Noble: S&P Ratings, and the NGC—why we can’t stay silent in face of “clumsy moves”

“True ignorance is not the absence of knowledge, but the refusal to acquire it.” Karl Popper, Austrian-British philosopher.

The recent S&P Rating is not a new and startling event for Trinidad and Tobago. While many may have focused on the national outcome, we may have missed the reality that some of our major institutions have also had a negative rating.

In the case of the National Gas Company (NGC), the most recent report indicates that its outcome aligns with that of the nation. This position is based on its relevance and significant role in the national economy.

The NGC is the sole gas seller and distributor in the country, and has a privileged competitive position and status as a vital infrastructure asset in the country’s midstream energy sector. The government wholly owns NGC.

However, it is worth noting that the NGC’s ratings can be affected by specific actions. Using Petrotrin as a template, some risks need to be managed to avoid a deterioration in the ratings.

The NGC’s 2020 loss of TT$316.2 million should never be forgotten.

In 2015, Petrotrin faced a debt overhang due to loan repayments that came due. These loans were taken to facilitate clean fuel initiatives, which were behind schedule and over budget. The other issue was the failed Gas-To-Liquids project.

As a consequence, both Moody’s and S&P downgraded the company. Some may recall that these events were at the root of the refinery’s closure. (Jupiter, 2022, pp 126 – 134)

The NGC acts as our Board of Inland Revenue for our gas and oil dealings with the multinationals. They collect the appropriate taxes and then funnel them to the Board of Inland Revenue.

As a country, we are at risk of not collecting the proper taxes if the NGC does not understand the value chain process and allows multinationals to bypass taxes that are due. The NGC has been our main profit centre since its incorporation.

To ensure that the NGC remains vigilant about the process, a team of qualified individuals is required. Andrew Jupiter, in his 2022 book Red, White and Black Gold, notes the depth of experience that inhabits the NGC.

It is not only about the leadership, but it is also shaped by the people who work on the calculations of the subsets. Although Jupiter does not include the narrative about his 2002 falling out with Prime Minister Patrick Manning, the details are present in the local newspapers.

Curtis Williams of the Trinidad Express then noted: “A conflict is brewing between Prime Minister Patrick Manning and technocrats in the Ministry of Energy over the PM’s decision to overrule them in a $250 million fight with oil giant Exxon/Mobil.”

That spat cost Jupiter his job as Permanent Secretary in the Ministry of Energy. He was reassigned to the Ministry of Works. He never worked a day there because of Professor Ken Julien’s intervention. Julien moved him to the National Energy Corporation.

In his 2012 salute to Jupiter, Julien wrote: “…in many respects, I saw him as an example of public service… in the tradition of Eugenio Moore, Dodderidge Alleyne, Frank Rampersad and Trevor Boopsingh.”

He continued: “They showed a good deal of professional independence. He was not prepared to be a yes man. He had a point of view and he was prepared to argue it.” (T&T Review July 2012).

Are we—and is the current NGC leadership—prepared to acknowledge that these professionals are employed for their expertise? Will they and we accept an independent viewpoint, free of political bias?

Who is the present-day Ken Julien who can intervene when the politicians get emotional about their desires? How much more can the nation afford when professionals ‘resign’?

We have seen the Central Bank Governor and the First Citizens’ CEO resign when they clearly did not. Do we have a surfeit of talent?

Kermit Waldron, in his contribution to the book From Oil to Gas and Beyond, made a pertinent observation (Boopsingh and McGuire, 2014). He notes that we have done a reasonable job in developing technical talent, although we still rely on an expatriate pool. He identifies that we have done a poor job in raising our leadership talent.

He asserts that we have not yet reached a point where we have all the necessary capacity to manage the complex operations in our energy business. (ibid, p 427).

When we characterise personnel changes as “par for the course”, we choose to ignore the risk they pose. When we transfer a veteran Permanent Secretary, who is specialised in energy matters, to handle sports and youth affairs, we show our unwillingness to learn.

What is the next step? To remove the professional premium we pay to our professionals in this sector? We can quantify the cost of the First Citizens’ debacle, but can we imagine the cost to the country of these moves?

In an earlier column, I noted that Corporation Sole would have lost $400 million and counting because of that self-enforced FCB error. Was this an ‘obscene’ error? Should the Corporation Sole or the key operators resign?

Here we are in the run-up period to renegotiating the new contracts for our Point Lisas plants, and we have the NGC Commercial Head ‘resign’.

Who do we have to replace a 20-year veteran? Her role is not a technical job, but rather an enterprise leadership position. Who is available to assume the responsibility, or will the Chairman act as the chief negotiator?

In 2012, the then Energy Minister, Kelvin Ramnarine, extended Jupiter’s term of office, as it tried to avoid losing his expertise at a crucial time in the sector. Are we in a better place today?

The people on the other side of the table are the same ones that we have accused of ripping off the NGC. When we accuse them of scandalously not paying their rent, can we contextualise the sum in the NGC accounts? Is the sum owed by one account or by several companies?

This ill-defined characterisation clearly demonstrates an inability to see the whole picture. All this chaos is happening at a time when we do not have a surfeit of gas.

Will we return to the days when contracts could not be signed and plants went idle? Have we calculated the cost of lost revenue to the national coffers?

The effect of the Minister and the Chairman acting as a ‘badjohn’ will be quickly reflected in our national accounts. It will not only be the cash contributions that will be missing, but rather the further downgrade in our Ratings.

Where do we get the revenue to backfill a shortfall in the NGC contribution?

As nationals, we do not wish for tragedy to happen because it would mean that we would all suffer. Therefore, we cannot remain silent when clumsy moves are taken.

For those who are alarmed by the peppercorn rentals, let us consider what we committed to with the leasing of prime Chaguaramas lands. However, more significantly, a precedent has been set with the relocation of Farmland Misschem from the La Brea Industrial Estate to Point Lisas North.

In that case, the company was given an incentive twice.

“Remember, Farmland Misschem when they offered the company the same greenfield terms even though they had moved it from La Brea to Point Lisas? That led to others demanding the same prices, and the country took a hit twice.”

We have to understand the big picture. Can technicians do so? Can people with blunt analyses and no experience in running large businesses be trusted to seek the good of the country?

Several significant issues require our nation’s attention. Can we expect that the Minister and the Chairman will address them?

The electricity rates require a review. While we assume that we should get a benefit for being a gas producer, does not our flagrant misuse of electricity require an adjustment? Will we dash that conversation away because of political reasons?

In recent days, we have seen an animated discussion about cross-border issues with Venezuela. It should be noted that at one stage, Venezuela did not see the monetisation of the fields as necessary.

Who within the NGC has the history and relationships with the Venezuelan counterparts to effect this goal? Is it that the Minister believes this is a ball that one person can carry?

Whether it is the Prime Minister or the Energy Minister, there is a need for experts to provide direction and guidance. Who is left in the NGC to give that support?

At the same time, Exxon Mobil is back. There appears to have been a non-compete block on our East Coast identified for the company. Interestingly, there has been no mention of a signing bonus. Jupiter illustrated the bid process and noted that in 1998, we received over USD 80 million in signature bonuses. (ibid, p80).

Are we still following this approach? Why did we offer this block on a non-compete basis?

In this regard, Waldron questioned two matters. Firstly, he asked whether we are managing our exploration activities to grow our reserves or optimise their monetisation.

Secondly, are we developing the right long-term strategy, and can we execute it effectively? Without the relevant data at hand, he raises a query about the time needed to process a bid round. A lengthening of the time would be an indication of a lack of enterprise skills. (Boopsingh and McGuire 2014, p437)

What are we planning to do about the twin challenges of climate change and sustainable energy?

We will have a downsized delegation led by Minister Kennedy Swaratsingh. This downsizing is occurring despite several speeches emphasising the importance of this effort. It is happening without a strong NGC input.

Similarly, there have been no reported discussions about the potential role that the NGC can play in the communications, electricity and water sectors.

Where do we go? I strongly suggest that our policymakers buy and read Jupiter’s book. Several significant issues covered in the Boopsingh and McGuire book should be discussed at the NGC board meetings.

Both Minister Moonilal and Chairman Ramdeen should learn from the mistakes made by Patrick Manning. Multinationals do not have the patience to wait for us to resolve our petty tribal squabbles.

Let us pray that the NGC leaders will not remain in ignorance. May they acquire knowledge.