Trinidad and Tobago minister seeking change to LNG profit formula

Curtis Williams
OGJ Correspondent

PORT OF SPAIN, Feb. 9 -- Trinidad and Tobago’s Energy Minister Carolyn Seepersad Bachan reported she will seek Cabinet approval to renegotiate the formula on how the profits are distributed from her country’s export of LNG.

Seepersad Bachan told the energy chamber’s annual conference in Port of Spain that the LNG industry had fundamentally changed with the emergence of shale gas in LNG importing countries, particularly in the US. She said this meant that her government has to review the netback prices paid to the upstream producers and the government from LNG sales.

Seepersad Bachan told the conference, “The sharing of revenues in the LNG value chain is being tilted in favor of the LNG marketing companies only, rather than an equitable distribution to the upstream and the LNG marketers.”

The twin-island nation’s energy minister added that the netback formula assume the export of LNG to the North American market while the current reality is that the US market is oversupplied with LNG and cargo diversions to Europe and Asia is the norm.

She said, “The Ministry of Energy and Energy Affairs is closely examining this development and I intend to take to Cabinet a proposal to reexamine the sharing of revenues generated through the marketing of this country’s gas based products including LNG.”

However BG Trinidad & Tobago Pres. Derek Hudson said his company has a formula that ensures all cargoes that are diverted from the US market to more lucrative markets result in an equitable sharing of the profits with the Trinidad and Tobago government.

He told OGJ in an interview that there was a clear formula and perhaps there was simply a need for clarity.

Hudson said the issue of diversion of cargoes and the Trinidad and Tobago government's tax take has been raised in the past and he felt that it was merely a mix up in communications.

BG Group is the second largest shareholder in Atlantic LNG and is involved all along the LNG value chain.

Seepersad Bachan argued that in order to have healthy upstream bid rounds, producers need to be confident that they can efficiently monetize their gas downstream.

Of the LNG exported in 2010 from Atlantic LNG, 40% went to North America and the Caribbean. Europe received 31% of the LNG exported, while Asia received 10% of the 2010 exports. South America (Brazil, Argentina, and Chile) received 17% of the LNG exports. In Europe Spain was the largest importer of LNG from Trinidad during 2010, taking 17.3% of our exports. Approximately 2% of LNG exported went to others, mainly the Middle East.

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