Train X plan still on track
PORT SPAIN
Trinidad & Tobago Express
Petroleumworldtt.com
12 31 08
A fifth Liquefied Natural Gas (LNG) Train, the controversial Train X, is still on the front-burner even though the Government is now using two prices for natural gas for the revised 2008/2009 Budget.
Train X which has been the subject of an economic feasibility for the past year remains a key objective of the Government even though the Budget was reduced to deal with an anticipated $5.3 billion loss in revenue this fiscal year due to the international financial crisis and lowering oil and natural gas prices.
"Why would it be on the back-burner? As far as I am concerned all the projects bringing value to Trinidad and Tobago, the temporary reduction in the price of the commodity based on the global financial market and the credit squeeze I don't consider that will continue throughout the life cycle of the product," said Energy Minister Conrad Enill.
He made the disclosure in an interview with the Business Express last week on the same day he revealed the Government had lowered the price of natural gas for the Budget from US$4 per million British thermal units (mmbtu) to a combination of US$3.25 per mmbtu and US$3.50 per mmbtu.
Getting more gas for your buck
Enill said the country's natural gas output currently stands at approximately 700,000 barrels a day of oil equivalent, which is in keeping with the Government's targets.
He said the reason why the Government is not shying away from Train X at this time is because such projects are long-term initiatives that do not become a reality overnight.
In other words, Enill's point was one of optimism in that even if the Government were to give the go-ahead for the establishment of Train X today, the amount of time it would take for it to be up and running would see a complete turnaround in the international financial crisis, more stable oil prices and even higher natural gas prices.
In his second address to the nation on the international financial crisis on November 30, Prime Minister Patrick Manning said "there is now an emerging view, already expressed by world leaders, that the financial crisis could be over by the end of 2010."
"When you make a decision, what happens is that it takes about eight or nine years to take it from where you are to get to where you need to be. So all those who are of the view that if you make a decision today you get the results tomorrow you are wrong," Enill said.
A time to keep or a time to cast away?
In his first address to the nation on the international financial crisis on November 20, Manning said "with respect to the development programme, the projects identified for downward adjustment are as follows:
New projects other than those of an urgent or critical nature; ·
Those projects for which there were no firm contractual obligations; ·
Onging projects for which the pace of implementation could be reduced without legal penalties;
Ongoing projects for which some components could be deferred.
The Business Express exclusively reported on November 5, that a study on the economics of Train X, which is now some 11 months behind schedule, is the only thing now keeping back the Government from making a decision on whether it makes sense to go ahead with the project or not.
Enill said last week a decision on Train X, cannot be postponed or cancelled even though natural gas has been on the decline since August.
Understanding the price of LNG
This country earns more than 60 per cent of its revenues from its LNG revenues and is the largest exporter of the product to the United States.
The Budget is based on the netback price received for gas sales before it is converted into LNG and shipped to the Henry Hub in Louisiana, United States.
The Business Express understands this country actually receives about 50 per cent of the Henry Hub prices depending on where the natural gas is sold - for example, gas sold to Atlantic LNG which operates the four existing LNG trains or gas sold for ammonia production.
A financial source told the Business Express that this means when the Henry Hub natural gas price average was US$6.34 last week, this country actually earned US$3.17 per mmtbu, which is below the new US$3.25 and US$3.50 prices for the new Budget.
Enill said that when it comes to Train X, decisions cannot be taken "on the basis of one year or two year projections".
"You make it on the basis of 20 and 30 years and, therefore, if you have a long-term view of the market and market considerations then you know investment will be looked at in the context of that," Enill said.
Story by Juhel Browne
from Trinidad & Tobago Express
Trinidad & Tobago Express
Wednesday, December 10th 2008
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