Home' Trinidad and Tobago Guardian : October 24th 2013 Contents OCTOBER 2013 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG3
Chief editor-business: ANTHONY WILSON
Editing and design: NATASHA SAIDWAN
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On Friday last, Norway's global
fertiliser producer, Yara,
announced that it and German
chemical giant BASF were
"evaluating a possible joint
investment into a world-scale ammonia plant
at the United States Gulf Coast."
While the four sentence news release did
not disclose critical details such as the size of
the investment, the equity split between the
partners, the size of the plant or its location,
the release triggered some internal alarm bells.
Why, I wondered, was Yara, a company that
operates three ammonia plants on the Point
Lisas estate, looking to build a world-scale
ammonia plant on the US Gulf Coast and not
looking to expand its production in T&T at
its existing plants or build a world-scale ammo-
nia plant here?
Was this an example of a current investor
in T&T's petrochemical industry opting to
locate a plant in the US to take advantage of
the explosion of shale gas there?
Are Yara and BASF opting to locate their
world-scale plant in the US because they per-
ceive that the price and availability of natural
gas make the Gulf Coast a more favourable
location than T&T?
Have blue-chip, potential foreign investors
in T&T's energy sector been put off of con-
sidering T&T as an investment location for
new plants by the gas curtailment issues that
affected the country's energy sector for the
last two years?
Despite the renewed efforts to find and
monetise new T&T sources of natural gas led
by BP, British Gas and others, are there lin-
gering concerns about the long-term avail-
ability of natural gas in T&T at prices that
will be competitive to the US Gulf Coast in
the long term?
Have foreign investors been put off con-
sidering T&T as an investment location for
new petrochemical plants by the PNM "policy"
which indicated a preference for going down-
stream of ammonia, methanol and urea rather
than allowing companies to establish world-
scale plants here producing these "primary"
Do potential foreign investors have concerns
about the approval processes and the possibility
that their reputations may be sullied by the
activism of the environmental lobby---as was
the case with Alcoa, the US aluminium giant
that was rebuffed in its attempts to locate a
smelter here in the last decade?
Do these potential foreign investors have
concerns that a future government may cancel
a project that is at an advanced stage of plan-
ning---as the People's Partnership adminis-
tration cancelled the Alutrint project in 2010?
If T&T cannot convince existing investors
such as Yara---which was known as Norsk
Hydro until 2004 and whose history in T&T
dates back to 1966 when it began construction
of an ammonia plant on the Point Lisas indus-
trial estate---to make large incremental invest-
ments in downstream petrochemicals, is there
hope of attracting new investors?
When I raised some of these concerns with
a local energy expert, I was told that a decision
to invest in a new plant in the US may not
necessarily be because T&T is less competitive
than the US in terms of gas supply and pricing.
I was also told there are many factors that
petrochemical investors take into consideration
before making location decisions for billion-
dollar investments. Some of these factors
include transportation costs and proximity to
the large markets for downstream petrochem-
But, at the end of the day, companies make
investment decisions based on calculations
with respect to return on their investment
and if there is a perception that the return on
investment for the US Gulf Coast is likely to
be higher---all things considered---than for
T&T, then the US will get most of the new
It is also obvious that Yara and BASF would
have done a global scan of potential investment
locations and weighed locations based on that
Given their prior location here, it seems to
me that if T&T's gas was competitively priced
and there was clarity with regard to the supply
of gas for more than a decade down the road,
Point Lisas would at least have been consid-
It is also worthy of local contemplation the
fact that more than 40 years after T&T began
to export ammonia---which is a key ingredient
in fertiliser---there is still significant impor-
tation of finished fertiliser (which is called
That means that in the 40 plus years we
have had an ammonia industry, we have not
been able to put capital, entrepreneurship or
skills in place to develop a fertiliser industry.
This dysfunction, which has been noted in
this space previously, means that T&T is not
really adding maximum value to its existing
The Government, of course, is uniquely
placed to change this paradigm that has trou-
bled Caribbean economies for centuries.
In the same way that the Ministry of Energy
has provided incentives for upstream produc-
tion, it can also provide incentives for investors
who want to go further downstream of ammo-
nia, urea and methanol.
In the same way that those incentives for
upstream production have resulted in renewed
exploration activity aimed at finding more oil
and gas, it is quite likely that incentives linked
to incremental investment in new downstream
production will lead to new money being
pumped in to the local economy.
An incentive programme---and some calrity
on the gas supply issue---may cause companies
like Yara and PCS to think again about expand-
ing their operations here.
Positive incremental investment decisions
would mean thousands of construction jobs,
hundreds of high-paying permanent jobs as
well as (eventually) new sources of revenue
and diversification within the energy sector.
What is needed is an independent study on
T&T's petrochemical competitiveness that
would guide the policy framework and the
And then the Government should go out
and tell the world that T&T's petrochemical
industry is once again open for expansion.
In October 1990, according to a 2011
paper by Mark Salina, Norsk Hydro
acquired the 49 per cent stake in the
two Tringen ammonia plants from the
US conglomerate WR Grace.
The Government was then the
majority 51 per cent shareholder in
these two plants and the State's
ownership stake in Tringen is currently
held by National Enterprises Ltd.
Is Point Lisas losing
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