Latest update March 28th, 2024 12:59 AM
Sep 05, 2021 News
By Kiana Wilburg
Kaieteur News – If governments recklessly implement policies and rush into poorly constructed deals, there can be dire consequences for current and future generations. This very lesson is what the current administration of Trinidad and Tobago (T&T) said it was made to learn since taking office.
In fact, T&T’s Energy Minister, Stuart Young, in July 2021, was keen to note during a post-cabinet press briefing, that the country’s gas industry was practically on a knife’s edge due to the decisions of his predecessor, and the former government by extension. He stressed that the Keith Rowley led administration has had to work tirelessly to correct those past mistakes that “decimated the energy sector.”
In explaining this state of affairs that gripped the CARICOM state, Young revealed that the country’s National Gas Company (NGC) ended 2020 with a TT$2.1B loss. This was not due to the crippling effects of the COVID-19 pandemic or a massive breakdown in equipment. Rather, it was the consequence of what Young described as a lopsided deal and policy that were associated with a Natural gas supply contract. That contract was for a methanol plant in La Brea.
Although he did not name the foreign company that signed the deal with NGC, Young was referring to Caribbean Gas Chemical Limited (CGCL). CGCL is a joint venture between Japanese companies: Mitsubishi Gas Chemical Company (26.25%), Mitsubishi Corporation (26.25%) and Mitsubishi Heavy Industries (17.5%), together with The National Gas Company of Trinidad and Tobago (20%) and Trinidad’s Massy Holdings (10%). The contract that NGC was part related to the construction and operation of a petrochemical complex, which needed a US$900M loan.
Young noted that the provisions of the “disastrous contract,” particularly those that leave NGC covering the loan, will lead to the gas company losing more than what it lost in 2020. In fact, he said NGC will lose TT$4.5 billion in the future.
Minister Young added, “But I want to explain to the people how we ended up here. It has to do with the people who held office from 2010 to 2015…It was on September 14, 2015, a mere five days after the government was installed that we were approached by a shareholder in this project for the provision of an opinion by the Attorney General with respect to the legal documentation of the project. But when the files were examined, they reflected that pressure was being placed on public servants at both the Ministry of Energy Affairs and the Ministry of Attorney General on Friday September 4, 2015 (the last working day before the general election), to hustle the contract through and Monday September 7, 2015 (the day of a general election), pressure was being placed on the public servants at the AG’s office to sign off on the final opinion that would have cast this (in stone), in terms that we would not be able to do anything.”
Young said his predecessor, Kevin Ramnarine, along with Mr. Larry Howai who served as the Minister of Finance and the Economy, and other former officials were at the forefront of this. Expounding further he said, “But the public servants resisted pressure and the opinion was not signed. God smiled on us.”
The Minister also noted other discoveries in relation to the US$900M project. The first he said, related to a ‘Debt Tail Buy Down’ Agreement. The Minister said this agreement was being forced through despite warnings in “red ink from the country’s technical personnel.”
Young said, “When we looked at these agreements we realised that not just the National Gas Company, but the country was disadvantaged by… Something called the ‘Debt Tail Buy Down’ Agreement.”
In this regard, the Minister said this is the first type of agreement of this nature that the country was ever entered into. “What this means is that it bound NGC to guarantee the payment of the loan. In other words, what they negotiated under the former energy minister was to put NGC as a 20 percent shareholder but NGC would carry the entire debt. So from day one, NGC would have had to carry the full cost of the loan totalling US$900M for the project and if it failed from day one T&T would have to pay to the Government of Japan through their banks, the full cost of the project.”
Young added, “And worse than that is the terms show that if they paid the full cost of the debt on the first day they would not get the plant. So we would not get the ownership of the plant but we have to pay the full cost. Again, Ramnarine and the UNC bound NGC and the country to these untenable conditions that would have destroyed our gas sector.”
But that is not the only mindboggling part of the story. Young revealed that Ramnarine and his colleagues were warned in red ink by personnel attached to the NGC that the terms of the agreement would be disastrous for the company and the country by extension. Young said, “I have here a letter dated February 24, 2015, by NGC and signed by then President, Indar Maharaj, addressed to the Finance Minister back then and copied, first person, Kevin Ramnarine. This five-page letter was sent by NGC in February 2015 before the (agreement for the project) was executed (and it) set out all the red flags on why they should not pursue what they did.”
“So on February 24, 2015, Howai and Ramnarine were written to. They were told that it was on December 4, 2014, that Cabinet approved the draft project agreement but the NGC was only told by letter on the 29th of January the following year. Why was there a delay in telling them about the 20 percent share NGC has to take in the CGCL Project. The letter then outlines eight red alert items why it is not a good idea.”
Young said Ramnarine and the former Finance Minister were told that going ahead with the contract terms, makes no sense as they could be booted out by larger shareholders. Another major issue was that NGC was tied to a provision that it would stand liability for any cost increase, Young said while adding that “this is what has come to past.” He said too that the former ministers were also warned that the project would negatively affect NGC’s cash in hand and by extension, NGC’s budget. Young said he found it troubling that the former Ministers and government by extension were warned of the detriments of this agreement but still pressed ahead.
Fortunately, those contract terms he said, were renegotiated.
Another startling discovery the Rowley administration made related to a policy that exposed NGC to billions in claims. That policy was called the “Green Field Gas Priority Policy.” He said this policy dictated that where there is a shortage of gas supply, downstream supply contracts entered into after January 1, 2014 would receive priority over gas supply contracts entered into prior to the date in question.
Young said Ramnarine and other officials were told that this would place the country in breach of existing agreements but the warning was ignored. Young said the former government proceeded with the policy, which, as predicted, exposed NGC to billions in claims.
“…So in the dark of night, this former minister went to the cabinet then and changed the whole gas allocation policy for Trinidad and Tobago and we, the population, had no clue about it. We were shocked to learn when we came into office in September 2015 that this was done. What this means is that every plant in Point Lisas that had supply contracts with NGC, if there was a shortage of gas, tough luck for them, they would have to suck salt and move to the back of the line, so immediately you can understand how this exposed NGC to billions of dollars in claims,” the Minister explained.
Upon discovering these matters, a team was appointed to renegotiate terms of agreement with Massy, Mitsubishi and the Government of Japan through its bank, the Japan Bank for International Corporation. Young said doing this was crucial so as to avoid the collapse of a whole industry.
He was keen to note that T&T’s Cabinet appointed the team via the standing committee on energy, and the team included himself and other government officials and technical persons who figured out how they would go about extricating the country from the contract and the policies and agreements that were associated with it. After months of negotiations, Young said the agreements were amended to protect NGC and the Green Field Policy was rescinded.
Young said he is aware that Ramnarine and others have since sought to deny the roles they played in “the destruction and decimation of the energy sector in 2010-2015.” He stressed however that the facts are clear while adding that documents and contracts were already signed; all that was needed was the Attorney General’s signature on a Standard Opinion for the project to “consummate everything.” He added, “Volume and costs of gas were already negotiated under the former Minister so to try and remove themselves from the decimation of the gas sector and attempt to moonwalk into the shadows and disappear,” is something the Rowley administration would not allow.
ADVISING GUYANA
Since the start of Guyana’s oil industry, Ramnarine has been advising on Guyana’s Local Content initiatives as well as its imminent Gas-to-Energy Project said to cost US$900M. He was also part of the nation’s Local Content Panel, which was commissioned last year by President, Irfaan Ali.
See tomorrow’s publication for Ramnarine’s response.
THIS IDIOT TELLING GUYANA WE HAVE NO SAY IN THE 50% PROFIT SHARING AGREEMENT WE HAVE WITH EXXON.
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