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NGC vs CNC, let us be logical

Published: 
Saturday, February 3, 2018

This is a testing period for the energy industry and all ancillary sectors. Change is never easy, but change has met us here, whether we are ready to accept it or not. We would be foolish to expect that the conditions that incubated our industry will sustain its growth forever.

NGC is not an altruistic organisation. It is a business. Accountable to the people of Trinidad and Tobago. The law of supply and demand dictates that scarce commodities fetch higher prices. It is no secret that our natural gas reserves are waning. It is more expensive to farm gas from smaller pools. The operators who extract the gas in the upstream must necessarily charge a higher premium for their product in order to turn a profit.

If NGC is spending more to pay for gas as an aggregator of our natural resources that increased cost will understandably be reflected in a higher retail price to customers. Nobody sells for less than they buy for.

Business 101. Like all businesses, NGC is seeking a positive balance sheet.

Considering the contribution that NGC makes to the national economy, Trinidad and Tobago is literally banking on the profitability of NGC’s business. If we accept that as truth, how can we in sound mind criticise the company for refusing to capitulate in the matter of its gas price? In a time of gas shortages other customers can be supplied, improving their bottom line thereby adding value to the country.

It seems a very broad statement to make that NGC’s action will affect the company’s and by extension the country’s international reputation with respect to the energy business. The Point Lisas Industrial Estate is teeming with international players, some of whom are currently in negotiations with NGC regarding renewal of gas supply contracts. None of these other entities are threatening to “pack up and leave”. They understand what good business is about. It just does not make good business sense to just move a plant. CNC and its media nay-sayers are creating a smoke-screen of panic on this score.

I note that that both companies have indicated that the matter is now in arbitration. This is a non-judicial process for the settlement of disputes and managed by an independent third party. In business, these are also often closed-door affairs and protected by confidentiality clauses to protect both parties. So why is CNC asking for a third party to intervene? The matter is already before a third party. By NGC refusing to speak further on the matter, it resonates that NGC is respectful of the arbitration process.

Trinidad and Tobago cannot afford to be strong-armed by CNC or any other company facing contract renewals. Concessions must be mutually beneficial. NGC is a state enterprise with no other economic motive for its business decisions than maximising profits for its shareholders, the people of Trinidad and Tobago.

This is not a battle of wills. If we accept that for over 40 years NGC has been consistently delivering on its responsibility to maximise the value we retain from natural gas extraction, should we not trust that its actions today are in service of that same mandate? If our natural gas is scarce, why would we sell it for less than its worth, especially when demand is high? Add to that the fact that international shareholders would be pulling their share of profits from the sale of ammonia, then the question presents—should we genuflect before international investors at the expense of our people?

ANDY JAMES

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