Energy Minister Franklin Khan has said T&T’s downstream industry has not been forgotten or neglected as it continues to be a significant earner of foreign exchange and has a critical part to play in the country’s economic recovery.
However, the downstream industry operates in a highly elastic global environment where prices are dictated primarily by demand, he said.
Khan was speaking at the virtual launch of the T&T’s Energy Chamber Energy Conference 2021 which was held yesterday.
The minister noted that prior to 2014, commodity prices for ammonia and methanol were at an all-time high.
In 2012 for example, ammonia prices reached as high as US$670/MT for the Caribbean Ammonia Spot Price, and US$700/MT for the US Tampa Spot Price, Khan said.
Since then, he noted, prices have fallen to just over US$200/MT, adding that similarly, for methanol, in 2014, FOB US Gulf Coast prices were in excess of US$400/MT, before falling steadily from there.
“The Government has no control over the global demand for commodities such as methanol and ammonia. We are at the mercy of the market,” Khan added.
He reiterated that the issues within the petrochemical sector are not solely due to COVID-19, but have certainly been exacerbated by the reduction in demand resulting from global lockdowns.
“In a low price environment, it is only reasonable to expect that companies would do what is in their best interest and reorganise their portfolios to cut costs, operate more efficiently, and support global prices for the commodities that they produce.,” he added.
This reorganisation of portfolios has come at a cost to T&T, the minister said.
“In Nutrien’s Q3 2020 earnings release, the company noted that the September closure of the O3 plant is expected to enhance the competitiveness at the Trinidad site, and that the three other plants at the site are running at normal production levels.
“Similarly, in Yara’s Third Quarter 2020 presentation, it was noted that the company’s overall improved energy efficiency was driven in part by the closure of the Yara plant,” Khan said.
In this new environment, some of these old, inefficient plants cannot survive he said, adding that this is the reality of operating mature plants in a low price environment
Khan said the Government was doing everything within its means to strengthen the natural gas value chain.
He added that in the natural gas business, more than almost any other industry, the upstream, midstream and downstream are inextricably linked, and each of these sectors is a complex, moving part in its own right.