Phoenix Park’s heats up regional gas market

Outlining the challenges to doing business in the international community, Tiah said, “Our LPG goes to the Caribbean and Central America and our natural gasoline goes much further. It actually goes West Africa or it can go to Columbia or other locations. We have always operated our business by exporting into the regional markets or extra-regional markets.”

For new and upcoming projects, gas availability and pricing is a concern for Tiah. The 2011 Ryder Scott report indicated that T&T’s natural gas reserves recorded a decrease in proven gas reserves and estimated they would last nine more years. Commenting, Tiah said the entire sector should not be judged by a snapshot only, since this does not tell the full story. He added that there are ongoing efforts to find new reserves. “We know that there is exploration and production activity that is trying to be stimulated. We also know a lot is happening globally as well, where tremendous amounts of reserves of gas have been discovered in Africa and elsewhere and ultimately it comes down to how competitive we are as a nation. An investment dollar from an exploration and production activity company, where should it go? Should it go into exploration and production in Africa or somewhere else, Australia? Should it come to T&T? It all depends on what the expected return on the invested dollar is and the likelihood of finding the resource and being able to market it,” he said.

 

 

Monetising gas should be done by conversion into other products. He said as a country, T&T has to re-think its strategy, “how we are going to go forward to deal with the energy industry.” Phoenix Park is exploring opportunities internationally, such as in Africa. “If we (T&T) can’t grow domestically due to the reality that things are pretty stagnant right now, then we need to look for opportunities to grow internationally. These are emerging locations, particularly West and East Africa. There have been lots of major finds of oil and gas and they are at their very embryonic stages of their development. They don’t have a history of expertise in that area so we see these as the better fit for what kind of capabilities and services we can offer,” he said. Areas in South/Central America where oil and gas is produced, for example, Colombia, the problems in Argentina and Venezuela that cause people not to want to go there because of their nationalisation activity surrounding foreign direct investment. “Certainly Colombia or Peru are interesting locations that have oil and gas—those are the areas that have very open policies with respect to foreign direct investment and participation in the oil and gas sector. In East Africa, you have Mozambique, Tanzania and other countries that have had enormous gas finds and are looking to monetise that resource. In West Africa, there is Ghana, which is a newcomer to the oil and gas industry, then Nigeria, which is a well-established oil and gas province and other West African countries.”

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Asked why Phoenix Park is not looking at the Middle East to deepen its footprint, he said, “The Middle East is a well sought-after area with a lot of major players already established there, and, therefore, it is going to be a difficult market in which to operate and to establish a presence immediately.” Asked how would PPGPL find the funding for its projects internationally, he said, “Funding with some equity and leverage with debt. I believe one would look at projects in a non-recourse way and then with a reasonable amount of gearing between 30 to 40 per cent equity and between 60 and 70 per cent debt.”

Non-recourse financing is debt where the loan is completely secured by collateral, which is often real estate. Although the benefits of such financing are obvious (the borrower is not using its balance sheet for the loan and can therefore undertake more leveraged projects than it could otherwise), such financing comes at a cost. Lenders often seek other credit guarantees and will almost certainly charge more for the loan than with more traditional, recourse financing. Non-recourse financing does not mean no risk, and some companies may undertake projects that have a riskier profile than they should otherwise assume.