Gas squeeze: Manufacturers up in arms over pending hike by state-owned NGC

An­tho­ny Wil­son

Con­sul­tant Busi­ness Ed­i­tor

an­tho­ny.wil­[email protected]

The whol­ly state-owned Na­tion­al Gas Com­pa­ny (NGC) has of­fi­cial­ly in­formed lo­cal man­u­fac­tur­ers that use nat­ur­al gas that the price of the com­mod­i­ty will be in­creased by be­tween 60 and 70 per cent by the end of Jan­u­ary.

The de­ci­sion by the NGC to in­crease the cost of nat­ur­al gas to man­u­fac­tur­ers comes as NGC is seek­ing to rene­go­ti­ate many of the gas con­tracts of petro­chem­i­cal com­pa­nies on the Point Lisas In­dus­tri­al Es­tate and the Union In­dus­tri­al Es­tate in La Brea that ex­pired at the end of last year.

The price of the nat­ur­al gas in those con­tracts is al­so be­ing ad­just­ed up­wards, in­dus­try sources told Guardian Me­dia.

NGC even in­creased the price of nat­ur­al gas sold to its sub­sidiary Phoenix Park Gas Proces­sors Ltd (PPG­PL) by 38.66 per cent from US$3.75 per mil­lion btu (mmb­tu) to US$5.20 per mmb­tu.

TTNGL, which is a pub­licly list­ed com­pa­ny on the Trinidad and To­ba­go Stock Ex­change, owns 39 per cent of PPG­PL.

Asked to re­spond to re­ports of high­er nat­ur­al gas prices for lo­cal man­u­fac­tur­ers, Min­is­ter of En­er­gy and En­er­gy In­dus­tries, Dr Roodal Mooni­lal, said, “The NGC has been in­volved in a ro­bust re­view of its busi­ness mod­el and is com­mit­ted to en­sur­ing that cit­i­zens re­ceive a rea­son­able re­turn on our nat­ur­al re­sources. Many of these mat­ters were ig­nored by the pre­vi­ous regime, and in the cir­cum­stances, our Gov­ern­ment has had to act de­ci­sive­ly.”

Man­u­fac­tur­ers who spoke to Guardian Me­dia yes­ter­day de­scribed the sharp and sud­den in­crease as an ex­is­ten­tial dan­ger to large man­u­fac­tur­ers in T&T, threat­en­ing jobs, tax rev­enue and for­eign ex­change earn­ings.

“Such a large in­crease will dri­ve up our cost of pro­duc­tion, which will in­crease prices on the do­mes­tic mar­ket, make lo­cal goods less com­pet­i­tive in re­gion­al mar­kets and re­duce the amount of tax rev­enue and for­eign ex­change gen­er­at­ed by the sec­tor,” said one man­u­fac­tur­er.

An­oth­er said, “This pro­posed in­crease goes way be­yond the price of our pre­vi­ous con­tract and puts our com­pa­ny in an un­sus­tain­able po­si­tion that would threat­en its abil­i­ty to con­tin­ue to com­pete lo­cal­ly against im­ports and cer­tain­ly elim­i­nate our abil­i­ty to con­tin­ue to ex­port and earn much-need­ed for­eign ex­change for T&T.”

NGC ef­fec­tive­ly func­tions as a mo­nop­oly in the whole­sale do­mes­tic nat­ur­al gas mar­ket, act­ing as the sole pur­chas­er, trans­porter and dis­trib­u­tor through its ex­ten­sive pipeline net­work to ma­jor in­dus­tries like petro­chem­i­cals, pow­er gen­er­a­tion and man­u­fac­tur­ers.

All man­u­fac­tur­ers who spoke to Guardian Me­dia did so on the con­di­tion of anonymi­ty be­cause they are in ne­go­ti­a­tions with the NGC and are re­quired to sign non-dis­clo­sure agree­ments (NDAs).

“Please re­mem­ber that de­tails of any dis­cus­sions with NGC re­gard­ing gas ne­go­ti­a­tions and con­tracts are sub­ject to an NDA and could have le­gal con­se­quences. Di­vulging de­tails about prices would put the per­son and com­pa­ny in a very dif­fi­cult po­si­tion,” said one ex­ec­u­tive.

A third ex­ec­u­tive said, “This will be tan­ta­mount to eco­nom­ic dec­i­ma­tion. There will be job loss­es at man­u­fac­tur­ing com­pa­nies and the down­stream of the man­u­fac­tur­ers. The high­er price of nat­ur­al gas will place fur­ther pres­sure on con­sumer prod­ucts man­u­fac­tur­ing and on an al­ready stag­nant con­struc­tion sec­tor.

“Man­u­fac­tur­ing will opt out of fur­ther re­tool­ing and cap­i­tal in­vest­ment due to un­com­pet­i­tive­ness. There will be a mas­sive net for­eign ex­change im­pact, as forex rev­enues will be lost due to un­com­pet­i­tive pric­ing, and there will be a dou­ble hit to the econ­o­my in terms of in­creased for­eign ex­change de­mand to re­place the pro­duc­tion that was orig­i­nal­ly sourced from lo­cal man­u­fac­tur­ers.”

There will prob­a­bly be a ten to 15 times neg­a­tive eco­nom­ic im­pact vs the in­cre­men­tal rev­enues from the in­creased gas price to the man­u­fac­tur­ing sec­tor, said the ex­ec­u­tive.

One man­u­fac­tur­er al­so ob­served the like­li­hood that the in­creased price of nat­ur­al gas to man­u­fac­tur­ers would negate the plans out­lined by Min­is­ter of Trade, In­vest­ment and Tourism, Satyaka­ma Ma­haraj, in No­vem­ber to ex­pand T&T’s ex­ports over the next five years.

In an ad­dress to the Trinidad and To­ba­go Man­u­fac­tur­ers’ As­so­ci­a­tion (TTMA) Pres­i­dent’s Din­ner at the Hy­att Re­gency, Ma­haraj linked the in­crease in ex­ports to the Gov­ern­ment’s plan to dri­ve in­vest­ment and strength­en the coun­try’s ex­port base.

“To­geth­er with the pri­vate sec­tor, we are aim­ing for ex­port growth of US$2 bil­lion in two years and US$5 bil­lion in five years. As it re­lates to in­vest­ments, we are aim­ing for US$3 bil­lion in new in­vest­ments over the next two years and US$9 bil­lion in in­vest­ments over five years, as well as the cre­ation of 3,000 jobs.”