Cur­tis Williams

Lead Ed­i­tor Busi­ness

cur­tis.williams@guardian.co.tt

There is now a full-blown cri­sis in the lo­cal petro­chem­i­cal sec­tor, with four plants shut down in four months and word that more could be tak­en out of op­er­a­tion as the sec­tor reels un­der low com­mod­i­ty prices and the high cost of nat­ur­al gas in T&T.

Yes­ter­day, the largest methanol pro­duc­er in the coun­try and one of the largest in the world, Pro­man, an­nounced that it had al­ready sus­pend­ed op­er­a­tions in one of its plants in T&T and more would be shut down if the sit­u­a­tion re­mains the same.

“While we have been work­ing hard to man­age these con­di­tions and pro­tect our busi­ness and our em­ploy­ees, the com­bined pres­sures of the glob­al down­turn and a high nat­ur­al gas pric­ing en­vi­ron­ment in Trinidad and To­ba­go has cre­at­ed sig­nif­i­cant chal­lenges that will im­pact the en­tire val­ue chain,” a re­lease from Pro­man said.

“Our M3 plant has been idled since mid-April, with fur­ther po­ten­tial shut­downs in the weeks ahead if the sit­u­a­tion re­mains un­changed.”

The com­pa­ny has joined with the rest of the Point Lisas op­er­a­tors propos­ing Gov­ern­ment tem­porar­i­ly re­duce the price they are pay­ing for nat­ur­al gas in or­der to keep the in­dus­try go­ing.

The Pro­man re­lease said: “To­geth­er with oth­er down­stream pro­duc­ers, we are work­ing close­ly with NGC and GORTT, via the Roadmap to Re­cov­ery Com­mit­tee, to try to se­cure the crit­i­cal short-term re­lief pric­ing mea­sures re­quired to sta­bilise the sec­tor.”

The shut­down of the four plants is al­ready cost­ing Gov­ern­ment an es­ti­mat­ed US$1.3 mil­lion a day in rev­enue and the Na­tion­al Gas Com­pa­ny has lost con­sumers for 15 per cent of the gas used on the es­tate, or al­most quar­ter of a bil­lion stan­dard cu­bic feet of gas a day.

NGC chair­man Con­rad Enill yes­ter­day told Guardian Me­dia he did not know if they would be stuck with pay­ing the bill for not tak­ing the gas but ac­knowl­edged this was a ma­jor con­cern. He said the state com­pa­ny was hurt­ing fi­nan­cial­ly and ac­knowl­edged it even tried to re-ne­go­ti­ate its gas con­tracts with the up­stream com­pa­nies, but while do­ing so the COVID-19 pan­dem­ic had made it all but im­pos­si­ble to find a so­lu­tion.

“COVID-19 has not helped us in any way; it has, in fact, cre­at­ed some ad­di­tion­al chal­lenges that we didn’t see be­fore. The biggest is­sue here is the price is­sue and it is bad and on the NGC side we have been look­ing at some ne­go­ti­a­tions, rene­go­ti­a­tions, and even all of that is not suf­fi­cient to deal with the de­cline on the price side. There are oth­er things we are look­ing at as well but it is gonna take time,” Enil said.

To un­der­stand how T&T got here there are a num­ber of things that have hap­pened.

The price for a met­ric tonne of methanol has fall­en in the last year from US$300 in the Amer­i­can mar­ket and US$340 in the Chi­nese mar­ket to US$180 in the Amer­i­can mar­ket and US$160 in the Asian mar­ket. In terms of am­mo­nia, the prices have been weak for the last year and has de­clined from US$200 per met­ric tonne to US$180.

When one con­sid­ers that T&T is sell­ing most of its prod­ucts in­to the Chi­nese mar­ket and one is pay­ing al­most US$60 per met­ric tonne for freight, the plants are es­sen­tial­ly earn­ing on av­er­age US$120 per met­ric tonne, with a break-even po­si­tion of US$250 per met­ric tonne. In oth­er words, they are earn­ing half what it costs to pro­duce the prod­uct. Added to that, T&T’s cost for nat­ur­al gas is one of the high­est among world petro­chem­i­cal pro­duc­ers and there is risk to con­tin­u­ing in busi­ness.

It is for this same rea­son that on Mon­day, Nu­trien de­cid­ed to shut down one of its plants and Methanex al­so moth­balled one of its plants last month.

Rene­go­ti­a­tions not go­ing well

NGC chair­man Con­rad Enill yes­ter­day ad­mit­ted that it is a dif­fi­cult be­cause the NGC’s busi­ness is de­pen­dent main­ly on buy­ing gas from up­stream pro­duc­ers like BPTT and Shell and sell­ing gas to down­stream users like Pro­man and Nu­trien.

He told Guardian Me­dia that while he has tried to re-ne­go­ti­ate con­tracts with the up­stream com­pa­nies, there have al­so been some chal­lenges with them want­i­ng things in re­turn that were out­side of NGC’s re­mit.

“There have been but oth­er mat­ters that they want ne­go­ti­at­ed that were out­side of the NGC re­mit, so, for ex­am­ple, things that are be­ing han­dled at the lev­el of the Gov­ern­ment and things gov­ern­ment meet on an on­go­ing ba­sis to dis­cuss, those is­sues are be­ing dealt with at that lev­el, but on the NGC side, I think we are do­ing the best we can and I be­lieve we have reached the stage where what­ev­er we would have gained, I think we are at that stage of this is what it is,” Enill lament­ed.

He added: “Well, we have been look­ing at the sit­u­a­tion. What we have seen is the glob­al price is­sue is af­fect­ing every­body and com­pa­nies are tak­ing glob­al po­si­tions as a re­sult of that. “No­body is look­ing at Trinidad, every­body is look­ing glob­al­ly as to where they can go and un­for­tu­nate­ly in most of the ju­ris­dic­tions, the prices are bad and so com­pa­nies are look­ing at this point in time to plant main­te­nance to do and re­duc­tion in ac­tiv­i­ty un­til such time they have a clear­er view as to what the fu­ture holds and that is the same for every­body.”

Pro­man al­so said yes­ter­day it is look­ing to un­lock sub­stan­tial planned in­vest­ment in the form of plant turn­arounds.

The com­pa­ny not­ed: “Giv­en the tur­bu­lence in glob­al oil and com­mod­i­ty prices and the im­por­tance of the en­er­gy sec­tor to the na­tion­al econ­o­my, col­lab­o­ra­tion across the whole val­ue chain will be vi­tal to weath­er this cri­sis, and en­sure the con­tin­ued con­tri­bu­tion of Point Lisas dur­ing this crit­i­cal pe­ri­od for our coun­try.”

It said glob­al­ly, the im­pact of COVID-19 has re­sult­ed in a sig­nif­i­cant de­cline in both de­mand and pric­ing for petro­chem­i­cal prod­ucts and it does not ex­pect its de­ci­sion to shut a plant to have any im­me­di­ate im­pact on its em­ploy­ee head­count.

Enill al­so in­sist­ed that un­less there is a re­bal­anc­ing in glob­al prices, he does not see a way for­ward at cur­rent prices and com­pa­nies will have to take ac­tion to do work on their plants and wait it out.

Asked if this would not sig­nif­i­cant­ly hurt the NGC and if it will lead to it go­ing to Gov­ern­ment for a bailout, Enill said the com­pa­ny had enough cash on hand at this point in time.

“But ab­solute­ly, it is al­so a hit on every­body else’s bot­tom line so NGC is op­er­at­ing in­side of that sec­tor and so yes NGC is go­ing to be af­fect­ed by com­mod­i­ty prices and the re­turns it can get from the busi­ness it­self. Ab­solute­ly! I think the group and the ba­sis of the group con­sol­i­da­tions and group ef­forts, we are go­ing to be able for some time to still con­tin­ue to op­er­ate and man­age the re­sources with­out hav­ing to go to the Gov­ern­ment, any of those things yet.”