On May 14, I wrote an ar­ti­cle ti­tled “Save the petro­chem­i­cal sec­tor.” It was meant to urge the Row­ley ad­min­is­tra­tion to see the great dan­ger the coun­try was in and how our prized pos­ses­sion had been brought to its knees by both the ex­ter­nal en­vi­ron­ment and the do­mes­tic gas sit­u­a­tion.

It was a few days af­ter the own­ers of plants op­er­at­ing on the Point Lisas In­dus­tri­al Es­tate asked the gov­ern­ment’s Roadmap to Re­cov­ery Com­mit­tee for tem­po­rary sup­port in nat­ur­al gas pric­ing, as the val­ue of methanol, urea and am­mo­nia had plum­met­ed to un­sus­tain­able lev­els.

I was there­fore hap­py to hear the Prime Min­is­ter, Dr Kei­th Row­ley and lat­er on, En­er­gy Min­is­ter Franklin Khan re­veal that the up­stream nat­ur­al gas pro­duc­ers were now sell­ing gas to the Na­tion­al Gas Com­pa­ny (NGC) at re­duced prices.

Khan told a land dis­tri­b­u­tion cer­e­mo­ny in Point Fortin: “As a mat­ter of fact, the up­stream­ers have re­cent­ly re­duced their price of nat­ur­al gas to the NGC but still it is not suf­fi­cient to keep some of the plants in op­er­a­tion. So the com­pa­nies have de­cid­ed to shut in the plants for main­te­nance.”

Khan said the de­mand for am­mo­nia and methanol was low be­cause of the im­pact of COVID-19 and the com­modi­ties were be­ing sold at be­low the cost of pro­duc­tion. This he rea­soned is re­spon­si­ble for sev­er­al plants be­ing “tem­porar­i­ly” shut down at the Point Lisas es­tate.

“Luck­i­ly we have com­pa­nies who are here for the long haul and they plan to ride through the de­pres­sion. They have main­tained all their staff and are await­ing on the prices to re­bound.”

He not­ed that am­mo­nia and methanol were at their low­est lev­els in years; av­er­ag­ing be­tween US$200 to US$250 per met­ric tonne pre COVID-19.

He said due to sur­plus in glob­al ca­pac­i­ty and the im­pact of COVID-19, there is a sig­nif­i­cant re­duc­tion in in­dus­tri­al de­mand for am­mo­nia and methanol lead­ing to the de­pressed prices.

“Some lo­cal com­pa­nies have tak­en de­ci­sions to shut-in some plants and de­fer turn­arounds dur­ing the COVID-19 pan­dem­ic. This has al­so im­pact­ed plants in oth­er lo­ca­tions out­side of Trinidad such as Chile as de­mand has fall­en and stor­age lev­els are high.

“In spite of what I have just said, T&T is for­tu­nate be­cause of prop­er pol­i­cy, plan­ning and re­la­tion­ship build­ing,” Khan told the dis­tri­b­u­tion cer­e­mo­ny.

“The ad­di­tion of new sup­plies in­to the mar­ket in 2020 and the coro­n­avirus pan­dem­ic, which has ex­ac­er­bat­ed the al­ready weak­ened mar­ket, will se­vere­ly con­strain the de­mand for methanol in the short term to medi­um term. Fu­tures prices for methanol for 2020 range from US$215 per met­ric tonne to US$250 per met­ric tonne,” Khan ex­plained.

You see, this is the kind of ole talk that I warned we should do with­out if we are to tru­ly solve the cri­sis at Point Lisas.

I have, on nu­mer­ous oc­ca­sions, had to fact check the Min­is­ter of En­er­gy and the Prime Min­is­ter, who are giv­en to re-writ­ing his­to­ry. And, in so do­ing, pre­tend away the fun­da­men­tal prob­lems fac­ing the sec­tor.

Less Mr Khan mis­leads us, the re­al­i­ty is that the COVID-19 pan­dem­ic has caused sig­nif­i­cant re­duc­tion in de­mand and a fur­ther col­lapse of glob­al prices.

But most com­pa­nies ac­cept that when a vac­cine or cure is found the world will re­turn to a much high­er lev­el of de­mand for the com­modi­ties.

What is un­like­ly though is that the prices of the US $700 per met­ric tonne of am­mo­nia or methanol will re­turn.

You see the ad­vent of shale gas and the ubiq­ui­tous na­ture of the hy­dro­car­bon has led to over-sup­ply and there­fore it calls for com­pet­i­tive gas prices and ef­fi­cient op­er­a­tions.

T&T’s nat­ur­al gas prices are no longer com­pet­i­tive both in terms of unit cost and in vol­ume. COVID-19 or no COVID-19 that will not change.

Planes will re­sume fly­ing but un­like what is be­ing sold to the coun­try by the Prime Min­is­ter, they will con­tin­ue to choose avi­a­tion fu­el as their fu­el of choice and not methanol.

It is this re­al­i­ty why Mr Khan and the Gov­ern­ment have now al­most for­got­ten the fa­mous Hous­ton trip and re­moved it from their talk­ing points.

Sev­en­ty days ago I warned that there is a great dan­ger in group­think and be­liev­ing your own rhetoric.

Group­think is es­sen­tial­ly the prac­tice of think­ing or mak­ing de­ci­sions as a group, re­sult­ing typ­i­cal­ly in un­chal­lenged, poor-qual­i­ty de­ci­sion mak­ing.

It is one of the chal­lenges that the coun­try has faced since in­de­pen­dence when we took a po­si­tion that the need for par­ty pol­i­tics meant the death of in­de­pen­dent thought and speech.

I wrote then: “Even be­fore the ad­vent of the COVID-19 cri­sis the lo­cal petro­chem­i­cal sec­tor was reel­ing from the rel­a­tive­ly high price of nat­ur­al gas and the con­tin­ued cur­tail­ment of the main feed­stock in­to the pro­duc­tion of am­mo­nia and methanol. As far back as 2011, the petro­chem­i­cal sec­tor was com­plain­ing about nat­ur­al gas short­ages that was im­pact­ing its av­er­age cost of pro­duc­tion and the re­li­a­bil­i­ty of op­er­a­tions.”

I not­ed that in 2018, in ne­go­ti­a­tions with the up­stream com­pa­nies who in­sist­ed they could no longer sell gas at the prices the NGC had been ac­cus­tomed to and the hikes had to come be­fore they would un­lock in­vest­ments, the NGC stood its ground in­sist­ing it could not agree to the prices be­ing de­mand­ed and the sit­u­a­tion reached a po­si­tion where con­tracts were com­ing to an end and the up­stream would be un­der no com­mit­ment to sup­ply gas to the NGC.

En­ter Prime Min­is­ter Dr Kei­th Row­ley, En­er­gy Min­is­ter Franklin Khan and Min­is­ter in the Of­fice of the Prime Min­is­ter Stu­art Young.

They jet­ted off to Hous­ton in what they used to call the fa­mous Hous­ton Trip, a phrase that has now been ap­par­ent­ly re­moved from their lex­i­con.

The PM met with the lead­ers of the up­stream com­pa­nies and when the meet­ing was over the NGC signed an agree­ment that is now prov­ing to be un­work­able.

The Gov­ern­ment, led by Min­is­ter Young, rub­bished the con­cerns raised by this col­umn call­ing those rais­ing the is­sue of the price as arm chair ex­perts who did not know what was ne­go­ti­at­ed, but as they say: time is longer than twine, and now ac­cord­ing to the chair­man of the NGC, the Gov­ern­ment has had to re­turn to the ne­go­ti­at­ing ta­ble.

It is on­ly group think that could al­low the Min­is­ter of En­er­gy to de­fend a price that he must know was not work­able and it shows why politi­cians need to stay out of com­mer­cial arrange­ments.

But we were warned about this even­tu­al­i­ty as econ­o­mist, Dr Ter­rence Far­rell did a sig­nif­i­cant study about the state of the petro­chem­i­cal sec­tor and pre­dict­ed it could be lost if as a coun­try we do not make the right choic­es.

In his study he said: “The down­stream petro­chem­i­cals in­dus­try is at a point of in­flex­ion. In a sce­nario of scarce and ex­pen­sive gas feed­stock, the in­dus­try is set for de­cline and pos­si­ble demise. En­er­gy pol­i­cy has not ad­e­quate­ly ad­dressed the chal­lenges which the in­dus­try now faces.”

In an in­ter­view on Tues­day, Chair­man of the NGC Con­rad Enill ad­mit­ted that for now at least, the low­er prices are tem­po­rary.

Sure­ly this is not a long term so­lu­tion to a mar­ket struc­tural­ly changed as I pre­vi­ous­ly in­di­cat­ed.

Enill could not com­mit to pass­ing on the sav­ings to the down­stream com­pa­nies say­ing the NGC had ab­sorbed many of the hikes from the up­stream com­pa­nies and what the state-owned en­ter­prise want­ed was a price that the en­tire val­ue chain could live with and even­tu­al­ly pros­per with.

Enill is look­ing in the right di­rec­tion. If on­ly Khan et-al can be more fo­cused on solv­ing the prob­lem and less on rewrit­ing his­to­ry.