Shell agrees to pay Trinidad & Tobago $2.5b by 2019

Prime Minister Dr Keith Rowley and De La Rey Venter, Executive Vice President of Shell’s Integrated Gas Venture business, watch attentively as a Shell representative displays a piece of equipment in the lab during the Prime Minister’s visit Shell Technology Centre in Amsterdam, last month.

(Trinidad Guardian) T&T could earn as much as $10 bil­lion over the next nine years fol­low­ing the sign­ing of a deal be­tween Gov­ern­ment and Roy­al Dutch Shell.

The an­nounce­ment was made by En­er­gy Min­is­ter Franklin Khan who gave de­tails to the Par­lia­ment on Mon­day fol­low­ing more a year of ne­go­ti­a­tions. He re­vealed that Shell agreed to pay gov­ern­ment $2.5 bil­lion by the end of 2019, the mon­ey to be paid in US to the sum of US $397 mil­lion.

Like the BPTT pay­ment last year to gov­ern­ment of $1 bil­lion, Shell is mak­ing its pay­ment but not ad­mit­ting to cheat­ing the coun­try of large sums of rev­enue in trans­fer pric­ing.

“The out­come of these phase 1 ne­go­ti­a­tions, with Shell, re­sult­ed in an agree­ment to pay the gov­ern­ment ap­prox­i­mate­ly, US$397m to the end of 2019 and the par­ties are mov­ing in­to phase 2 of the ne­go­ti­a­tions which sur­round the re­struc­tur­ing of At­lantic LNG,” Khan told the Par­lia­ment.

The En­er­gy Min­is­ter at­tacked the Op­po­si­tion and the En­er­gy Cham­ber of T&T for seek­ing to re-open the LNG con­tracts with en­er­gy ma­jors BPTT and Shell, but not­ed that the re-ne­go­ti­a­tions had led to bil­lions in rev­enue to the coun­try.

Khan de­clared: “Both the UNC and mem­bers of the En­er­gy Cham­ber ac­cused the Gov­ern­ment of be­ing an­ti-in­vest­ment and pur­su­ing ac­tion that would con­sti­tute a vi­o­la­tion of the sanc­ti­ty of con­tracts ex­e­cut­ed with in­ter­na­tion­al oil com­pa­nies.”

The En­er­gy Min­is­ter said be­tween 2010 and 2014 it was es­ti­mat­ed that the coun­try lost up to US$6 bil­lion an­nu­al­ly from trans­fer pric­ing prac­tices of BPTT and Shell.

He said that is why in April 2018, he was part of a Gov­ern­ment team led by the Prime Min­is­ter Dr Kei­th Row­ley and in­clud­ing Com­mu­ni­ca­tions and Na­tion­al Se­cu­ri­ty Min­is­ter Stu­art Young which met in sep­a­rate dis­cus­sions in Lon­don, with Shell and BP to ad­vance the mat­ter of im­prov­ing the coun­try’s po­si­tion.

He ex­plained: “Aris­ing from these dis­cus­sions, both Shell and BP agreed to es­tab­lish em­pow­ered teams to en­gage the gov­ern­ment sep­a­rate­ly on LNG mar­ket­ing arrange­ments, gas-re­lat­ed is­sues and oth­er im­por­tant is­sues raised by the com­pa­ny.”

In a de­tailed speech on the agree­ment signed in The Hague, Nether­lands, Khan told the Par­lia­ment that over the next nine years the coun­try will re­ceive im­proved rev­enue of $6.4 bil­lion from At­lantic’s Trains 2,3 and 4 and should Train 1 con­tin­ue to op­er­ate, could earn $800 mil­lion in ad­di­tion­al rev­enue an­nu­al­ly. The En­er­gy Min­is­ter said it was agreed to use the new Train 1 for­mu­la for fur­ther in­vest­ment which will pro­vide in­creased rev­enue to Gov­ern­ment. In ad­di­tion, the gov­ern­ment team ne­go­ti­at­ed that sub­ject to pro­ject­ed avail­able fa­cil­i­ty ca­pac­i­ty, it will be en­ti­tled to utilise up to 50 per cent of the North Coast Ma­rine Area (NC­MA) in­fra­struc­ture ca­pac­i­ty, with no li­a­bil­i­ty for any his­toric cap­i­tal costs. There will al­so be an eq­ui­table shar­ing of op­er­a­tional costs and any new cap­i­tal cost.

The Min­is­ter said Shell will em­bark on two projects that when de­vel­oped, will add nat­ur­al gas to the coun­try’s over­all sup­ply. He es­ti­mat­ed gov­ern­ment earn­ings from the two projects to ex­ceed $22 bil­lion over the life of the fields.

“In keep­ing with its in­vest­ment pro­gramme, Shell has em­barked on the de­vel­op­ment of its Col­ib­ri and Bar­racu­da projects. For the Bar­racu­da project 5C, first gas is pro­ject­ed for 2020. First gas for the Col­ib­ri project, block 22 and NC­MA 4 is pro­ject­ed for 2021.”

The En­er­gy Min­is­ter added: “The gov­ern­ment and Shell al­so agreed that gas sup­plied from these Pro­duc­tion Shar­ing Con­tracts (PSCs) and any new sanc­tioned PSCs for the pro­duc­tion of LNG will be based on the new Train 1 Freight on Board (FOB) for­mu­la. It is es­ti­mat­ed that the val­ue of ap­prox­i­mate­ly US$3.3 bil­lion will be ac­crued to the Gov­ern­ment from these two projects.”

Khan said the Row­ley ad­min­is­tra­tion had been build­ing the plat­form of mu­tu­al re­spect and the abil­i­ty to sit in the room as equals with the multi­na­tion­al com­pa­nies. He re­mind­ed that the gov­ern­ment’s spot­light on en­er­gy was held against a back­drop of an in­ad­e­quate eco­nom­ic re­turn from the ex­ploita­tion of the coun­try’s nat­ur­al gas re­sources.

The En­er­gy Min­is­ter said while Gov­ern­ment wel­comes in­vest­ment it feels the re­source own­er, which is the peo­ple of T&T, must en­joy a fair eco­nom­ic rent.

“Through our ef­forts, this is now clear­ly un­der­stat­ed by the In­ter­na­tion­al Oil Com­pa­nies (IOC’s) and has trans­lat­ed in­to the eco­nom­ic gains that we have col­lec­tive­ly achieved. These ben­e­fits will ac­crue to the peo­ple of Trinidad and To­ba­go,” Khan as­sured.

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