After collapse of negotiations with Sabic and Sinope Govt pursues other investments for petrochemical projects

Government says it is pursuing other potential investments for petrochemical projects following the collapse of negotiations with Saudi Basic Industries Corp (Sabic) and China Petroleum & Chemical Corp (Sinopec) for construction of a $5.3 billion methanol complex in this country.

A statement from Sabic/Sanopic over the weekend said the parties could not reach agreement on the fundamental issues of natural gas price and the terms of supply and had mutually agreed to suspend negotiations. This development comes just over a year after the consortium was selected as the preferred bidder for the project in a competitive bidding process. 

In a January 17 letter to the Ministry of Energy, Sabic-Sinopec indicated that should the circumstances change it would be “interested to pursue renewed discussions with the objective to invest in manufacturing of value added chemicals and plastics in your country..” The ministry said in a news release yesterday that development of an integrated methanol and downstream processing facility remains an integral part of government’s plans to go further downstream of methanol, including production of derivative methanol chemicals, polyethylene and polypropylene. All these projects would rely heavily on natural gas as a feedstock.

The ministry said it is now seeking a more favourable partnership that would facilitate these development goals. When the companies announced last February that they had started negotiations to build the complex, they said the process would not be binding to either side until final agreement was reached. At that time Sabic-Sinopec did not set a timeframe for the final agreement and did not indicate the capacity of the plant which was to produce methanol and then convert it to olefins.

Larry Howai, who was not yet Finance Minister at that time, speaking in his capacity as chairman of the National Gas Company (NGC), said then that he expected agreement within a three-month deadline that Cabinet had given to the two parties. The understanding was that if the parties could not reach an agreement in that timeframe, the NGC would move on to the second highest-placed bidder. Other companies that bid for the project included Texas-based acetyls producer Celanese; Methanol Holdings Trinidad Ltd (MHTL); Integrated Chemicals Co Ltd (ICCL) of the USA, in partnership with Mitsubishi of Japan and Neal and Massy of Trinidad and Tobago; and Saudi International Petrochemical Co, Mitsui & Co and Daicel Chemical Industries of Japan.

The project became mired in controversy within months of the start of talks after the ambassadors of the United States and Japan wrote to the Government to express concern that companies from their countries were bypassed in favour of the Saudi/Chinese consortium. There were also concerns that the price for gas being offered by the consortium was 36 per cent lower than the price the NGC wanted for its gas—less than $1/MMBtu. The proposed project called for 225m cubic feet/day of natural gas. A source close to the negotiations said the consortium had doubts about whether the country could provide enough gas for the project. T&T supplies roughly 70 per cent of all US methanol imports, but that percentage is likely to be reduced significantly in the next few years because of a restarted unit in Texas and plans for restarting or building new plants in the US.