12 in the USA and four each in Russia and Australia. Russia, which has humongous reserves estimated at 1,234 tcf, has hitherto relied on selling its gas via a network of pipelines that distribute the product to much of Europe and neighbouring Asian countries. Similar systems facilitated the trade among Canada, the USA and Mexico. And never forget that Iran sits on 1,173 tcf of gas, little of which is traded because of the punishing US sanctions against Teheran.
It is not all grim news, although it seems that BPTT and Shell plan to fight to retain their dominance, not to add the lion's share of the profits from the plant, since they control exploration, production, processing and marketing. It is too late now to speculate that with our limited reserves, we might have been better off not entering the LNG business, which politicians on both sides of the divide agree, adds far less to the value-chain than our petrochemical industries.
Maybe we ventured four trains too far. History will judge those who made that decision.
Share your views here...