By Kimberly Ramkhalawan
kramkhalawan@caribmagplus.com
On April 1, many in the Trinidad and Tobago energy sector would wake up to the announcement that yet another plant closure was looming at the country’s Point Lisas’ Industrial Estate. For those whose income is dependent on these plants, it would be much better if it were an April fool’s prank. But the letter written by Claus Cronberger, managing director of Proman Limited was yet another one highlighting the perilous road Trinidad and Tobago has been continuing along since 2002, which may lead the once largest gas producing nation in the Caribbean, see the death of its downstream energy sector.
Proman Limited, a Swiss-based company which owns five methanol companies in Trinidad, announced that it would be putting its Methanol Holdings Trinidad Limited (MHTL)M4 and M5000 plants in idle mode immediately, while its M2 and M3 will continue to run on gas from De Novo. In Trinidad and Tobago, there are seven methanol plants in total, of which four are currently not in operation. According the Energy Ministry, when combined, both plants are said to have a producing capacity of over 2,470,000 metric tonnes of methanol annually.
Citing a drastic increase in NGC’s (National Gas Company, a state-owned enterprise) gas prices for the month of April as its reasoning behind the shutdown, the company said this change made it “economically unsustainable to continue its operations”. The move comes after the company held talks in February with NGC for a short-term gas contract extension for March to facilitate continued operation of plants while discussions continued. It added that it had reached the end of its flexibility on “contract price, terms and conditions after engaging with the NGC and the government” for some time now.
In response, the NGC said it was working with the operators of MHTL to secure a mutually acceptable agreement, and that it will continue to honour its contractual obligations for the supply of gas to MHTL under its other gas sales contract.”
Prior to this, in 2018, Proman would cause a stir in the sector, when its gas company, De Novo, came onboard as the first local upstream company to operate an offshore gas field, becoming the fifth gas producer in the country, joining the likes of EOG, BPTT, Shell and BHP. The company did this in an effort to curtail any gas shortage it was foreseeing, by tapping into the idle field, Iguana, located west of Trinidad and Tobago, which was abandoned since the 1980s. Proman invested over US$250M in De Novo back in 2016, transforming the idle fields into something profitable, as a means of taking action rather than waiting for the gas supply situation to get worse. The company had done so even while its M1 methanol plant and the Melamine 2 plant were idle, also due to the gas shortage, while it was also forced to shut down its Caribbean Nitrogen Company (CNC), an ammonia plant when NGC refused to supply it natural gas. This was something also as a direct result of continuous logger heads between state owned NGC and its gas prices, resulting in a three-month stalemate back in 2018. The company had even gone on record stating that expansion was not on the cards in Trinidad and Tobago, since it was no longer the top producing ammonia state in the world, and was instead eyeing investments in Mexico and the US state, Texas, where it owns over 100 natural gas wells. This only ended when a new agreement was negotiated allowing for a long-term gas supply to be secured.
Proman isn’t the first to shut down its plants on the popular Industrial Estate in Trinidad. In 2019, YARA, a Norwegian company, which owns another ammonia plant, shut down one of its three plants it operates. Shortly after, in less than six months, its Trinidad partners closed a second plant, Tringen I, in July 2020. The reason for its closure, a breakdown in negotiations with NGC over its gas prices. The Yara plant had contributed five per cent of ammonia production with an annual output of 270,000 tonnes.
2020 also saw the closure of Nutrien, another ammonia plant. However, this company cited the slump in global ammonia prices for its coming down.
These closures also mean that more workers are placed on the breadline and a sector burgeoned with skilled workers are losing avenues to earn their income as the downstream sector continues to shrink.
The present rate of gas production marks the lowest it has ever reached in sixteen years.
Currently the natural gas yields have been lower than 3.110bn standard cubic feet per day (Bscf/D) and Energy Minister Franklin Khan does not think production can return to four billion cubic feet per day (bcf/d) until 2025, when the Loran Manatee Field comes on stream, a field Trinidad and Tobago shares with its neighbouring Venezuela.
The remedy to this gas shortage was said to have been stated in the National Gas Master Plan which was put forward in 2015 by Poten and Partners, a UK firm hired by the previous administration for the project. In its pages, the firm while underscoring the decline in gas supply since 2002, it urged suppliers to develop and supply their own gas resources to the market. Something Proman did, when it created De Novo as its exploration and production company for sourcing its gas supply.
It added that new exploration had to be undertaken at maximum if Trinidad and Tobago was to ensure it met the “economic realities of the upstream sector and its end markets.” But it also meant that government was required to sufficiently incentivize the sector to maintain performance among its players. Proman chief executive officer, David Cassidy has stated that getting the De Novo project going, proved quite difficult than times gone before, as it has become more bureaucratic than it used to be, as forming De Novo, 70 different permits with 16 government agencies has to completed.
TT’s Former Energy Minister and current consultant to Guyana’s Local Content Advisory Panel, Kevin Ramnarine, in response to the statement issued by Proman’s Managing Director, said “there must be an understanding of the gas value chain and its relation to taxation and royalties, and a willingness by players along the chain, (including the Government) to compromise such that the redistribution of value allows for all to survive”.