Jul 2013 Financial News

NGC awaits Cabinet nod on Total asset buy

Jul 04, 2013

The National Gas Company (NGC) is awaiting written confirmation from the Cabinet before it goes ahead with the purchase of French energy giant, Total assets in T&T.

Several sources at the NGC and the Ministry of Energy confirm that Cabinet has approved and the NGC will soon get the note and the official approval so that it can proceed with the billion-dollar purchase.

Last month Energy Minister Kevin Ramnarine said the Cabinet had authorised the NGC to enter into negotiations with Total.

“Cabinet has agreed that the NGC can enter into negotiations with Total, but, of course, that still has to be negotiated between the NGC and Total. You will also note there are other shareholders in Block 2(c) and 3(a) who will have pre-emptive rights. One of those players is, of course, Petortrin. Petrotrin has said to us that they will not exercise those pre-emptive rights.”

Ramnarine said he had looked at the economics of such a purchase by the NGC and was satisfied it was a move in the right direction.

“What I can say about the Total acquisition is that the economics look very good when the economics were presented to me and we think it’s a step in the right direction to diversify the NGC, to have its own upstream presence. Of course, they have a small upstream presence in Teak Samaan and Poui (TSP), but this is a step in the right direction,” Ramnarine explained.

On March 14, the Business Guardian exclusively reported the NGC was in the final stages of purchasing the Trinidad assets of the French energy giant Total SA. Multiple sources at the Ministry of Energy, the NGC and Total had confirmed the sale, which was expected to be completed by the end of May.

Ramnarine confirmed that the NGC was working with a tight deadline to complete the transaction.

“The timeline is pretty tight right now. Total wants to know because they have other people who are knocking on the door right now but the NGC is the preferred bidder.”

Long overdue

Energy consultant Dr Krishna Persad told Business Guardian he agreed with NGC’s decision to purchase the assets, saying it was long overdue.

Persad said he felt the NGC, and not Petrotrin, should have purchased the assets because he feels the company should take the lead role in attempts to move operations from out of T&T as so many other state oil and gas companies have done globally.

He said the NGC was not burdened by the challenges that Petrotrin faces in managing an organisation with a strong trade union presence. He said the goal of the NGC should be to have operations along the value chain, including upstream, mid-stream and downstream.

Persad said the real risks in the upstream are from exploration and cost overruns associated with the development programe, but that there were few risks associated with reservoir or reservoir management. He said all over the world, oil companies were making billions and as a country, we should not be afraid to invest into the upstream business.

Explain rationale

Both an energy consultant and a former government minister say while the asset is potentially valuable, the Government should explain its choice of the NGC over Petrotrin.

Energy consultant Tony Paul told the Business Guardian, “We need to know what the Government’s overall strategy for the energy sector is. There is no doubt that it may be a valuable asset, but what is the reason for the NGC purchasing the exploration and production assets and not Petrotrin. Is it that we are now going to have two companies from the State sector involved in E&P?”

Paul said it was not good enough that since the NGC was not the operator of the block that it could be an investor.

“Investors are usually the financial sector type of companies and they have external advisers telling them about what to do with their E&P assets. If not they are usually E&P companies with built in E&P knowledge and capacity. In that case, the NGC will have to build such capacity,” Paul said on Tuesday.

Former energy minister Conrad Enill shared Paul’s view, saying the NGC’s core business does not include E&P, which reside in Petrotrin. In that context, Enill said it may have been wiser for Petrotrin to purchase the assets.

Enill said it could not be argued that the NGC has a better cash flow because all was required was for a dividend to be paid to the Minister of Finance and it then be passed onto Petrotrin. On the issue of the union, Enill said the union had to be dealt with and properly managed.

The NGC is expected to make the purchase within the next 60 days.


Source:
Trinidad Guardian
Thursday July 4, 2013

http://www.guardian.co.tt/business-guardian/2013-07-04/ngc-awaits-cabinet-nod-total-asset-buy