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Pt Lisas jobs threatened as natural gas prices rise

Published: 
Sunday, June 17, 2018

A report into the state of the energy sector by the Ministry of Energy and Energy Industries has warned that the high natural gas prices are threatening the viability of the downstream sector and consequently jobs at Point Lisas.

There have been rumblings at the Point Lisas Industrial Estate over the price and continued shortage of natural gas which some on the estate say are threatening the economic lifeblood of the country and may even lead to plants shutting down and hundreds of people losing their jobs.

The Sunday Guardian has obtained a copy of the ministry’s report which notes that apart from higher prices there is a concern about limited gas being sent for processing.

“Given their demands, recent gas contracts with upstream companies have been at significantly higher prices. These prices pose a challenge to both the NGC and the downstream companies. The situation is compounded by the preference of the upstream companies to provide gas for LNG rather than downstream industries. As a consequence, the future of our downstream industry is being jeopardised. The GORTT is currently reviewing our options that may include a gas allocation policy to ensure the sustainability of our downstream industries,” the report stated.

Well-placed sources in the downstream sector told the Sunday Guardian that on average a methanol plant spends about $1.7 billion (TT) a year to operate in T&T. That cost includes the price of natural gas, wages and salaries, capital expenditure, and taxes to the Government. In return, the average profit on a plant is about $210 million. However, if the price of gas increases by 20 to 25 per cent then the energy companies may make on average a profit of $140 million. This figure is before the companies pay any loans they may have and dividends to shareholders. It also includes retained earnings so that the company may further invest.

The downstream sector is considered one of the greatest achievements of the country because it has allowed T&T to use its natural gas and add value to it by making products like ammonia, methanol, urea, and melamine, all of which are either essential fertilisers or used in manufacturing. It has also made T&T the envy of many energy producing countries because this country is the largest exporter of ammonia in the world and the second largest exporter of methanol in the world.

It must be noted that the downstream sector contributes billions of dollars annually to the country. An example is Caribbean Nitrogen Company which revealed that on average it contributes more than $1 billion to the economy, inclusive of wages and salaries, taxes and payments for services like electricity and water.

The report said the upstream companies have made it clear that unless their rewards match the risks they are taking they will not be prepared to reinvest in searching, finding, and producing more oil and gas.

The report stated, “Notwithstanding the super profits achieved by the upstream companies, they maintain the following views.

1) That they share a disproportionate share of the rewards for the level of risk they take.

2) The maturity of T&T as a hydrocarbon province has been occasioned by greater sub-surface and geological risks without the commensurate reward.

3) NGC and downstream companies have benefited disproportionately in the returns accruing to the sector.”

Investors make more $$ in T&T than most other jurisdictions

The ministry’s report stated that the Government’s studies on the competitiveness of this country as a hydrocarbon province show that investors make more money in this country than most other jurisdictions like Brazil, Colombia, Ghana, Norway, and Nigeria.

The report also stated that while downstream producers are paying higher prices for natural gas in T&T, they are facing increased pressure from US producers who are benefiting from low gas prices due to the shale revolution.

“Considering the current market dynamics in the USA, where lower price shale is causing growth and self-sufficiency in the USA domestic petrochemical industry, producers in Trinidad and Tobago have been encouraged to actively seek alternative markets,” the report stated.

However, it was not all bad news as it noted the significant improvements in natural gas production, with a prediction of production levels reaching to 3.94 billion cubic feet per day by next year and 4.1 billion cubic feet by 2021. This, it said, could finally bring an end to what has already been seven years of gas shortages.

The report revealed, “Based on the current natural gas production forecast, it is expected that the current natural gas supply shortage will be minimised or even eliminated as upstream investment activities take place over the next five years. This will positively impact the downstream industries as they will be able to return to producing at higher capacities. A gas allocation policy is being explored to ensure that the future of the downstream industries is not jeopardised or made unsustainable by the expiry of contracts or increased natural gas prices, due to renegotiated contracts with upstream companies.”

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