Sep 2016 Financial News

NGC: Internationalising business

Sep 01, 2016

Experts have long said that if Trinidad and Tobago’s (TT) energy sector is to survive and even thrive during downturns; price and/ or supply, indigenous companies must expand into overseas markets.

This is exactly what the National Gas Company of Trinidad and Tobago (NGC) has set out to do in the West African nation of Ghana, an emerging player in oil and gas.

This follows the May 9 signing of a Memorandum of Understanding (MOU) between the TT and Ghanaian governments in Ghana, and the more recent signing of an MOU between NGC and Ghana’s Bulk Oil Storage and Transportation Company Limited (BOST), in Port-of-Spain on August 24.

Earlier this week, Business Day sat down with NGC chairman, Gerry Brooks, acting president of Phoenix Park Gas Processors Limited (PPGPL), Alvin Dookie and NGC’s manager of Engineering Services, Ernest Esdelle, to find out more about how NGC and its subsidiary companies plan to use gas and gas pipeline expertise to the mutual benefit of NGC/TT and BOST/Ghana.

Seated in the boardroom of NGC’s head office, Orinoco Drive, Point Lisas Industrial Estate, Couva, Brooks said the “Ghana outreach is part of the NGC Group’s plan to internationalise our business. We recognise that (it) cannot remain a domestic business.” Emerging markets which have “significant gas potential”, such as Ghana, Guyana and Suriname, are of particular interest to NGC.

Brooks told Business Day, “What is of interest to emerging gas jurisdictions is the Pt Lisas model, the important and pivotal role that the NGC played in developing it (as well as) NGC’s role as an executor of Government policy and too, as the inspirer of a range of services on the Pt Lisas estate and country-wide.” NGC delegations have visited Ghana on several occasions, some in 2009, 2010 and more recently this year, as the Dr Keith Rowley administration renews plans to export TT’s 100-plus years of expertise to emerging markets such as Ghana.

The plan was first set in motion by the late former Prime Minister (PM) Patrick Manning in the early 2000s but was ‘put on hold’ by the previous administration, the People’s Partnership.

Brooks said the 2016 visits to Ghana by a small NGC delegation included representatives from NGC, the National Energy Corporation of Trinidad and Tobago Limited (National Energy) and PPGPL.

This is because the NGC Group of Companies is “looking at a value chain of opportunities which include gas processing, pipeline infrastructure and engineering expertise, which also includes developmental opportunities in the area of aluminum processing and other downstream industries.” Brooks noted that downstream opportunities could be developed through National Energy while NGC could “play a role” in connecting TT energy services companies with “opportunities to develop local content” in Ghana.

BOST, one of Ghana’s State enterprises, holds the Natural Gas Transmission Utility License granted to it by the Ghana Energy Commission (EC) on December 19th, 2012.

According to BOST’s website, the NGTU will provide transmission and interconnection services for natural gas without discrimination throughout the country.

The transmission license given to BOST as per Natural Gas Licensing manual shall permit BOST: 1) To monitor and control the operation of the national interconnected network for the transmission of natural gas in areas within the country, and to ensure the safe, reliable and economic transportation of natural gas facilities connected to the transmission system; 2) To provide transmission interconnection services without discrimination to other licensees in the natural gas industry; and 3) To provide transmission interconnection services to operators of natural gas networks in ECOWAS member states.

Dookie noted that BOST was given a mandate by the president of Ghana, John Dramani Mahama, to develop the pipeline infrastructure in Ghana, with first priority being to “link Ghana’s gas reserves with its power (supply) sector.” This is because of what Dookie described as the “low level of penetration of electricity into households in Ghana.” Asked about NGC’s role in achieving this, he replied that “the intention is to develop a joint special purpose company (joint- SPC) that would be responsible for development and operation of pipeline infrastructure in Ghana.” Apart from the aforementioned aims of the MOU, Dookie sees “a peripheral range of opportunities” for TT’s educational/vocational training institutes in Ghana as Ghanaians seek to learn skills which would secure them wellpaying jobs in their growing energy sector.

The deadline for expanding Ghana’s pipeline infrastructure is “a very aggressive time line” because new tranches of gas production are expected to come on stream by the end of 2018.

However, Dookie said this investment opportunity “needs to meet NGC’s strategic, economic and risk criteria and the approval of its shareholder, and by extension, the local energy sector.” “For example, if we are successful at making an investment with BOST in Ghana, we foresee opportunities for the local construction sector and energy services sector to participate, along with NGC, in building out the new infrastructure in Ghana.” Adding to what Dookie said, Esdelle pointed out that the NGC opportunities “would revolve around project management, construction management and providing operational maintenance capabilities for BOST, since BOST is actually now getting into design and construction of pipeline operation.” Esdelle added that NGC will bring to bear its vast experience in operating pipeline infrastructure.

He noted that the company’s safety record and its having completed pipeline projects on time and within budget, “is one of the reasons” why BOST is interested in working with NGC.

“I wish to emphasise that during their visit (to Trinidad), BOST members were very impressed with our facilities – we took them to our warehouses, showed them our workshop, introduced them to our control room. They were very impressed with how we do things and see that as added value to their operations in the future,” Esdelle stated.

The August 24 MOU between NGC and BOST would, as Brooks explained, “focus on mutual areas of interest” such as development of the pipeline, the possibility of a gas fractionation project, sharing of expertise and any further development of the energy sector, using NGC’s experience and the experience of the local energy sector.

“I can’t over emphasise the fact,” Brooks declared, “that it is NGC’s intent to embrace our local energy services sector, where the expertise is deep, to ensure that Ghana and other jurisdictions have the benefit of that.” Business Day asked the NGC chairman if he viewed this ‘deal in the making’ with Ghana as a change from the usual model of a developed nation helping a developing nation to develop a sector of its economy, a deal that is in line with the South-South model of trade and corporation.

“Yes, that’s extremely important. PM Rowley alluded to that; the bringing to life and the bringing into reality, of South-South trade for the benefit of countries which find themselves similarly positioned but which have a similar aspiration.” “The other thing is that the balance sheet of the NGC is still quite robust and therefore, we’re going to be particularly careful in deploying that capital to the benefit of the NGC as well as to the benefit of Corporation Sole,” Brooks stated.

Ghana has two major oil fields, the second of which was commissioned on August 18.

Dookie noted that unlike TT, the oil produced in Ghana is exported “without ever reaching the shores of Ghana”, using a Floating Production, Storage and Offloading (FPSO) vessel.

This means Ghana “sees little benefit” other than the revenues that come back to the country through the monetisation of its oil.

Dookie said this is why the NGC delegation has been “promoting the idea to Ghana, based on the TT experience, that the country’s development depends on how you monetise the gas side of it.” He argued that what makes NGC stand out from other potential investors, is that it can not only bring cash, it has a “track record and expertise that can help to make a successful roll out of gas-based industries in Ghana.” What’s next as both NGC and BOST seek to finalise their agreement? Brooks said “we’re at the diligence stage now”, so a small engineering, commercial and financial team is expected to return to Ghana this September to negotiate gas terms, gas agreement, tariffs and to conduct a “financial evaluation of the project, such as the hurdle rates, break-even and pay back et cetera.” This next stage would also include finalisation of the ownership percentages of the proposed joint-SPC which would play a key role in improving the electricity supply to households across Ghana.

Source:
By Sasha Harrinanan
Newsday
Thursday September 1, 2016

ttp://www.newsday.co.tt/businessday/0,232637.html