Minister Young's statement in Parliament regarding the re-negotiation of Caribbean Gas Chemical Limited Project
December 2, 2016: The following is a Madame Speaker I have been authorised by Cabinet to make the following statement on this Government’s re-negotiation of the Mitsubishi/ Massy Natural Gas to Petrochemicals Complex project – the Caribbean Gas Chemical Limited (“CGCL”) project.
During the period of June 2010 to September 2015 the true position with respect to the availability and supply of natural gas to the Hydrocarbon downstream industry in Trinidad was not provided. Since 2010, there were serious gas curtailment issues that affected the downstream gas industry and these curtailments were not as the result of maintenance, either scheduled or unscheduled.
Upon entering office in September 2015 the Government was immediately faced with the following,
1. Dealing with billions of dollars in claims, from downstreamers who claimed that they were not getting their full daily contractual gas supplies from NGC as a result of the ongoing curtailment situation;
2. Expired contracts between NGC and downstreamers – leaving a situation whereby disputes arose due to no long term contracts being in place to govern the volumes of, and the prices to be paid for, the gas being supplied;
3. A failure to commence negotiations and discussions with respect to a number of both upstream and downstream contracts that were due to expire; and
4. No plan to deal with the alleviation of the gas curtailment situation that existed.
On September 14, 2015, a mere five days after the Government was installed, we were approached by Massy, a shareholder in the CGCL project, for the provision of an Opinion by the Attorney General with respect to the legal documentation for this project.
When the files at the Ministry of the Attorney General were perused they reflected that pressure was being placed on the public servants at both the Ministry of Energy and Energy Affairs and the Ministry of the Attorney General on Friday 4th September, 2015 and Monday 7th September, 2015 for them to agree that the Attorney General should execute an Opinion for the CGCL project. The public servants at the Ministry of the Attorney General resisted this pressure and the Opinion of the Attorney General was not signed.
The former Prime Minister, had turned the sod for this project on September 1st, 2015. However, what was discovered was that the former administration, had agreed to a number of items that raised cause for concern and potentially exposed Trinidad and Tobago to billions of dollars worth of claims.
An inspection of the files at the Attorney General’s office revealed that the legal officers in the Solicitor General’s office did not agree to the Attorney General issuing the requested opinion. The legal officers objected, in red ink, to what had been agreed to previous to September 7, 2015. The legal officer wrote, “I am of the view that no legal opinion should be given as per my comments…”
These warnings were coupled with written warnings issued to the former Minister of Finance and the former Minister of Energy that the agreements that they were proposing be entered into exposed NGC to claims for damages and losses.
In looking at the agreements that had been entered into it was found that T&T was disadvantaged by:
The terms of the Debt Tail Buy Down Agreement, which was the first type of agreement of this nature that had ever been entered into by T&T. This agreement bound NGC to guarantee payment of the loan
installments of CGCL and the liquidation of the whole loan amount in the event of a gas shortage, based on an agreed formula, without NGC receiving any benefit. NGC would have to liquidate the whole loan for CGCL without getting the plant in return; and
A policy that had been decided by the Cabinet in December 2013, which the public was never informed of. This policy exposed NGC, to billions of dollars in claims for damages. The policy, was “the Green Field Gas Priority Policy”, it dictated that, where there is a shortage of gas supply, downstream gas supply contracts entered into after January 1st, 2014 would receive priorty gas over gas supply contracts entered into prior to January, 1st, 2014. It was pointed out to the former Minister of Finance, and the former Minister of Energy, that this gas assurance policy could potentially place NGC in breach of existing Gas Sales Contracts. This warning was ignored and the former government proceeded with the policy which exposed NGC to billions of dollars in claims, especially in the climate of gas curtailment as it would discriminate against third parties who had signed their gas suppply agreements prior to January 2014 (this included almost all of the downstreamers on the Point Lisas Estate).
Upon discovering these matters, the Standing Committee on Energy appointed a team to re-negotiate the terms of the agreements with Massy, Mitsubishi and the Government of Japan through its Bank, Japan Bank for International Cooperation (“JBIC”).
Having regard to the current gas curtailment climate, Trinidad and Tobago would have been exposed to billions of dollars in claims against NGC and there was the potential to collapse our gas industry. Additionally, if the Debt Tail Buy Down scenario occurred, NGC would potentially be expected to repay billions of dollars on behalf of CGCL without any security or benefit to NGC.
After many months of negotiations, with Massy, Mitsubishi and JBIC, which included a turnaround trip to Japan to meet with officials of the Government of Japan and JBIC, this Government was able, in August 2016 to execute amended agreements which have protected NGC and by extension the people of T&T.
This Government rescinded the Green Field Gas Priority Policy and re-negotiated the effects of this removal with Massy, Mitsubishi and Japan. The Debt Tail Buy Down Agreement was also re-negotiated to ensure that NGC is protected by a number of mechanisms including that a fund be set up by CGCL to ensure that there is cover for loan instalment payments and if NGC has to make any payments on behalf of CGCL it receives security.
The re-negotiated agreements and the rescission of the Green Field Gas Priorty Policy mean that NGC is no longer exposed to the potential billions of dollars of claims for damages.
Additionally, Madame Speaker, the Government is working towards finding lasting solutions for the curtailments being experienced in the gas industry