The petro­chem­i­cal sec­tor has been a life jack­et for the T&T econ­o­my ad­mit­ted Fi­nance Min­is­ter Colm Im­bert as he pre­sent­ed the mid-year bud­get re­view last Mon­day.

Im­bert told the Low­er House that the in­crease in gov­ern­ment rev­enue for the first six months of the fis­cal year was due to high­er than an­tic­i­pat­ed re­ceipts of tax­es up­on in­comes and prof­its of $3.2 bil­lion.

“If we drill in­to the fig­ures what we find is that the good per­for­mance on tax­es on in­comes and prof­its was due to high­er than pro­ject­ed re­ceipts col­lect­ed from oth­er com­pa­nies and that cat­e­go­ry in­cludes the petro­chem­i­cal com­pa­nies which are prov­ing to be a sig­nif­i­cant, let’s call it a life jack­et for T&T, due to the con­sid­er­ably in­creased prices of petro­chem­i­cals,” Im­bert said.

He added, “For those of us who mon­i­tor these things one would see that the prices of petro­chem­i­cals, am­mo­nia, methanol, urea, etc have dou­bled, tripled and quadru­pled over the last cou­ple years and the tax­es from the petchem com­pa­nies is a di­rect cor­re­la­tion with the prices of the end prod­uct, the petro­chem­i­cals, the methanol and so on. So we have had a sig­nif­i­cant boost from the petchem sec­tor.”

US am­mo­nia prices in­creased from US $487 per tonne in 2020 to US $746 per tonne in 2021, in­creas­ing US $259 per tonne, or a 53 per cent in­crease. The last time the an­hy­drous am­mo­nia price was above $746 per tonne was in June 2014.

The price for am­mo­nia in the US mar­ket is now over US $1,400 a tonne.

One week ago prices were US$1,425 per tonne and has been at that lev­el since the start of May.

The sto­ry is not as stel­lar with methanol but still the prices are ex­treme­ly strong, all good news for the coun­try and the Min­is­ter of Fi­nance.

Ac­cord­ing to one of the world’s largest methanol pro­duc­er Methanex, its North Amer­i­can methanol prices have moved from US $276 in Sep­tem­ber 2020 to US $639 per tonne as of May 1, 2022.

Im­bert’s rev­e­la­tions of the petro­chem­i­cal sec­tor as be­ing a life raft are in keep­ing with the ar­gu­ment that were con­tained in the Poten and Part­ners Nat­ur­al Gas mas­ter plan which ad­vised gov­ern­ment that the coun­try earns more per mol­e­cule of nat­ur­al gas from the petro­chem­i­cal sec­tor than it does from LNG.

There­fore, ac­cord­ing to Poten and Part­ners, pri­or­i­ty for nat­ur­al gas should go to the down­stream sec­tor and not LNG.

The gov­ern­ment tax­es the petro­chem­i­cal sec­tor at 35 per cent cor­po­ra­tion tax­es, high­er than the 30 per cent it charges oth­er com­pa­nies, and it is the same as what the banks pay.

Un­like the banks, how­ev­er, the petro­chem­i­cal com­pa­nies al­so pay their tax­es on prof­its to the gov­ern­ment in US dol­lars, sig­nif­i­cant­ly help­ing gov­ern­ment with much need­ed for­eign ex­change and the gen­er­al small open econ­o­my with the hard cur­ren­cy need­ed to re­main sus­tain­able.

Fur­ther with the ex­cep­tion of the Caribbean Gas Chem­i­cals Methanol Plant the petro­chem­i­cal sec­tor is ma­ture and, there­fore, not en­joy­ing tax hol­i­days.

High petro­chem­i­cal prices al­so helps gov­ern­ment by get­ting high­er tax­es at the well head from the nat­ur­al gas pro­duc­ers as some of the well head prices are in­dexed to petro­chem­i­cal prices.

It al­so helps the NGC by in­creas­ing its prof­its, lead­ing to high­er gov­ern­ment tax­es on prof­its and larg­er div­i­dend pay­ments.

While no one ex­pect these ex­tra­or­di­nary prices to re­main so in the long term, the CEO of Methanex John Flo­ren is pre­dict­ing con­tin­ued strong prices for methanol for the next two quar­ters or for the rest of T&T’s fi­nan­cial year.

Flo­ren was asked dur­ing an earn­ings call in Cana­da what is the re­al val­ue of methanol at the mo­ment and said, “I think there are a num­ber we al­ways watch one is the MTO (methanol to olefin) that’s the one on the af­ford­abil­i­ty curve, the one that gets im­pact­ed first.

“In the high-priced en­er­gy en­vi­ron­ment that we are see­ing to­day, that is al­so very good for olefin prices be­cause they are ob­vi­ous­ly pay­ing more for naph­tha to­day than they would have been this time last year, so that slipped in­to the cost curve nice­ly, so the MTO pro­duc­ers are run­ning like 95 per cent to­day so un­less you saw a huge cor­rec­tion in olefin prices then that would mean en­er­gy prices falling quite a lot from where they are to­day I think we are go­ing to be fine on the de­mand side.”

He ac­knowl­edged that there is a lot of neg­a­tive sen­ti­ment in the mar­ket with the cur­rent lock­down in Chi­na and the in­fla­tion­ary pres­sure but said when Methanex looks at its sup­ply/de­mand bal­ance it feels de­mand is hold­ing up.

“MTOs are run­ning well, high en­er­gy prices make the oth­er en­er­gy ap­pli­ca­tions very, very at­trac­tive for methanol, so we ex­pect de­mand to con­tin­ue to grow and we are watch­ing it very close­ly and we have vis­i­bil­i­ty through­out the globe…and we are not see­ing any im­pact on de­mand.”

He said there are like­ly to be a num­ber of planned out­ages and point­ed to the fact that there was al­ready a plant in T&T that is down. He not­ed this will lead to a con­tin­ued favourable sup­ply/de­mand bal­ance for Methanex.

Prices have been be­yond the cost curve and part of that is due to con­strained glob­al Methanex sup­ply.

Flo­ren told the earn­ings call that Methanex saw the restart of its idled plant in Trinidad as one area of growth in pro­duc­tion for the com­pa­ny and was hope­ful that it could be restart­ed.

Methanex CEO said the com­pa­ny want­ed to en­sure it would get gas at a price that it can sus­tain through­out the cy­cle and was in dis­cus­sions with the gov­ern­ment to fi­nal­ly restart op­er­a­tions.

Flo­ren re­vealed that the gov­ern­ment has told Methanex that it want­ed to see all of the down­stream pro­duc­tion and was hope­ful that it could get a gas deal once ne­go­ti­a­tions were con­clud­ed be­tween the Na­tion­al Gas Com­pa­ny and the up­stream sup­pli­ers.

He said, “Our fo­cus will be on get­ting our idle plants in New Zealand and Trinidad restart­ed. So that will be our growth be­cause they are idle to­day....Right now the up­stream and the gov­ern­ment are ne­go­ti­at­ing, their con­tracts are com­ing up this year and you know un­til that ne­go­ti­a­tion gets fi­nalised I would say it is un­like­ly that Ti­tan will se­cure a gas con­tract to al­low that to restart, but those con­tracts will be ne­go­ti­at­ed this year and the gov­ern­ment has told us they want to keep all the down­stream alive and they just need to have their con­tracts ne­go­ti­at­ed with the up­stream and that is on­go­ing.

“We are con­tin­u­ing to di­a­logue with the gov­ern­ment and the task is to get gas at an eco­nom­ic price that al­lows us to op­er­ate Ti­tan through the cy­cle and that’s what we are fo­cused on.”

CLICK FOR MORE NEWS