Venezuela gas price beats home rate: Trinidad PM

  • Market: Fertilizers, Natural gas, Petrochemicals
  • 08/27/18

The price that Trinidad and Tobago agreed to pay for Venezuelan natural gas is "extremely competitive" and lower in some cases than what state-owned NGC pays domestic producers, Trinidad's prime minister Keith Rowley said yesterday.

Rowley spoke a day after his government signed a long-awaited agreement with Venezuela to purchase 150mn cf/d of gas from Venezuelan state-owned PdV's offshore Dragon field.

Describing the deal as a "government-to government-arrangement," Trinidad's energy minister Franklin Khan said yesterday that the price is confidential. One part of the agreement sets out the commercial terms, while the other commits both governments to implement and complete the project, he said.

Neither government nor company officials have specified the gas price. A June 2018 attempt to sign the deal failed because PdV and NGC could not agree on the price. An executive in PdV's onshore Gas Anaco division told Argus that PdV had been seeking $5/mn Btu, while NGC was pressing for $2.50-$3.00/mn Btu, around the US Henry Hub benchmark. The executive, who is privately critical of the new agreement, said it is bad deal for Venezuela, because it deprives domestic industries such as steelmaking, petrochemicals and power generation of much-needed supply.

The key parties to the agreement are PdV, NGC and Shell whose facilities in Trinidad will receive the gas and tie it into the national distribution network managed by NGC.

Shell and NGC will construct a $150mn flowline of 17km that will deliver the gas across the maritime border to Shell's existing Hibiscus platform off northwestern Trinidad starting in 2020. Volumes are eventually slated to double to 300mn cf/d.

Shell did not reply to a request for comment.

According to Trinidad's energy ministry, the agreement was signed in Caracas by Rowley, Venezuelan president Nicolas Maduro, NGC chief executive Mark Loquan and Shell's vice president for commercial operations in South America and Africa Mounir Bouaziz.

For Trinidad, the Venezuelan gas is fundamental to ending nearly five years of supply curtailments to key gas-based industries, including Atlantic LNG in which Shell is a leading shareholder, along with BP. Both majors are Trinidad's top gas producers. The terms of their domestic gas supply agreements with NGC are not public.

Other gas-based industries affected by Trinidad's gas shortage are methanol and ammonia.

Trinidad's gas production has been falling since 2012, when it averaged 4.1 Bcf/d. Output began to rebound in November 2017 on the back of two BP-led projects that are delivering a combined 790mn cf/d. National gas production averaged 3.68 Bcf/d in January-June, up by 12.5pc year on year, according to energy ministry data.

For Venezuela which is in the throes of a severe economic crisis, the gas supply agreement will bring in desperately needed hard currency. Politically, the deal with Trinidad helps Maduro to counter international efforts to isolate his autocratic government. Venezuela's opposition and detractors inside PdV say the Trinidad agreement will be revoked after Maduro is swept from power, because it was struck without the approval of the opposition-controlled national assembly, which Maduro replaced with a rubber-stamp constituent assembly in 2017.

Trinidad's political opposition group UNC is also critical, contrasting the "glitz and glamour" of Rowley's trip to Venezuela with what it says are sparse details about the agreement. "This deal has immense local and international ramifications, and we are putting a great deal of experience and expertise behind it, so we must be given the details to ensure that this good deal for Trinidad and Tobago."

Dragon forms part of Venezuela's 14.7 trillion cf Mariscal Sucre complex, which also encompasses the Patao, Mejillones and Rio Caribe fields.

The pricing and template of the Dragon agreement will allow Trinidad and Venezuela to restart negotiations on sharing cross-border gas, Khan said.

Venezuela and Trinidad have been trying for eight years to reach an agreement to tap 10 Tcf of gas in the Chevron-operated Loran-Manatee field – the biggest of three cross-border deposits.

In his remarks yesterday, Rowley said the Dragon agreement will not be affected by US financial sanctions on PdV. The US will remain Trinidad's trading partner, just like Venezuela, and "Trinidad is a sovereign country and we make decisions based on the best interest of our people," he said.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
02/23/24

CEE countries ask EU to protect internal gas market

CEE countries ask EU to protect internal gas market

London, 23 February (Argus) — Five central and eastern European countries have issued a joint call for the EU to better protect the internal gas market, as storage levies in neighbouring countries could distort regional trade. The Czech industry and trade ministry is leading the initiative, in which Hungary, Austria, Poland and Slovakia are all taking part. The European gas market is "threatened by the introduction of new charges" for transporting gas across borders, which could "distort its functioning, create barriers to trade and hinder cross-border co-operation", the Czech ministry said. The five countries on 20 February asked the Belgian presidency of the EU to place the subject on the agenda of the 4 March energy ministers' meeting so that the issue can be discussed on an EU-wide basis. Europe has done a "tremendous job" in getting rid of its dependence on Russian gas supply, and it should "avoid taking steps that will undermine the work we have done, [and] damage our unity", Czech industry and trade minister Jozef Sikela said. The main target of criticism is the German storage levy, charged on all gas exiting the German grid and currently set at €1.86/MWh for the first half of this year. The levy creates barriers to the free trade of gas between EU countries, creating an "uneven playing field for national economies, increased energy costs for households and reduced cross-border cooperation", the minister said. The Italian regulator recently proposed a similar measure and "other countries" are also considering such levies, "suggesting a possible negative trend towards the extension of such charges across Europe", Sikela said. Levies "undermine efforts to diversify gas sources and favour gas supplies from Russia, which is contrary to the EU's geopolitical and energy security objectives", the minister said. These five countries call for "better protection" of the European gas market and the need for a "co-ordinated European solution". Energy Traders Deutschland expects German levy to rise further The storage levy has led to higher costs within Germany as well, the head of the gas taskforce of Energy Traders Deutschland Joachim Rahls emphasised on the sidelines of the E-World conference in Essen this week. Even within Germany, lower cross-border flows as a result of the levy are raising transport tariffs, as the same costs have to be distributed across less booked capacity, Rahls said, adding a higher storage levy would exacerbate the problems. Rahls "firmly expects" the storage levy to rise further in the next six-month period as current cross-border flows and revenues remain below the ones projected in the most recent setting of the levy. By Brendan A'Hearn and Till Stehr Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read More
News

Fire breaks out at S-Oil's Onsan plant in South Korea


02/23/24
News
02/23/24

Fire breaks out at S-Oil's Onsan plant in South Korea

Singapore, 23 February (Argus) — A fire broke out at South Korean private-sector refiner S-Oil's Onsan plant on 23 February, affecting operations at a crude distillation unit (CDU). The fire broke out at a pump linking refinery units. The 580,000 b/d Onsan plant's 250,000 b/d No.3 CDU was impacted, sources close to the refiner said. No casualties have been reported thus far. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indonesia may delay PE, PP import quota enforcement


02/23/24
News
02/23/24

Indonesia may delay PE, PP import quota enforcement

Singapore, 23 February (Argus) — The Indonesian trade ministry may delay the enforcement of a mandatory quota for polyethylene (PE) and polypropylene (PP) imports to Indonesia that was earlier expected to come into effect on 10 March, according to local sources. The enforcement could be delayed by at least three months, based on local associations' appeal requests to the trade ministry, and this may be announced soon, according to market sources. The associations had mostly requested for a grace period to be given to PE and PP importers after the mandate takes effect on 10 March. No official announcements have been made. Local associations including the Indonesian chamber of commerce and industry (Kadin), Indonesian employers association Apindo, Indonesian food and beverage association Gapmmi and several plastics associations including Aphindo, Giatpi and Abofi have opposed or sought delays in the import quota mandate, mainly because of a lack of clarity in the application processes that could affect converters' operations later. International business associations in Indonesia including the Korean chamber of commerce and industry Kocham, American chamber of commerce Amcham and the European chamber of commerce Eurocham have also undertaken similar courses of action. The Indonesian trade ministry on 11 December last year announced that Indonesian PE and PP importers will need to apply for specific quotas to be able to import polymer resins from 10 March this year, or risk their cargoes getting rejected during customs clearance. A surveyor report is also required for resin imports. Importers can only begin their applications from 10 March. Indonesian PE and PP buying interest and prices soared from late December until January, with importers stocking up for cargoes to arrive before the enforcement date. Spot polymer supplies in southeast Asia tightened in January because of unexpectedly higher Indonesian imports, which pushed up regional prices up, although higher feedstock costs also supported the price hikes. The month-to-date average February southeast Asian duty-free LLDPE film price was at $1,065/t cfr southeast Asia, $79/t higher than average prices in December 2023. The month-to-date February average of southeast Asian duty-free PP raffia prices was at $1,040/t cfr southeast Asia, $81/t higher than December 2023's average prices. For a comparison, month-to-date February LLDPE film and PP raffia prices in the key Chinese market were at $935/t and $890/t cfr China respectively, only $7-9/t higher than December 2023's average prices. Imports and domestic buying slows Indonesian PE and PP import discussions have slowed down since early February as most exporters are not able to guarantee cargo arrivals before 10 March. Converters and distributors also experienced a rise in their inventories because of earlier stock-ups. Southeast Asian PE and PP price hikes began slowing down in February because of weaker Indonesian import interest, while regional buyers are unwilling to secure supplies at current high prices, citing persistently weak downstream demand. In the Indonesian domestic market, buying interest has also slowed down, with converters likely holding higher inventories. Downstream PE and PP consumption in Indonesia has likely been high in January-February as converters have raised production of finished goods in anticipation of higher consumption during the recent general election in February and the upcoming Eid al-Fitr holidays in April. But converters are expected to reduce operating rates in March–April during the Islamic fasting month of Ramadan and Eid al-Fitr holidays in the first half of April. Delay to help importers gain clarity A delay or a grace period would likely allow Indonesian PE and PP importers and converters to achieve more clarity on the application procedures for the quota. Such a delay would also lengthen the time for importers to apply for other licenses that would allow for imports without restrictions, although the application process is stringent and likely only attainable by large-scale converters with good company records, said local sources. Importers that have the Indonesian 'MITA' and 'AEO' import certifications as well as export-oriented converters can currently import polymer resins without applying for a quota. Importers with bonded warehouses could store their resin imports temporarily while they apply for import quotas. PE and PP prices in Indonesia are therefore less likely to soar to the extent that was observed in January, after the mandate takes effect officially, with importers likely able to manage the circumstances better. The stocking up of domestic PP supplies and unplanned cuts in local production have led to domestic prices soaring in Indonesia in the past two months. Import discussions that were halted in February because of tight delivery windows further widened the gap between domestic and import PP prices in the country. But a delay in the import quota enforcement could possibly lead to domestic PP prices falling, especially for the commodity grades and regional PP import prices stabilising when Indonesia resumes imports. Indonesia imported 749,000t of combined LLDPE and HDPE in 2023, more than 45pc of its annual consumption, according to Argus estimates. Import volumes increased by 21pc from 2022. The country also imported 1.25mn t of PP in 2023, around 65pc of its annual PP consumption. But this import volume was lower by 5pc when compared with 2022. By Yee Ying Ang Southeast Asia, China LLDPE prices $/t Southeast Asia, China PP prices $/t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Jera to invest $1.4bn in Australia's Scarborough gas


02/23/24
News
02/23/24

Jera to invest $1.4bn in Australia's Scarborough gas

Osaka, 23 February (Argus) — Japanese LNG importer Jera has decided to invest $1.4bn in the Scarborough gas project being developed by Australian independent Woodside Energy off the northwest coast of Western Australia, in a deal that will give it up to 1.2mn t/yr of LNG. Jera on 23 February agreed with Woodside Energy through its subsidiary Jera Australia to acquire a 15.1pc stake in the Scarborough gas field. The $1.4bn is Jera's biggest investment in any gas field by monetary value. The transaction is likely to be completed in the latter half of 2024, subject to conditions including obtaining permits and approvals. The Scarborough gas project aims to produce 8mn t/yr of LNG at Woodside's 4.9mn t/yr Pluto LNG facility from 2026, where it is building a second 5mn t/yr train 2 facility. Jera plans to secure LNG for around 20 years on an fob basis, basically for its own use. It could consider chartering a new LNG vessel in the future, while leveraging its existing fleet, the company said. Jera has decided to get involved in the Scarborough gas development, as the project is in relatively close proximity to Japan and has already passed its final investment decision in November 2021. The percentage of CO2 in gas in the field is at less than 0.1pc, which has also encouraged the company to invest. Jera will not consider installing carbon capture and storage (CCS) technology in the project. It could purchase carbon credits, if CO2 emissions rise above the baseline set for the project. Jera also agreed on 23 February to buy six LNG cargoes per year (around 400,000 t/yr) from Woodside's portfolio over 10 years beginning in April 2026. The deal is on a des basis, with the price formula undisclosed. Combined LNG quantities in the last two deals account for around 4.6pc of Jera's current LNG handling volumes of 35mn t/yr. It is unclear whether handling quantities would increase in the future, which is dependent on demand, Jera said. But the company sees LNG playing a vital role in Asia to balance stable energy supply, to support economic growth with decarbonisation and back up unstable renewable power output. Jera looked for a new LNG supply source, while the US in late January decided to temporarily pause new licences for gas export . Jera said it is monitoring the US situation, without clearly adding that this has influenced its recent investment decisions. Jera and Woodside also agreed on 23 February to explore collaboration in areas such as ammonia, hydrogen and CCS. More details such as timelines for discussion are yet undisclosed. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

India’s Gail seeks to add LNG tanker for US project


02/22/24
News
02/22/24

India’s Gail seeks to add LNG tanker for US project

Mumbai, 22 February (Argus) — Indian state-controlled gas distributor Gail plans to add an LNG tanker to ship cargoes from the US, two persons with knowledge of the matter told Argus . Gail is seeking delivery of the tanker between October 2024 and September 2025 for a minimum period of seven years, which can be extended by another two years, a source in a shipping firm said. The tanker would have a capacity of 159,000m³ to 181,000m³ to transport the fuel from the US. Gail has a term deal for 3.5mn t/yr of LNG from the US' Sabine Pass terminal and 2.3mn t/yr from Cove Point, valid till 2038. The firm currently has four LNG tankers to bring the super-chilled fuel from the US, which includes two-time charter agreements with Japan's Mitsui O.S.K Lines and the rest with NYK Line. The new tanker will help Gail bring more US LNG cargoes to the country instead of swapping cargoes. It will also provide more operational flexibility to the firm, keep its downstream consumers adequately supplied and at the same time reduce supply uncertainty stemming from geopolitical conflicts like the continuing Red Sea tensions. Gail has sold some LNG cargoes sourced from Cheniere Energy's terminal in the Gulf of Mexico to an unnamed highest bidder in Europe, Argus had reported quoting Gail's director of marketing Sanjay Kumar on the sidelines of the India Energy Week in Goa on 9 February. Gail used the proceeds from the sale to source spot cargoes from Gulf countries — shipments which do not have to transit through the Suez Canal to reach India. The firm is likely to issue more LNG tenders to swap US term cargoes with supplies closer to India as cargoes face difficulty in transiting the Suez Canal, Kumar added. The conflict in the Red Sea since December 2023 has disrupted shipping operations as tankers heading to India have been taking the longer route around the Cape of Good Hope. An inability to take the shorter Suez Canal route adds up to seven days in delays for Gail's US LNG shipments to reach the 17.5mn t/yr Dahej LNG import terminal on the west coast of India, Kumar said. Gail offered several LNG cargoes from the Cove Point LNG export terminal in 2017, in order to overcome the problem of a shortage of tankers that could deliver supplies to India. The swap deal resulted in shorter and more efficient deliveries as the swapped cargo ideally would come from a terminal closer to India as compared to the US, and the Cove Point cargo would go to a destination nearer to the US as compared to India. But swap tenders from the US have declined because of availability of four LNG tankers to bring cargoes to India. Gail originally planned to bring all its US cargoes into the country this year, but the conflict in the Red Sea prompted the firm to change tack and issue swap tenders instead, a source with knowledge of the matter said. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.