The average gas selling prices of two major upstream producers in Trinidad & Tobago declined by approximately 35% between 2015 and 2016, with BP reporting average prices of US$1.72 in 2016 and EOG Resources reporting average prices of US$1.88 per mmscf. These figures are taken from the company’s Annual Reports and SEC filings; in the case of BP, the figure quoted is for their South American region, but as Trinidad & Tobago, is their only gas producing asset in the region, the price can be assumed to be the Trinidad & Tobago price.
Both companies reported prices that were below the benchmark Henry Hub price, which averaged US$ 2.52 per mmbtu in 2016 (see box for explanation of units).
The prices obtained by these two major upstream gas producers in Trinidad & Tobago are significantly lower than the prices that they were able to secure in many other markets where they operate. For BP in 2016, Trinidad & Tobago represented their lowest gas prices out of all their global locations, with their gas fetching averaging as much as US$ 5.71 per mmscf in the Australasia region. For EOG Resources, their Trinidad & Tobago operations were able to sell gas at a higher price than their US operations, where they only average US$ 1.60 per mmscf, though significantly lower than their other international operations, which obtained prices of US$3.64 per mmscf.
This is the first time that BP’s Trinidad & Tobago selling prices have dipped below the Henry Hub price since 2011, when they averaged US$ 4 per mmbtu. The average selling price for bp reflects a combination of gas sold to LNG through the various marketing arrangements for the four different trains and gas sold to the National Gas Company (NGC) under long-term contracts. EOG Resources on the other hand sells all of its gas to the NGC.
The details of these contracts are all subject to commercial confidentiality and not in the public domain, but it is public knowledge that the newer vintage EOG contract prices are linked with final commodity prices, while BP’s prices from NGC are at fixed prices, with a gentle price escalation over time. NGC and BP have been involved in intense negotiations for a new gas supply contract to come into effect in January 2019, which the Prime Minister and both companies have recently reported is very close to finalisation.
In most years, BP has secured higher prices for its natural gas in Trinidad & Tobago than EOG Resources, because of its access to international LNG markets through Atlantic. Since the advent of US shale gas, most of this gas would have been sold to South American markets. The higher LNG prices that BP was able to access through LNG sales partially offset the lower prices under the long-term NGC contracts. The fact that BP was unable to secure higher prices than EOG in 2015 and 2016 reflects the weakness of LNG prices in both global and South American markets. Lower gas production from bpTT also meant that the company was unable to sell as much gas as LNG, also acting as a dampener on their average selling price even when LNG prices were higher than the selling price to NGC.
The weakness in Trinidad and Tobago gas prices in 2016 underlines both the challenge to the government in collecting taxation from a sector whose profitability would have been severely challenged and the challenge for the respective companies to commit muchneeded capital to increase production.