American Oil and Gas company EOG Resources has revealed that the average price it got in 2019 for natural gas in T&T is US 50 cents per million standard cubic feet (mmscf ); more than it earned from selling its gas in the American market, effectively making the feedstock much more expensive for local petrochemical companies than it is for their American competitors.

In its 2019 annual report, EOG said it earned US $2.72 per mmscf for the gas it sold to the National Gas Company (NGC) while it earn US $2.22 per mmscf in the US market.

In 2018 the company received a slightly higher average price for gas it sold to the NGC when it was able to earn on average US $2.94 per mmscf. But this is significantly higher than the company made in 2017 when it got an average of US $2.38 per mmscf for the gas it sold to the NGC.

These numbers clearly show that EOG, like the other upstream companies, BPTT and Royal Dutch Shell are benefiting from the improved prices they were able to get following the deal brokered by Prime Minister Dr Keith Rowley which has now led to the NGC demanding much higher prices from the downstream sector.

To put it into context the NGC buys gas from EOG, BHP, BPTT and Shell and then sells its to the downstream sector at a mark up that includes its costs for use of pipeline and the necessary percentage of profit it makes, called its margins.

The downstream companies have to then take that higher price, include its costs, its shipping and then compete in the US market with companies buying its major feedstock at a significant discount compared to local gas prices.

In the US there is no middle man like the NGC as gas producers sell directly to customers.

It is this which has made the petrochemical companies complain that in the midst of low commodity prices they are unable to pay the prices being demanded by the State company and according to economist Dr Terrence Farrel this threatens the Point Lisas model.

Already two major plants have shut down with the owners walking away from T&T saying they can’t afford the NGC prices.

The NGC remains in negotiation with other companies on the estate and with the exception on CNC and Nutrien has not been able to conclude the discussions.

EOG, through its subsidiaries, including EOG Resources Trinidad Limited, holds an 80% working interest in the exploration and production license covering the South East Coast Consortium (SECC) Block offshore Trinidad, except in the Deep Ibis area in which EOG’s working interest decreased as a result of a thirdparty farm-out agreement.

It also holds an 80% working interest in the exploration and production license covering the Pelican Field and its related facilities; a 50% working interest in the exploration and production licenses covering the Sercan Area; a 100% working interest in a production sharing contract with the Government of Trinidad and Tobago for each of the Modified U(a) Block, Modified U(b) Block and Block 4(a).

The company also has a 50% working interest in the exploration and production license covering the Banyan Field and the Ska, Mento, Reggae Area deep Teak, deep Saaman and deep Poui offshore Trinidad (collectively SMR Area).

It also is involved in the Petrochemical sector with a 12% equity interest in an anhydrous ammonia plant in Point Lisas, Trinidad, that is owned and operated by Caribbean Nitrogen Company Limited; and a 10% equity interest in an anhydrous ammonia plant in Point Lisas, Trinidad, that is owned and operated by Nitrogen (2000) Unlimited.

In 2019, EOG’s net production from Trinidad averaged approximately 260 MMcfd of natural gas and approximately 600barrels of oil per day.

Its annual report noted that in 2019 the company drilled and completed two net wells in Trinidad.

One of these wells was a successful development well, while the other well was determined to be an unsuccessful exploratory well. In addition, EOG drilled one stratigraphic exploratory well which discovered commercially economic reserves.

In its annual report the company warned that it could experience cash flow challenges if the oil and gas prices remained weak for a protracted period.

It noted that lower commodity prices can also reduce the amount of crude oil, natural gas and NGLs that it can produce economically in the USA.

It read: “Substantial and extended declines in the prices of these commodities can render uneconomic a portion of our exploration, development and exploitation projects, resulting in our having to make downward adjustments to our estimated proved reserves and also possibly shut in or plug and abandon certain wells. In addition, significant prolonged decreases in commodity prices may cause the expected future cash flows from our properties to fall below their respective net book values, which will require us to write down the value of our properties.”

Such reserve write-downs and asset impairments could materially and adversely affect its results of operations and financial position and, in turn, the trading price of its common stock the company’s annual report warned investors.

“If commodity prices decline from current levels for an extended period of time, our financial condition, cash flows and results of operations will be adversely affected and we may be limited in our ability to maintain our current level of dividends on our common stock. In addition, we may be required to incur impairment charges and/or make downward adjustments to our proved reserve estimates. As a result, our financial condition and results of operations and the trading price of our common stock may be adversely affected.”

The report read.

In Trinidad, EOG sells is gas to the NGC and crude oil and condensate to Heritage Petroleum Company Limited.