IT manages to cost what it is willing to pay and what it is willing to accept in negotiations.
And for the past few years, it has been the price point in negotiations between downstream companies based in Point Lisas and the National Gas Company of Trinidad and Tobago (NGC) that has caused some bottlenecks, some plants have been put into operation or closed.
The story of T & Ts natural gas, after all, was that it was an annoying oil by-product that was able to monetize it successfully, which gave birth to Point Lisas Industrial Property.
The gas, which was once ignited, was cheap.
But in the last decade, plants faced constraints as NGC struggled to meet demand with limited supply.
Prior to 2010, the high-energy bpTT had maintained a cushion gas, which T&T would use if there were power outages.
However, this disappeared in 2010 when BP production decreased significantly.
The shift in output is attributed to a change in Government fiscal policy, which hampered BPT’s investments in T&T.
From 2010 to 2014, eight Lisas Estate-based energy companies suffered combined losses of $ 1,639,694,699.20 (or approximately $ 10 billion) due to irregular natural gas supplies.
Energy Minister Franklin Khan, while defending his term in the no-confidence motion filed against him by the United National Opposition Congress (UNC) last month, said that in 2015, there were unresolved contract negotiations between the NGC, upstream and downstream gas suppliers contracts.
The latter resulted in large claims against NGC, amounting to $ 756 million. Under that administration, we have reduced those claims to just $ 363 million, he had said.
With the issue of supply stabilized quite a bit, it came down in price.
And gas is no cheaper.
Plants on the estate started the ArcelorMittal (2016), MHTLs M1 (2017), Yara (December 2019), Methanexs Titan (March 2020) and Nutrien 3 (May 2020) shutters.
Last week, the country’s largest methanol producer, the Swiss-based Proman Group, announced it was working on the M4 and M5000 methanol plant at the Lisas Industrial Estate, effective immediately.
In a message to staff, Promans local chief executive Claus Cronberger said the decision to lay off two of its five methanol plants was based on Promans’ inability to secure an economically viable short-term gas supply contract for the month of April.
MHTL has continued to operate two methanol plants, M2 and M3, using a supply from its subsidiary DeNovo.
By the end of this month, another contract with NGC expires at this time with Tringen
(See table to the right)
An industry source stressed that the daily contracted quantities of NGCs with its customers will not take into account the volumes that would have gone to the M4 and M5000.
This means that NGC is now contractually obliged to supply about 1.276 million cubic meters of natural gas per day. That means NGC is selling about 30 percent less natural gas than it did six years ago, the source explained.
The Sunday Express understands that apart from the Tringen and Proman contracts, the contracts will not expire until 2023.
Plant closures were expected
By 2020, the steadfast people of the industry had predicted more plant closures at Point Lisas.
Atlantic LNG chairman Ian Welch had told Express Business, in an interview in June 2020, that there was an urgent need for adjustment.
There is a need for trade regulation along the value chain, including some innovations and risks to the sustainability of the industry. The main issue is competition as a result of lower raw material prices in other jurisdictions where our products are sold. Trinidad has become the shaky manufacturer for some products, Welch had said.
At the time, when asked if he expected to have more plant closures, he replied, Yes, I would expect more closures as the current model is not stable in today’s market.
Former Permanent Secretary of the Ministry of Energy Andrew Jupiter had said, Covid has negatively impacted the situation lower prices for ammonia and methanol, a decline in global demand for petrochemicals and lower prices for natural gas. It is expected that more plants may be temporarily shut down and / or plant optimization.
Jupiter had pointed out that the last petrochemical plant built at Point Lisas was the melamine urea urea (AUM) plant built by MHTL 2009.
No new petrochemical plants in Point Lisas for 11 years. Clearly, this model is no longer attractive, he had said.
Former NGC chairman, industry veteran Frank Look Kin had told the Sunday Express, Well, NGC has always acknowledged that when the price is low, some plants may have to fall. Plants that were less effective.
People may not want to accept it, but that is the reality. So the Yara plant was shut down because it was the most inefficient plant in Trinidad.
I know everyone sees this in the short term, but it is a long term industry. Yes, we are trying to find new formulas and try to see if we can get lower prices from manufacturers because those contracts will expire in 2024. It would expire in 2024. But we have to fight to pass 2020-2022. I think the country has to fight now.
Where will it end?
It will be difficult. It will be very difficult because upstream people have a given interest because those who do not sell to methanol companies or the petrochemical company, they sell us LNG (liquefied natural gas), but LNG is also low. Conversely, we face a dilemma because there is an oversupply of gas, in a sense for both ammonia and methanol, as well as for LNG markets, globally. And, unfortunately, there is no short-term answer.
Because it takes, it takes time. And then Covid has made demand for all sorts of things fall. And, therefore, if demand does not increase for ammonia and methanol, and LNG, we will have to fight, at least for 2020, 2021, if not 2022. The government has held a consultant to assess the industry and make recommendations for a way forward, Kin told the Sunday Express.
Training 1 and return
Khan, in his contribution to Parliament, had said that the current challenges being experienced by the petrochemical sector in Point Lisas were as a result of the gas value chain, which included upstream purchase price agreements, collectors and carriers in electricity (which is NGC), downstream production cost and commodity market prices.
What has happened at Point Lisas is really a rapid drop in methanol and ammonia prices. This is the genesis of the problem? It has nothing to do with the Government. In 2014, of which you boast, ammonia prices were US $ 500 per metric ton. Do you know what the price was in 2020? $ 200 per metric ton. From $ 500 to $ 200. It has nothing to do with government, and $ 500 had nothing to do with UNC either. It has to do with international market conditions.
In methanol, in 2014, the price was US $ 400 per metric ton. In 2020, it was under US $ 200. There is a rise and a rise in price in the first quarter of 2021. Prices are now moving again and we hope the trend continues and brings a wise mind to the system.
In plant closure plants were closed worldwide during the Covid period. During 2020, ammonia plants in China, Ukraine, France, Qatar and Brazil have been weak and unemployed. Methanol plants in Chile are spoiled. Urea plants have been shut down in India, Bolivia, China and Brazil. All of these things are happening internationally. Trinidad is not immune.
However, Trinidad has some advantages. Our petrochemical plants have already paid off its initial capital investments and Trinidad and Tobago is still considered one of the lowest costs of ammonia production compared to countries like Russia and Indonesia, he had said.
When Khan submitted the results of the 2019 Ryder Scott report in February, he had said a turnaround for the sector would come in 2022, with the country expected to reach excess gas demand by 2024.
To that end, he had said that the decision of governments to invest capital to keep the Atlantic LNG Train running is strategic, given that by 2024, he expects to have gas from the Manatee field.
The Manatee Field, once known as the Loran-Manatee Field, is a deep-water cross-border field between T&T and Venezuela.
Last year, Prime Minister Dr. Keith Rowley said the field has gas reserves of 10.07 trillion cubic meters (tcf), of which 2.71 tcf belong to T&T and 7.35 tcf belong to Venezuela.
Based on a 69 percent recovery factor, Dr. Rowley had said that T&T could expect to produce up to 1,872 tcf and Venezuela, 5,076 tcf.
Khan had said if all the Government production projects come, the country would have excess gas at that point.
To this end, it decided to keep Train 1 operational.
In December 2020, he told Parliament: Atlantic Train 1 will not close in January 2021. Train 1 will continue to operate in 2021 and will be part of the broader negotiations that have been taking place between the shareholders of Atlantic LNG to form a facility that includes all four trains.
He had said that NGC, acting on behalf of the Government, is taking the actions required to maintain the functioning of Train 1, pending the finalization of the structure negotiations for the unified unit.