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EOG to supply gas to Trinidad methanol plant Company signs 15-year contract to supply portion of plant’s requirements; its Trinidad production rose 13% in 2003 Ray Tyson Petroleum News Houston Correspondent
Natural gas producer EOG Resources, which saw its 2003 fourth-quarter earnings soar from a year earlier, said it has signed a 15-year contract to supply a portion of natural gas for Trinidad’s M5000 methanol plant, expected to come on stream in mid-2005.
The Houston-based independent said that when the plant is at full capacity it expects to supply daily about 95 million cubic feet of gas during the first four years and roughly 125 million cubic feet during the remaining 11 years of the contract. That would be 67 and 87 million cubic feet net to EOG.
The wellhead price will be linked to Caribbean methanol prices with a guaranteed floor. “With this new production beginning next year, EOG’s long-term growth profile in Trinidad is strengthened,” the company said.
EOG also will supply 47 million cubic feet of gas per day to the Nitro 2000 Ammonia Plant under a separate 15-year contract.
EOG’s total natural gas production in Trinidad last year rose 13 percent, primarily reflecting a full year of sales to the CNC Ammonia Plant. In the fourth quarter, the company embarked on a nine-month drilling and exploration campaign aimed at finding additional reserves offshore Trinidad.
“The key event there is with higher prices in the U.S. it makes almost everything economic in Trinidad,” EOG President Ed Segner said Feb. 6 at the Credit Suisse First Boston Energy Summit 2004. “But discoveries are needed to fill current LNG trains.”
EOG said it expects to achieve company-wide annual production growth of 6.5 percent in 2004, 10 percent in 2005 and 7 percent in 2006. Link between Trinidad supply and North American demand “While our focus remains North American gas, we see an increasing linkage between North American gas demand and Trinidad supply,” said Mark Papa, EOG’s chief executive officer. He said EOG’s supply contracts to two ammonia plants and the new methanol plant provide the company “an even broader exposure to North American natural gas fundamentals.”
Segner said EOG believes U.S. natural gas production will continue to decline at an annual rate of 2 to 3 percent, leaving a supply shortfall this year of about 1.8 billion cubic feet per day. “There’s no question that we need both LNG and domestic supply,” he said.
On the earnings front, EOG’s profit for the 2003 fourth quarter rose to $71.8 million or 61 cents per share from $41.7 million or 36 cents per share for the same period a year earlier.
At year-end 2003, EOG reserves were about 5.2 trillion cubic feet of gas equivalent, an increase of 614 billion cubic feet of equivalent, or 13 percent higher than 2002. EOG’s total reserve replacement was 249 percent of production. From drilling alone, the company replaced 183 percent of its production.
EOG said it expects to spend about $1.1 billion on capital projects in 2004, excluding any acquisitions, compared to $917 million in 2003. At year-end 2003, EOG’s debt-to-capitalization ratio stood at 33.3 percent, down from 40.6 percent at year-end 2002.
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