State-owned National Gas Company of T&T Ltd (NGC) has promised even if it becomes the operator of Atlantic LNG’s Train 1 it will not be at the expense of the downstream petrochemical sector.
The Sunday Guardian had reported exclusively that the NGC is taking a major gamble by agreeing to spend hundreds of millions of dollars to do an end-of-life turnaround (TAR) of the plant as Train 1’s major shareholders, Royal Dutch Shell and BPTT have made it clear they do not have the gas for Train 1 and were not prepared to put out huge sums of money for a TAR when they cannot see the funds being recovered.
Well-placed sources in the NGC tell the Business Guardian that the company has been instructed by the government to do all it can to save Train 1, including the major expenditure.
To date sources say the NGC has not been able to secure the 400 million standard cubic feet per day (mmscf/d) of natural gas needed to fully operate the plant.
The NGC has also found itself in a difficult position in which some plants have closed because of the weak commodity prices for methanol and ammonia but also in a situation where for years those very plants were not getting enough gas because of curtailment issues.
The Business Guardian asked the NGC if it could guarantee that the downstream sector will not be short-ended for natural gas should there be a way forward for Train 1. The company assured: “NGC has met and will continue to meet its downstream obligations.”
Business Guardian further asked the NGC where it is it likely to get gas from for its Train 1 proposal?
“All discussions between NGC and the Train 1 shareholders is and remains strictly confidential and NGC is therefore precluded from making and proffering any comments on same.”
Two week ago Energy Minister Franklin Khan told the Parliament that the partners had agreed to the TAR, but did not give details.
He said, “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 1,” he said.
Business 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 shows that not only has the company not allocated a molecule of natural gas for Train 1, it is expecting a catastrophic fall in its own production.
The document shows the company expecting an average of 1.371 billion standard cubic feet of natural gas per day in 2021. Compare this to March this year when the company was producing over two 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, 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 Business 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 negotiations are ongoing even as the Central Bank put out staggering numbers on Monday showing major declines in the petrochemical sector and the challenges that the energy sector is facing.
According to the Central Bank available indicators suggest that energy sector activity remained further constrained in the third quarter of 2020, declining 20.1 per cent.
According to the bank the effects of the COVID-19 pandemic on economic activity saw significant year on-year declines in the local production of natural gas (19.9 per cent). Refining activity dropped 20.1 per cent, evidenced by declines in LNG (19.9 per cent) and NGLs (20.8 per cent).
The bank’s Monetary Policy Report (MPR) read; “Downstream activity was also adversely impacted, following the trend of upstream counterparts, as petrochemical output fell (31.1 per cent) over the three month period. The notable decline was driven by a 49.6 per cent falloff in methanol production, on the heels of closures to the CMC, TTMC II and Titan facilities during the period. Additionally, ammonia output fell 16.8 per cent (year-on-year) over the period.”
The MPR noted that both midstream and downstream activities weakened with refining activity falling by 4.8 per cent when compared with the first half of 2019. LNG production decreased by 4.0 per cent, while NGL production fell by 7.3 per cent.
“Activity in the petrochemical sub-sector contracted by 7.1 per cent in the first half of 2020as several domestic petrochemical plants closed due to the dampening effects of the coronavirus on commodity markets and the world economy at large. Production of methanol fell by 9.2 per cent (year-on-year) in the first half of 2020. Notwithstanding a marginal 1.1 per cent increase in urea production, fertiliser production fell by5.2 per cent, weighed down by a 6.0 per cent fall in ammonia production,” the MPR revealed.