Trinidad’s GTL futureSeptember 17, 2018
Ainsley Gill, NiQuan Energy’s group CEO and director, talks to TOGY about the challenges and advantages of the company’s GTL project, the government’s role in supporting the development and the availability of local financing for energy projects. NiQuan acquired Petrotrin’s World GTL project in 2015 and will soon bring the facility on line.
• On GTL advantages: “GTL fuel is far cleaner than the crude-derived diesel it displaces, and the result is a higher performance and lower emissions value offering for the consumer. It also means reduced environmental impacts and improved local air quality. The business case for gas-to-liquids is compelling.”
• On global ambitions: “NiQuan Energy is building a global GTL business. Our plant at Pointe-à-Pierre is only the first of many. NiQuan Energy intends to be a major part of a global clean fuel future, because that is what gas-to-liquids technology delivers.”
• On the robust value chain: “NiQuan Energy believes that the best guarantee of a profitable future for any organisation is to be competitive and demonstrably add value, and our supply chain has certainly delivered. The supply chain in Trinidad and Tobago quite rightly aspires to seek export opportunities abroad and NiQuan’s experience is that it is well equipped to do so.”
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Why is GTL so important to NiQuan and the region?
Wherever you are in the world, the challenge is to use energy in an ever cleaner and smarter way. Many technologies help us do this, but NiQuan believes that hydrocarbons will continue to play a major role for the foreseeable future. The cleanest of the hydrocarbons is natural gas; therefore, it makes sense to find ways to use natural gas in a transport application.
Gas-to-liquids technology is the simplest way of doing this without having to adapt vehicle drivetrains or install expensive new distribution infrastructure. GTL fuel is far cleaner than the crude-derived diesel it displaces, and the result is a higher performance and lower emissions value offering for the consumer. It also means reduced environmental impacts and improved local air quality. The business case for gas-to-liquids is compelling.
What has been the biggest hurdle in accomplishing this project in Trinidad and Tobago?
The single biggest challenge has been coming to terms with the legacy of the project and all that goes with it. The one thing you can be sure of is that, even those who don’t know much about the project know that it consumed a huge amount of public money with nothing to show for it at the end. There is understandable resentment about that, not to mention considerable scepticism as to whether it will work this time round.
As we’ve developed the project, we’ve had to work very hard to explain to people that the project is going to be completed entirely at NiQuan Energy’s risk and that NiQuan Energy is providing the financing to get the job done. We don’t require the help of the taxpayer to complete the plant and get it operational. Finally, the country is going to get something back for its original investment in terms of jobs and revenues.
That message is now more widely understood than when we first started, but the scepticism is going to continue until the plant is started up and begins commercial production. Given the history, that’s entirely reasonable and it would probably be unrealistic to expect it to be otherwise. Project success will change everything and NiQuan Energy is comfortable with that challenge. This story is going to have a happy ending.
Why are you confident that NiQuan will be successful in this endeavour when the project failed under Petrotrin?
Though the history of the project has been a handicap in some regard, it has also given us the huge advantage of hindsight. Also, we are dealing with a plant that is at an advanced stage of completion, so in that regard, our task is very different to that of starting from a greenfield site.
That said, what we are trying to do is highly unusual. We are taking a partially constructed GTL plant that has been in a state of preservation for a considerable time and we are bringing it back to life. As far as I’m aware, that’s not been done before in quite this way. Happily, we have the team and the technical partnerships necessary for success, but we’ve treated this challenge with the greatest of respect from day one, because that’s the only way it’s going to work.
In addition to our technical capabilities, I think we have also adopted the correct business approach, which has been to do as much as possible to de-risk the project, and Aon [Energy Caribbean] has worked closely with us in this regard.
For example, we have accepted the increased cost inherent in a lump-sum turnkey contract approach in return for the certainty that it provides, and the plant will be built with mechanical and technical guarantees. Black & Veatch is the EPC contractor, with a reputation that speaks for itself, while our local contractor, Junior Sammy, is an organisation of proven worth and a demonstrable ability to deliver.
From the very beginning, we have deliberately set out to create a complete package that is credible and therefore financeable. The strong support we have had from investors and other key stakeholders following extensive due diligence is a clear indicator that we have achieved this objective.
How has NiQuan Energy funded the project?
NiQuan GTL is being funded by project financing with Republic Bank as the lead arranger. Project financing has been almost entirely raised locally in Trinidad and Tobago, and from a wide range of sources including First Citizens Bank and local credit unions. Trinidad and Tobago was always going to win from our project, in terms of job creation and increased revenue to the national treasury, but a range of Trinidad and Tobago investors are also going to benefit.
How will events at Petrotrin affect NiQuan?
We do not believe that the events at Petrotrin will affect us materially, but we are keeping a close eye on developments. Petrotrin is the offtaker for the project and that hasn’t changed. It’s an important partnership for us and we have great expectations of it as we grow our business.
What is NiQuan’s long-term objective?
NiQuan Energy is building a global GTL business. Our plant at Pointe-à-Pierre is only the first of many. NiQuan Energy intends to be a major part of a global clean fuel future, because that is what gas-to-liquids technology delivers. GTL fuel is traditionally associated with road transport, but there’s no reason why it can’t help cut marine emissions, particularly in light of the tougher International Marine Organisation fuel specifications being introduced in 2020.
GTL already has a presence in the aviation sector, where it can be used in up to a 50-50 blend. It will be an important option for the aviation industry going forward. Cleaner fuel in aviation is a particular win because there are no realistic drivetrain alternatives or the equivalent of electric vehicles. Currently, and for the foreseeable future, improving fuel quality is and will remain the easiest and safest means to cut emissions for an aviation sector that has very few other options.
All in all, there’s a very exciting future for clean fuel producers in almost every sphere of transportation, and NiQuan Energy intends to be at the centre of it.
What has been the most surprising aspect of the project?
One of the most surprising aspects of the project has been the relative ease with which we have been able to expand local content from 40% to 90% and the way that that has happened organically. NiQuan Energy is both cost conscious and quality dependent, and the supply chain in Trinidad has consistently delivered the solutions that make the most business sense for what we’re trying to achieve.
NiQuan Energy believes that the best guarantee of a profitable future for any organisation is to be competitive and demonstrably add value, and our supply chain has certainly delivered. The supply chain in Trinidad and Tobago quite rightly aspires to seek export opportunities abroad and NiQuan’s experience is that it is well equipped to do so.
How has NiQuan heeded local content regulations on the project thus far?
The most pleasing aspect of the project is how local it is. In terms of project financing, we always imagined that we would have to go to the international markets because there was not really a local precedent for a project like ours. That proved completely false and the local financial services industry stepped up and stepped out to deliver.
In terms of local content, we went from 40% to 90% on the basis of purely business considerations and best value, and without anyone attempting to impose any target upon us. Our project is stronger as a result.
Finally, the entire NiQuan Energy board is made up of the sons and daughters of Trinidad and Tobago. We didn’t necessarily start out with these intentions, but we’re extremely happy with how things turned out and where we are today. I think it’s fair to say that our plant is probably more deeply rooted in this country and better connected to the people of Trinidad and Tobago than at any previous point in its history.
What are the major challenges to successful completion?
Our destiny is now defined by the quality of our project execution. That is a management and corporate challenge, but it’s one that faces every company in the energy sector and one that ultimately speaks to core competencies.
The NiQuan Energy team has already achieved a considerable amount to get the project to where it is today, and the skillsets, and particularly the discipline, required to negotiate the various project phases that still lie ahead are very similar. On that basis, I feel that NiQuan Energy is in a good place and is well equipped to bring the project home.
How critical has government support been?
Our gas-to-liquids plant will be the first commercial plant of its type in the Western Hemisphere. That means it has the potential to lead a clean fuel future in the Caribbean region, which will deliver demonstrable environmental benefits, particularly with regard to emissions. It should also be noted that the physically benign qualities of GTL fuel make it particularly suited for use in sensitive marine environments such as ours.
I know that the government has been very attuned to the environmental aspects of our projects and is keen to show leadership in this area, but it is also fully aware of the compelling business case for completing the plant, starting production, generating jobs and revenue, and demonstrating that Trinidad and Tobago’s energy sector can develop and execute complex projects that use advanced processing technology.
The government has been a consistent supporter of our project on the understanding that the risk and cost of completion is entirely NiQuan’s, and the leadership that the government showed to ensure our project had the required gas supply was critical to our success in getting the project to this point.
What do you say to sceptics who argue that NiQuan Energy got the plant on the cheap?
No one who understands our project would argue that we’ve gotten anything on the cheap. The headline cost of plant acquisition is only part of the story. The fee paid to acquire NiQuan GTL was exactly that: a fee to acquire the plant. NiQuan GTL is not an operational facility and it will take more than USD 100 million to complete the plant and commission it. That’s a considerable sum of money and considerable amount of work. It also comes with the associated risks of any energy project.
Until that money’s been spent and the plant has been completed, all we’ve bought is potential. We have simply acquired an unfinished project with a scrap value only. Far from being cheap, the money paid to acquire NiQuan GTL represents a considerable act of faith and confidence by our investors and the team that has worked so hard to get us to where we are today. The old saying comes to mind: “If it was easy, everyone would be doing it.” NiQuan GTL represents value, but there’s nothing cheap about it.
How do you view the future of the energy industry in Trinidad and Tobago?
Overall, I’m very, very positive. It is clear that the upstream opportunities remain and that new ones are being created. That is a very necessary foundation for any successful energy sector. The current changes will inevitably be challenging, but I’m confident that the industry that emerges on the other side of them will be in a better place to compete globally and deliver the benefits of success to Trinidad and Tobago as a whole.
Looking through the specific lens of our project and our direct experience, first of all, we have a vibrant and competitive supply chain that’s prepared to compete on quality and able to win when it does so. That is critical because the contractors and suppliers are always the main employers in the oil and gas sector. With the exciting regional developments taking place, particularly in Guyana, our supply chain is well placed to take advantage further afield. Everyone wins from a confident and dynamic supply chain, and domestic and export successes will feed off each other.
The other cause for great optimism, based on the direct experience of NiQuan GTL, is that the financial sector of Trinidad and Tobago is now actively looking to invest in energy projects. For the industry here to have a domestic source of project financing is a huge development. It doesn’t mean that companies can be complacent and expect to borrow purely on the basis of nationality, but it does mean that a robust business case does not necessarily have to go chasing abroad for money.
NiQuan GTL is a clear demonstration that Trinidad and Tobago can successfully develop complex energy projects which use advanced processing technology; however, it has always seemed slightly strange that the country’s energy success has not allowed us to cultivate a financial sector capable of supporting it and driving it to new horizons. That is now changing and it may be that the single most important development for the successful future of the energy sector in Trinidad and Tobago is actually taking place outside of it.
The future of the energy sector in Trinidad and Tobago is very bright and we are very excited that NiQuan Energy and our plant, NiQuan GTL, are going to be an important part of it.
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