Moonilal: Global tensions, LNG reform could deliver energy windfall

GEISHA KOW­LESSAR-ALON­ZO

Se­nior Re­porter

geisha.kow­[email protected]

A po­ten­tial bil­lion-dol­lar surge in en­er­gy rev­enue could be on the hori­zon for Trinidad and To­ba­go, dri­ven by es­ca­lat­ing geopo­lit­i­cal ten­sions and a re­struc­tured At­lantic LNG pric­ing for­mu­la, En­er­gy Min­is­ter Dr Roodal Mooni­lal has said.

Mooni­lal not­ed that the coun­try is unique­ly po­si­tioned to ben­e­fit from a spike in Asian LNG price mark­ers. How­ev­er, his op­ti­mistic fis­cal out­look was quick­ly chal­lenged by his pre­de­ces­sor, Stu­art Young, who ar­gued that no amount of glob­al price in­creas­es could off­set what he de­scribed as “de­struc­tive prac­tices” desta­bil­is­ing the lo­cal petro­chem­i­cal sec­tor.

Speak­ing on the ef­fects of the shift­ing geopo­lit­i­cal land­scape in the Mid­dle East, Mooni­lal told Guardian Me­dia yes­ter­day that es­ca­lat­ing in­ter­na­tion­al con­flicts could pro­vide an “un­in­tend­ed” wind­fall for T&T’s en­er­gy cof­fers.

“Re­gret­tably, these glob­al con­flicts do bring un­in­tend­ed con­se­quences to our en­er­gy rev­enues. The on­go­ing con­flict can re­sult in an in­crease in com­mod­i­ty prices, es­pe­cial­ly giv­en the im­por­tance of the Strait of Hor­muz as a ma­jor en­er­gy cor­ri­dor. Should there be a sus­tained in­ter­rup­tion, cou­pled with im­pacts to pro­duc­tion from Gulf coun­tries, an in­crease in both oil and nat­ur­al gas prices—es­pe­cial­ly the Asian mark­ers—can be ex­pect­ed,” Mooni­lal said.

“In terms of the lo­cal en­er­gy sec­tor, in­creas­es in oil prices will re­sult in high­er gov­ern­ment rev­enue from ex­plo­ration and pro­duc­tion li­cences through tax­es, and from pro­duc­tion-shar­ing con­tracts via an in­creased prof­it share,” he ex­plained.

Mooni­lal al­so point­ed to the strate­gic re­struc­tur­ing of At­lantic LNG (AL­NG) as a key fac­tor in al­low­ing T&T to cap­i­talise on glob­al price volatil­i­ty.

Un­der the new terms for Trains 2 and 3, the LNG pric­ing for­mu­la now in­cludes an oil-linked com­po­nent and ex­po­sure to Asian LNG price mark­ers.

“As a re­sult of the re­struc­tur­ing of AL­NG, the pric­ing for Trains 2 and 3 now in­cludes an oil com­po­nent in ad­di­tion to ex­po­sure to an Asian LNG price mark­er. Both fac­tors can re­sult in high­er LNG prices and, sub­se­quent­ly, in­creased rev­enue to the Gov­ern­ment of Trinidad and To­ba­go,” the En­er­gy Min­is­ter added.

How­ev­er, Young chal­lenged that op­ti­mistic nar­ra­tive.

While ac­knowl­edg­ing that the rough­ly 20 mil­lion bar­rels of crude oil and re­fined prod­ucts pass­ing dai­ly through the Strait of Hor­muz could trig­ger a tem­po­rary price surge that would ben­e­fit T&T, he ar­gued that the do­mes­tic en­er­gy sec­tor re­mains in a state of self-in­flict­ed cri­sis.

“We are all wait­ing to see what glob­al oil prices will open at. There is cur­rent­ly a lot of un­cer­tain­ty, as about 20 mil­lion bar­rels of crude oil and re­fined prod­ucts pass through the Strait of Hor­muz dai­ly. It is ex­pect­ed that prices will rise tem­porar­i­ly un­til there is greater cer­tain­ty. Any rise in price will as­sist Trinidad and To­ba­go,” Young said.

He added that LNG sup­plies could al­so be af­fect­ed, not­ing that Qatar is the world’s sec­ond-largest LNG ex­porter.

“So LNG prices are al­so like­ly to be tem­porar­i­ly af­fect­ed, which could ben­e­fit us in terms of rev­enue. How­ev­er, none of it as­sists our do­mes­tic con­sumers of nat­ur­al gas, in­clud­ing NGC’s cus­tomers, who are still strug­gling with what I con­sid­er in­com­pe­tent lead­er­ship and de­struc­tive prac­tices that are mak­ing it dif­fi­cult for petro­chem­i­cal off­tak­ers to re­main vi­able,” Young said.

Young fur­ther ar­gued that the clo­sure of Nu­trien cost the coun­try hun­dreds of mil­lions of dol­lars in lost rev­enue and said there has been no mean­ing­ful up­date on the sec­tor’s re­cov­ery.

“So while there may be some tem­po­rary glob­al price in­creas­es, the medi­um- and short-term sus­tain­abil­i­ty of our en­er­gy sec­tor re­mains un­cer­tain,” he added.