The significant growth in the petrochemical sector has been a major contributor to what Finance Minister Colm Imbert describes as a turnaround of the economy.
According to the budget documents, the sector grew by nine per cent and with petrochemicals now lumped with manufacturing in the non-oil sector, it is the major reason for the growth of the non oil revenues.
In the Review of the Economy 2018 it was revealed that during the October 2017 to June 2018 period, the petrochemical sector in T&T performed favourably, registering significantly higher production and export levels of both methanol and urea. Notwithstanding a minimal decline in the production of ammonia during the current fiscal period, exports exceeded that of the same period one year ago.
It read, “An increased supply of natural gas to local downstream industries accounted for the overall improvement in the sector’s performance.
“During the first nine months of fiscal 2018, methanol production surged to 3,985.9 thousand metric tonnes, from 3,411.1 thousand metric tonnes in fiscal 2017 (an expansion of 16.9 per cent). This was the first such increase since 2014. Consequently, methanol exports jumped by 18.8 per cent to 3,972.9 thousand metric tonnes, from the 3,345.1 thousand metric tonnes in the corresponding fiscal 2017 period; and the 17.1 per cent contraction recorded in that year.”
Like methanol the report revealed that total output of urea amounted to 480.3 thousand metric tonnes ; 11.1 percent higher than 2017. Urea exports also rose sharply by 22.5 percent, to 512.4 thousand metric tonnes, from 418.1 thousand metric tonnes.
The review of the economy continued: “Increased methanol and urea production during fiscal 2018 can be attributed to significantly fewer plant downtime days when compared to the fiscal 2017 period, due to the more severe natural gas supply limitations previously experienced.”
This is no doubt good news for the country as natural gas production continues to rebound and with it petrochemical production. However the methanol figures could have been significantly better had all the country’s installed capacity been operational.
While the Minister of Finance is correct to be pleased with the increased natural gas supply and the concurrent knock on effect the reality is that one of Methanol Holding’s methanol plant remains idle for a lack of gas.
This is installed capacity and the government and the NGC have been silent on whether there will be a solution to the ongoing issue. Even as this plant remains shut in, the Minister of Finance boasted about the coming on stream of another methanol plant.
He told the Parliament, “The methanol to dimethyl ether (DME) complex, being established by Caribbean Gas Chemical Ltd, with majority ownership by Mitsubishi Chemical Holdings Corporation, is at an advanced stage of completion with commercial operations slated for the first quarter of 2019. The complex has a capacity of 1.0 million metric tonnes of methanol per annum and 20,000 metric tonnes of DME per annum and exports will generate substantial foreign exchange and economic activity in the area.”
The completion of the plant is good news for the country but the issue is whether T&T has the 150 methanol standard cubic feet of gas that it will require on a daily basis for its optimal operation? Even if the gas is found, will it be at the detriment of other plants and does that not open the door to the NGC being accused of conflict of interest, since the NGC is a shareholder in the new methanol plant and yet it is the very NGC that will determine which plant gets gas and how much?
In the case of ammonia production the review of the economy demonstrates how damaging the shutting off, of the gas by the NGC to the CNC ammonia plant was to the country and the Finance Minister.
The review read, “ Following an increase of 1.1 percent during the period October 2016 to June 2017, production of ammonia decreased slightly by 1.5 percent in the 2017/2018 period, with output dipping from 3,739.3 thousand metric tonnes to 3,681.9 thousand metric tonnes.
The fall in production was precipitated by a temporary production stoppage at the Caribbean Nitrogen Company’s (CNC) plant in January 2018, consequent to a breakdown in negotiations over a new natural gas supply contract. “
It adds, “During the four-month January to April period (which encompasses the nine weeks during which the plant was closed and the subsequent ramp-up in production), CNC produced 72,233 thousand metric tonnes. This was 51.1 per cent lower than the 147,737 thousand metric tonnes the company produced during the same period in 2017.”
If anything the budget and its supporting documents demonstrate the power of the petrochemical sector in adding value to natural gas production. It shows that the country has to be careful to manage the sector in such a way that competitiveness and good sense are crucial going forward.