THE chairman of the National Gas Company (NGC) Conrad Enill has admitted that his board was counting on gas previously contracted to the downstream petrochemical sector in 2020. But when that sector required their portion of gas in 2021, there was none to restart Train 1.
Their team could not identify any other single source of gas to keep this plant operating so they were counting on the effects of Covid-19 as most of the downstream companies were not taking the gas allocated to them.
NGC has to pay for this gas anyway and as the price offered to these downstream companies in 2019 and 2020 was considered high. The price the downstream petrochemical companies were required to pay NGC for this gas, the companies decided to shutdown their plants in 2020.
The NGC board was counting on using this same gas in 2021 to operate Train 1 effectively counting on the downstream companies not being able to operate on 2021. Counting on them remaining shutdown.
NGC has a take-or-pay contract with gas producers such as Royal Dutch Shell, BHP, BPTT and EOG. This means they have to take the gas from these companies whether they have the sale for the gas to the downstream petrochemical companies or not.
They have a contract where they have to take the gas from the upstream companies and they usually sell it back to the petrochemical companies but if the companies were shutdown temporarily because of the Covid-19, and gas prices were high, then NGC is left still having to pay the upstream companies for the gas.
So NGC decided to bet on the effects of a virus, that these downstream petrochemical chemical companies would remain in this shutdown mode and they could use this gas for Train 1 while the downstream companies was not taking the gas.
It was an ill-conceived plan from the start as the world reopened from the lockdowns, the downstream companies wanted their gas back and business improved for them therefore the Point Lisas plants wanted their gas back again.
This was easy, in my opinion, to forecast, as one could see once the world started to reopen their borders and remove the lockdowns by November 2020 that the downstream companies would become operational again and that using their promised gas to run Train 1 was not sustainable.
In addition the majority stakeholders BPTT, the Chinese investors and Shell told the government in writing that Train 1 was not sustainable with no option for sustainable gas supply availability and would not be participating in the investment to upgrade Train 1.
So the Government and the Conrad Enill’s board decided to place the financial burden on NGC alone, who was already facing issues with supplying gas to other down streamers in Point Lisas.
So, any person with half a brain in the industry, would have realised by November 2020 that the industry would rebound and their plan to use gas promised to downstream petrochemical companies would fail.
The Government and NGC were fully aware that there would be no gas from BPTT for Train 1, however they still decided to spent huge sums of money, hundreds of millions of dollars on contractors to upgrade Train 1.
This is one for the books and will go down as the great Train 1 blunder.
The decision of the board of NGC to invest $440 million in a turnaround of Train 1 should go down in history as a terrible decision and a great misjudgment in gauging the energy market in this industry.
It is clear now that the board has realised its blunder and with Government approval is now seeking an indemnity because they realised that this investment was a serious error and a further waste of taxpayers’ money, money we so crucially need now for other investments to keep the economy afloat.
The citizens of this country put their trust and faith in the Government and their ability to appoint capable people to run these large state-owned energy companies and to ensure they make proper decision for our future generations so they are profitable, not to squander our funds on bad ill conceived plans like this one, which will have ripple effects across our economy for years to come.
The Government and their technocrats continue to fail us and our country as we continue down a road to economic fallout. God help us.
(Neil Gosine is an insurance executive, the North East Regional Coordinator of the United National Congress and a former chairman of NP. The comments and opinions expressed by him in this column are not necessarily those of AZPNews.com, a division of Complete Image Limited.)
Commentary: The Great Train 1 Blunder
THE chairman of the National Gas Company (NGC) Conrad Enill has admitted that his board was counting on gas previously contracted to the downstream petrochemical sector in 2020. But when that sector required their portion of gas in 2021, there was none to restart Train 1.
Their team could not identify any other single source of gas to keep this plant operating so they were counting on the effects of Covid-19 as most of the downstream companies were not taking the gas allocated to them.
NGC has to pay for this gas anyway and as the price offered to these downstream companies in 2019 and 2020 was considered high. The price the downstream petrochemical companies were required to pay NGC for this gas, the companies decided to shutdown their plants in 2020.
The NGC board was counting on using this same gas in 2021 to operate Train 1 effectively counting on the downstream companies not being able to operate on 2021. Counting on them remaining shutdown.
NGC has a take-or-pay contract with gas producers such as Royal Dutch Shell, BHP, BPTT and EOG. This means they have to take the gas from these companies whether they have the sale for the gas to the downstream petrochemical companies or not.
They have a contract where they have to take the gas from the upstream companies and they usually sell it back to the petrochemical companies but if the companies were shutdown temporarily because of the Covid-19, and gas prices were high, then NGC is left still having to pay the upstream companies for the gas.
So NGC decided to bet on the effects of a virus, that these downstream petrochemical chemical companies would remain in this shutdown mode and they could use this gas for Train 1 while the downstream companies was not taking the gas.
It was an ill-conceived plan from the start as the world reopened from the lockdowns, the downstream companies wanted their gas back and business improved for them therefore the Point Lisas plants wanted their gas back again.
This was easy, in my opinion, to forecast, as one could see once the world started to reopen their borders and remove the lockdowns by November 2020 that the downstream companies would become operational again and that using their promised gas to run Train 1 was not sustainable.
In addition the majority stakeholders BPTT, the Chinese investors and Shell told the government in writing that Train 1 was not sustainable with no option for sustainable gas supply availability and would not be participating in the investment to upgrade Train 1.
So the Government and the Conrad Enill’s board decided to place the financial burden on NGC alone, who was already facing issues with supplying gas to other down streamers in Point Lisas.
So, any person with half a brain in the industry, would have realised by November 2020 that the industry would rebound and their plan to use gas promised to downstream petrochemical companies would fail.
The Government and NGC were fully aware that there would be no gas from BPTT for Train 1, however they still decided to spent huge sums of money, hundreds of millions of dollars on contractors to upgrade Train 1.
This is one for the books and will go down as the great Train 1 blunder.
The decision of the board of NGC to invest $440 million in a turnaround of Train 1 should go down in history as a terrible decision and a great misjudgment in gauging the energy market in this industry.
It is clear now that the board has realised its blunder and with Government approval is now seeking an indemnity because they realised that this investment was a serious error and a further waste of taxpayers’ money, money we so crucially need now for other investments to keep the economy afloat.
The citizens of this country put their trust and faith in the Government and their ability to appoint capable people to run these large state-owned energy companies and to ensure they make proper decision for our future generations so they are profitable, not to squander our funds on bad ill conceived plans like this one, which will have ripple effects across our economy for years to come.
The Government and their technocrats continue to fail us and our country as we continue down a road to economic fallout. God help us.
(Neil Gosine is an insurance executive, the North East Regional Coordinator of the United National Congress and a former chairman of NP. The comments and opinions expressed by him in this column are not necessarily those of AZPNews.com, a division of Complete Image Limited.)