NGC’s developments in Trinidad and abroadNovember 22, 2018
Gerry C. Brooks, chairman of The National Gas Company of Trinidad and Tobago Limited (NGC), talks to TOGY about how the financial performance and outlook of the company has improved, project milestones achieved, opportunities cultivated abroad and the progress of planned technological developments. Established in 1975, NGC is Trinidad and Tobago’s state-owned flagship energy company.
• On company strategy: “Our board and executives developed a strategic plan predicated on four pillars: grow locally and internationally, secure current business, develop the organisation and strengthen national contribution. This plan is being actively and successfully executed.”
• On opportunity abroad: “By confining the group to Trinidad and Tobago, NGC will not optimise the value chain, which is international in scope and opportunity. There are considerable and very attractive opportunities outside Trinidad and Tobago which must be leveraged to improve the richness and consistency of our revenue stream, while allowing us to leverage our more than 40 years of experience and gas expertise.”
• On digital transformation: “The company is driving digital transformation throughout our operations, as it is necessary to maintain a competitive advantage and continually transform and diversify the business. It is the way forward for NGC and Trinidad and Tobago to drive growth and positive change. With this understanding NGC is moving past being a bleeding-edge company and we are rapidly progressing towards being leading edge.”
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How has NGC evolved since 2015?
Three years ago, when our board assumed responsibility, NGC and the NGC Group was in a very difficult position, as was the country. Persistent and severe gas curtailments, misaligned leadership, challenging industry circumstances and substantial revenue and profitability declines confronted the group. Equally, and as daunting, were the avalanche of multi-billion-dollar claims and arbitration matters that were in the billions of dollars and had to be addressed and resolved. We had to rebuild staff morale as well as hire new executives, as the wider gas industry underwent unprecedented change and transformation.
The environment was one in which confidence was low, prices were plummeting and revenues and margins were at historic lows, threatening to drop even further. Even worse, the company was deluged by a flood of claims. We had to reconfigure and re-engineer the business, not only from an NGC perspective, but also from a regional perspective. A new equilibrium and new architecture had to be found to allow the company, and Trinidad and Tobago as an energy jurisdiction, to find a new balance and new relevance.
In 2018, in reviewing the financial reports for the previous two years, NGC is in much better shape. The group declared improved profit in 2016, up by 28% over the previous year. Profitability improved in 2017 as well, increasing by 37.2%. Positively, we are looking to 2018 with confidence.
Our board and executives developed a strategic plan predicated on four pillars: grow locally and internationally, secure current business, develop the organisation and strengthen national contribution. This plan is being actively and successfully executed. We have rebuilt a strong leadership team. Additionally, many of the legacy projects have been completed. The outstanding projects will be finalised in 2018.
What is the significance of the legacy projects that have been addressed so far?
The PPVS [Phoenix Park Valve Station] upgrade project will provide NGC and Trinidad and Tobago with greater supply integrity and redundancy in the event of any disruptions at our core Beachfield facilities. It will allow us to collect condensate and remove liquids. Completed in 2018, that facility is now totally on line and operational, with a capacity to transport 3 bcf [85 mcm] of gas per day.
The second significant legacy project which we have operationalised is the Liquid Fuels Pipeline Project [LFPP]. This facility provides a system in which diesel, petrol and jet fuel will be supplied online, rather than having road tanker wagons transport the product throughout the island. We have effectively reduced the risk, modernised the process and made transportation far more efficient. We have already introduced jet fuel into our LFPP facility at Caroni. It has been transported to Piarco, the ultimate filling destination. Currently, diesel is being introduced to the facility and will be followed by petrol for filling at the Caroni facility.
These are very substantial multi-million-dollar projects. The PPVS project is approximately USD 350 million and the LFPP project is in the same order of magnitude. There were protracted delays in prior years, which led to price escalations.
How has renewed discipline in the company allowed NGC to expand outside Trinidad and Tobago?
Importantly, when we conceptualised our strategic pillars, our vision was that NGC could not purely be a Trinidad and Tobago-focused company. By confining the group to Trinidad and Tobago, NGC will not optimise the value chain, which is international in scope and opportunity. There are considerable and very attractive opportunities outside Trinidad and Tobago which must be leveraged to improve the richness and consistency of our revenue stream, while allowing us to leverage our more than 40 years of experience and gas expertise.
Equally significant is that Trinidad and Tobago has spawned services companies and nationals that participate in many jurisdictions internationally. This allows NGC and the country to leverage potential partnerships. Our partnerships with major energy players in the US, Europe, Central America and Guyana cannot be restricted to a one-dimensional, jurisdictional view any longer.
We set out to rekindle some of the relationships, which had previously been developed in Africa and other territories by the company in 2007 and 2008. Very early, a delegation visited Ghana. We also had engagements with other West African territories including Nigeria and Equatorial Guinea, and under the prime minister’s and the government’s lead, we re-engaged the Bolivarian Republic of Venezuela, where we began to deepen our work with the Loran-Manatee field and initiated discussions on the Dragon field.
We have recently signed a term sheet with PDVSA [Petróleos de Venezuela] and Shell related to the Dragon field, which will create a lucrative partnership for both the people of Venezuela and Trinidad. This agreement will liberate revenue for Venezuela, allowing the country to monetise its gas resources while utilising Shell’s and NGC’s infrastructure and technology. It provides Venezuela with access to Trinidad and Tobago’s global energy markets and LNG infrastructure.
The execution of the MoU and the Heads of Agreement among PDVSA, Shell and NGC preceded the execution of the commercial term sheet. Work is progressing apace to operationalise this historic initiative.
What work is NGC involved with in Africa and the Caribbean region?
Considerable effort has been invested in developing the Ghana and Africa initiative, in the context of South-South trade and cooperation. This is an excellent opportunity for NGC and the Trinidad and Tobago energy sector to work with African companies to provide advisory and technical support in midstream activity, including fabrication and gas processing, as well as downstream and technical services. The company also held earlier discussions with Nigeria and Equatorial Guinea.
In East Africa, visits have been made to Tanzania and Mozambique. In the case of Tanzania, a TSA [technical services agreement] is being contemplated. In Mozambique, work is being progressed under an MoU between Empresa Nacional de HidroCarbonetos and NGC. It has also been extended to a TSA in which a mutually agreed scope of services will be provided.
There is also the opportunity for equity investment and participation as Mozambique looks at its downstream and midstream sectors. That initiative is progressing well with the joint teams hard at work.
In 2016, a formal, deliberate engagement occurred with Cuba, Cupet and several of its subsidiaries, including Cuba Metales. The visit was co-ordinated by PPGPL [Phoenix Park Gas Processors Limited] and included our sister state enterprises, Trinidad & Tobago National Petroleum Marketing Company and Petrotrin. Both companies have historically traded fuel oils, lubricants and provided other products to Cuba. PPGPL has also provided propane and butane to this market.
It is critical that we recognise that the Caribbean energy space has changed fundamentally. Opportunities have also emerged in Grenada. While this is still at a nascent stage, NGC executed a gas supply agreement with GPG [Global Petroleum Group] in Grenada in April 2018. This agreement underscores collaboration and energy co-operation between Trinidad and Tobago and Grenada, and will provide opportunity for growing and strengthening energy linkages as well as both economies.
NGC and GPG will also continue to work collaboratively on several fronts relating to geotechnical and geophysical support, as appropriate. Similarly, the leveraging of NGC’s infrastructure in Trinidad and Tobago will provide a commercially efficient mechanism to monetise any resources which are identified and developed.
How can Trinidad and Tobago remain regionally competitive?
Trinidad and Tobago and NGC are repositioning ourselves in the context of a revamped regional architecture. The construction of a new framework agreement at the Caricom [Caribbean Community] level and its execution, can create a deliberate and formal architecture where countries better understand each other’s competencies and aspirations, and are able to realise those aspirations more efficiently.
This is an excellent opportunity to accelerate regional economic growth. It cannot evolve by chance! Our government and Minister Franklin Khan are also actively working to shape an agenda with the relevant energy ministers in the region to achieve this. This framework architecture and agreement is already beginning to take shape.
Equally important, regionally, countries will have to put in place appropriate domestic energy legislation and formal measures that are both advantageous and mutually complementary in order to build and shape a powerful energy architecture. The foregoing will involve a host of agreements, infrastructure and capacity building for the region to offer and compete with a full range of services.
Oil and gas benefits are going to permeate the various economies, which will positively impact the services and financial services sectors, as well as the maritime industry and other industries. There will have to be a greater focus on how countries organise the development of their industrial parks and economic zones. Countries will have to define and redefine multilateral and bilateral agreements to underpin and drive the development agenda, as well as more efficient transportation and logistics. Infrastructure will also have to be re-engineered.
Of course, we are also engaging the University of the West Indies to rethink its role in terms of the number of engineers, coursework offered, post-graduate areas of interrogation and speciality, and areas of priority focus to ensure relevance to and support of the ever-changing energy architecture.
Greater consideration is also being accorded to alternative energy and renewables. This area is being actively developed by National Energy, including three projects that have been developed, and for which active discussions are occurring with the Ministry of Energy and the companies responsible for transformation and support.
How is NGC embracing technology and technological developments?
Deliberately, NGC has adopted a group-wide approach to IT. The objective is to employ one harmonised, integrated IT platform. This will accelerate system migrations and upgrades and align functionality across the group. With seamless functionality and integration across the Group, data analytics, predictive analytics and efficiencies can improve exponentially. It will also be a key enabler to strategy and productivity, which will also drive profitability and team performance. Prospectively, it is a critical tool.
Consistent with this thrust, executives have embarked on data cleansing across the group. Clean data is at the heart of insightful analytics, which is a critical driver for accurate, timely and smart decision making.
We are truly embracing technology, as it can have significant, beneficial impact. One area of priority is procurement and the supply chain. In 2018, our e-procurement platform will be launched. This will improve value added and efficiency in our multi-billion-US dollar budgeted capex spending across the group. Procurement also becomes much more timely and efficient. It will also reduce potential overstocking and obsolescence and avoid stock-outs. E-procurement and supply chain management is a critical area of focus for the group. Historically, improvement in this area has added 15-20% profit improvement to businesses.
Another area is financial analysis. With far better data, NGC will be even more disciplined in terms of financial analysis across the group, as well as in predictive analysis, which will reward our shareholders with greater dividends and shareholder value.
Another candidate area is how NGC embraces technology to be more efficient and effective in our plant maintenance costs. Our IT partners, including SAP, are drawing on both international and industry experience to leverage international best practices in plant maintenance and improved uptime integrity. NGC is now employing artificial intelligence and predictive analytics, to secure improvements in this area. IT will underpin both our transformation and diversification thrust. We are a TTD 44-billion [USD 6.46-billion] company, and our strategic intent is to double that. A critical driver is the case of using data, IT and diversification incisively and transformatively to achieve double-digit growth.
Digitisation will also improve the ease of doing business, because we now have the democratisation of information. We all see real-time data, which allows us to make faster decisions and generate more timely approvals. It also allows us to secure better margins by improved analytics, and more informed strategic objectives. As an example, PPGPL is now securing greater value for condensate cargoes that were not yielding any value three years ago. This enhances margins, profitability and shareholder value. It allows us to buy smarter and more efficiently in terms of e-procurement and do better post-execution analysis and unlock shareholder value. Democratisation and analytics are going to help us to make the international leap.
The company is driving digital transformation throughout our operations, as it is necessary to maintain a competitive advantage and continually transform and diversify the business. It is the way forward for NGC and Trinidad and Tobago to drive growth and positive change. With this understanding NGC is moving past being a bleeding-edge company and we are rapidly progressing towards being leading edge.