Atlantic LNG close to mothballing 20pc of capacity

BP and Shell may shut in 20pc of the capacity of Trinidad and Tobago's 14.8mn t/yr Atlantic LNG complex because of a shortage of natural gas feedstock.

BP, the main shareholder in 3mn t/yr train 1, said that infill drilling had failed to deliver at forecast levels to ensure supply after 2019.

"Recent disappointing results from our infill drilling programs have had a material impact on our forecasted production, especially in 2020 and 2021," BP said on 11 May. "This means there are challenges to our supply of gas to Train 1 after 2019."

Infill drilling is used to increase production from fields that are already operating. BP did not name the fields.

"BP, along with Atlantic and its shareholders, are working through options for the future of the train," BP said.

The announcement is a blow to Atlantic, which was a liquefaction pioneer in 1999. Since 2017, the Caribbean country's domestic gas production has been rebounding, boosting supply to Atlantic and other gas-based industries, but the failure of the infill project indicates that the recovery may be short-lived.

The other three trains of the Atlantic facility will not be affected by the deficit in forecast gas production, BP said.

BP and Shell are the leading shareholders in the four-train Atlantic complex at Point Fortin on the southwestern coast of Trinidad. The minority partners are China's sovereign wealth fund CIC unit Summer Soca and Trinidad's state-owned gas company NGC.

This is not the first time the shareholders have considered mothballing capacity because of a feedstock deficit. But earlier proposals have been thwarted by the differing shareholder structures of each train.

In the case of Train 1, Shell owns 46pc, BP 34pc, and NGC and Summer Soca 10pc each.

The government declined to comment on the likely shutdown of Train 1. "This is a shareholder issue," energy minister Franklin Khan said.

Trinidad reached an agreement with BP and Shell in December 2018 to extend the life of Train 1 by five years to 2024. Train 1 began operating in 1999. Initial long-term agreements for the remaining three trains will expire by 2027.

BP is Trinidad's largest gas producer, with output of 2.124 Bcf/d in February 2019, up by 10.2pc from January, according to energy ministry data. National gas production in February was 3.956 Bcf/d, 7pc less than January. This helped to lift Atlantic's production in January-February 2019 to 4.96mn m³, 2pc more than in the same two-month period of 2018, the ministry said.

Trinidad's gas production has been recovering since November 2017 following a slide from a peak of 4.3 Bcf/d in 2010. The recovery helped to lift Atlantic's output in 2018 to 28.4mn m³, the highest since 2015, according to the energy ministry.

The prospect of a partial shutdown of liquefaction capacity follows BP's projection of higher gas production. In February, the UK company launched the 600mn cf/d Angelin project 60km off the southeastern coast of Trinidad. Two other BP projects - Cassia Compression and Matapal - that will have combined capacity of 1.6 Bcf/d, will be commissioned in 2022.

BP also announced in June 2017 the discovery of an estimated 2 Tcf of gas in place in its offshore Savannah and Macadamia exploration wells.

Despite BP's recent exploration successes, "these recent drilling results remind us that there is inherent uncertainty in the sub¬surface," the company's regional president Claire Fitzpatrick said.

"This is the nature of our business and we will continue to leverage the latest technology to find and develop resources. We remain committed to the development of our acreage in the Columbus Basin and will continue to progress the Angelin, Cassia Compression and Matapal projects as planned."

The slide in gas production that started in 2010 caused supply curtailments that also eroded production of ammonia and methanol.

The government has pledged that curtailments will end in 2021 when projects underway by BP, Shell and EOG Resources will boost average gas output to 4.14 Bcf/d.

Trinidad's government had been hoping that 2019 would be the start of gas supply from the offshore Dragon field in neighboring Venezuela, where Shell would be the main shareholder. But negotiations involving Shell, NGC and Venezuela's state-owned PdV have been suspended indefinitely as a result of Venezuela's economic and political turmoil. The target date for first gas from the Dragon field was revised to the end of 2020, Trinidad's energy ministry tells Argus.