IT’S time for Point Lisas to evolve.
That’s the view of Prof Kenneth Julien, the man regarded as T&T’s energy czar and often credited with the development of the Point Lisas Industrial Estate.
And it was shared by industry stalwarts: retired permanent secretary in the Ministry of Finance, Andrew Jupiter, and Ian Welch, chairman of the Point Lisas Energy Association (PLEA) and former Nutrien managing director.
Welch described the situation as “urgent”.
The model, an amalgamation of varied industries utilising T&T’s natural resource, natural gas, in an estate serviced by a port which provides employment and revenue, is often referred to as the Point Lisas model.
“Our presence today at Point Lisas testifies to the fundamental change that has taken place in the world economy and in the economic balance of power. Here at Point Lisas sugar cane gives way to wire rods,” said the country’s first prime minister Dr Eric Williams at the sod-turning of ceremony of ISCOTT in 1977, which marked the beginning of the development of the estate as a natural gas hub.
The estate now spans 860 hectares and, according to its website, is home to approximately 103 companies involved in a range of activities.
While the model is now fabled, having served T&T for about four decades, the success has lost a bit of steam.
T&T, having monetised the nuisance by-product of oil to create an enviable industrial estate and the largest liquefied natural gas (LNG) plant in the western hemispehere in 1999, is running out of the now, more-favoured commodity.
In the last decade, the natural gas-using plants on the estate faced curtailments as the National Gas Company (NGC) struggled to meet demand with limited supply.
Prior to 2010, energy major bpTT had maintained “cushion gas,” which T&T would utilise if there were disruptions in supply.
That disappeared in 2010 when BP’s production dipped significantly.
The production dip was attributed to a change in the Government’s fiscal policy which stymied bpTT’s investment in T&T.
From 2010 to 2014, eight energy companies based in the Point Lisas Industrial Estate suffered combined losses of US$1,639,694,699.20 (or roughly TT$10 billion) because of irregular natural gas supply.
Then, plants in the estate started to be closed down: Mittal Steel (2016), MHTL’s M1 methanol (2017), Yara Ammonia ( December 2019), Methanex’s Titan Methanol (March 2020), MHTL’s M3 Methanol (April 2020), Nutrien 02 Ammonia (May 2020), MHTL’s M2 Methanol (May 2020) and Nutrien 01 Ammonia (June 2020).
The model base
“Let us remember there was no strategic plan for a Point Lisas model,” recalled Jupiter.
He said back in the 1970s, a certificate of environmental clearance wasn’t even in place.
“Flared natural gas was compressed free of charge by law from the east coast to be used in the generation of electricity at Point Lisas. Success commenced. That is simple. How do we now use natural gas? From simple products- ammonia and methanol using natural gas as a feedstock.
“Therefore natural gas was used as a feedstock for the petrochemical industry, starting with small capacity plants and emerging with largest capacity plants in the world. Availability of land, deep-water harbour, tax incentives, fast decision making by government and technocrats, skilled labour force and national pride to be successful. NGC, as a conduit to purchase gas from the upstream players, transport gas and sell the gas to downstream plants, clearly carrying out government’s policy.
“Therefore the model was based then on the availability of cheap gas, a deep-water harbour, availability of land and infrastructure, tax holidays, facilitation of government ministries. As a result, the model was developed incrementally building on success with less than one per cent of the gas reserves,” he explained.
The Express Business questioned whether the model remained relevant.
“To answer this question you need to look at the building blocks of the Point Lisas model:
• Availability of cheap natural gas—No;
• Tax holidays—No;
• Skilled labour force—Yes;
• Fast decision making—No.
The ingredients that allowed Point Lisas to be successful have dissipated,” Jupiter said.
He identified the following as the present challenge the model is facing:
1. Decreased volumes of natural gas from the upstream producers;
2.Increased price of natural gas from the gas producers;
3. No buffer gas;
4. Reduced price of ammonia and methanol on the international market;
5. Lower natural gas prices in the United States;
6. Increase in natural gas production in the United States;
7. Replacement of our petrochemical volumes by the building of plants in Louisiana and Texas
“Therefore NGC is unable to purchase and sell natural gas at a price to continue to sustain the Point Lisas model,” Jupiter said.
Need for Adjustment
Welch said the Point Lisas model is ”in urgent need of adjustment”.
“It needs commercial adjustment along the value chain, including some innovation and risk for the sustainability of the industry. The main issue is competitiveness as a result of lower feedstock prices in other jurisdictions where our products are sold. Trinidad has become the swing producer for some products,” he told the Express Business.
Welch noted that in addition to challenges the estate was facing, the Covid-19 pandemic caused a reduction in industrial demand, in particular, causing more supply/demand issues and further price decline.
Questioned on whether, he expects there to be more plant closures, he answered: “Yes I would expect more closures as the present model is not sustainable in today’s marketplace.”
Jupiter echoed this view.
“Covid has negatively affected the situation-lower prices for ammonia and methanol, a decrease in world demand for petrochemicals and lower natural gas prices. It is expected that more plants can temporarily be closed down and/or optimisation of plants,” said Jupiter.
The last petrochemical plant built in Point Lisas was the Ammonia Urea Melamine Plant (AUM) built by MHTL 2009.
“No new petrochemical plant at Point Lisas for 11 years. Clearly this model is no longer attractive,“ said Jupiter.
Welch observed: “Be aware also it is not all “doom and gloom” Trinidad still has some advantages to operating here.”
What will a future Point Lisas look like?
For Julien, the question seems simple- how do we add more value to what we have?
While market and market forces will direct how the petrochemical plants conduct its business, Julien said a major issue the Government is faced with is: are we going to have adequate gas to attract more plants?
“Government is not an investor in any of these plants. Presumably, these guys are going to be out there saving their own neck.
“The question the Government has to face - that it has worked well for us and we should do more of it. If we want to do more of it- where is the gas going to come from?” he asked.
By comparison, he said T&T was in a better position to deal with recession than in the 1980s because of the gas industries.
“Now we have a base. We are spending more money than we should but we have a good solid base. We’re doing all right. But the question remains whether we as a country make use of the period the way we should. For example, there are private sector people here, in no other business but trading. Are they investing? I don’t know if they are investing. I think our manufacturing sector is suffering so I don’t know the answer. What I know is that the energy sector has generated a lot of service industries but are there other industries which should be generating?”
In moving forward, Julien said the Government should put a lot of effort in finding investors who would be interested who would add more value to methanol and ammonia which the country now produces.
The goal: to go downstream by adding more value to the gas.
“Where does methanol end up? It’s an amazing building block for several things, which happen outside of T&T. You need to get investors to come add value here to methanol and ammonia,” he said.
Welch said while its difficult to deal with such a complex issue in short sentences, he offered these views on what he thinks the future would look like:
“A model where risk is given appropriate recognition. A model where all stakeholders along the value chain can make a reasonable return on their investment and be able to reinvest in Country, People, Plant and Equipment and in some cases grow the business.
“A model which is sustainable within the context of a finite resource. A model that recognises the fact that we have a cadre of world class companies in the sector. A model that is conducive to further investment, inclusive of initiatives around the environment (green Initiatives),” he said.
He noted that the Government has already engaged a consulting company to look at the model.
As for Jupiter?
“Accelerate bid rounds, drill more exploration wells, develop marginal fields, encourage downstream players to be involved in upstream. Encourage upstream players to be involved in downstream. Emphasis must be placed on reducing CO2 emissions and utilizing same for carbon capture storage and utilization, energy efficiency of petrochemical plants, to source cheaper gas externally and to explore the production of hydrogen,” he said.
Mittal Steel (2016)
MHTL ‘s M1 methanol (2017)
Yara Ammonia ( December 2019)
Methanex’s Titan Methanol (March 2020)
MHTL’s M3 Methanol (April 2020)
Nutrien 02 Ammonia (May 2020)
MHTL’s M2 Methanol (May 2020)
Nutrien 01 Ammonia (June 2020)