Trinidad and Tobago government questions Atlantic LNG contracts

The Trinidad and Tobago government alleges that Atlantic LNG Co. of Trinidad & Tobago has not fully reported its revenues and has denied the country its fair share of taxes.

But the consortium denies any wrongdoing. "The partners at Atlantic LNG have always operated within the terms of contractual arrangements, and Atlantic correctly reports on all of its revenues," it said.

Trinidad and Tobago Energy Minister Eric Williams told the Parliament that the government would seek to review its contractual arrangements with Atlantic for Trains 1, 2, and 3.

Williams said existing contract terms will be renegotiated to "plug loopholes in the contract, which could then allow Trinidad and Tobago to earn more revenue."

Williams said, "We have identified an opportunity to increase our economic returns from LNG being sold under contractual arrangement." Spanish market

Williams argued that Trinidad and Tobago lost revenue on declining LNG prices from the Spanish market.

The contracts involve marketing arrangements for LNG to be sold in Spain and US markets, where the prices "were very comparable" at the time that the contracts were signed.

"Since then, the Spanish market has experienced declining prices due to increased sources of supply in LNG and from competition from alternative fuel sources."

He said US market prices reached $5.66/Mscf while the Spanish market averaged $3.03/Mscf.

As a result, Spanish distributors diverted LNG cargoes to the US market, Williams explained.

"The returns to Trinidad and Tobago are based on a formula that derives a destination in Spain, and we've discovered that—given the technologies of the day—these cargoes are being sent to more lucrative US markets and being supplanted by cheaper sources, but the revenues reported back to Trinidad and Tobago are revenues as if it had gone to Spain, and we're about to close that loophole" Williams told the Parliament.

Renegotiation

The contracts have a provision for the sharing of any premium in excess of the contracted price, he said. The parties also are allowed to seek a contract price renegotiation given that Spain's economic circumstances changed, and that the contract price no longer reflects the market value.

Atlantic LNG partners said they diverted cargoes from Spain to the US but with the commensurate revenues being passed on to the Trinidad and Tobago government.

"The US and Spanish markets have experienced differential fortunes, and fortunately the terms of the contracts were flexible enough to allow access to these premium markets with some of the value flowing back to Trinidad and Tobago."

The joint statement was issued by BP Trinidad & Tobago, British Gas Trinidad LNG Ltd., National Gas Co. Trinidad & Tobago Ltd., Repsol LNG Port Spain BV, and Tractebel LNG.

Atlantic LNG operates three trains with a fourth under construction. It is the largest supplier of LNG to the US.