A aerial shot of the Point Lisas Industrial Estate.

On May 14, I wrote an article titled “Save the petrochemical sector.” It was meant to urge the Rowley administration to see the great danger the country was in and how our prized possession had been brought to its knees by both the external environment and the domestic gas situation.

It was a few days after the owners of plants operating on the Point Lisas Industrial Estate asked the government’s Roadmap to Recovery Committee for temporary support in natural gas pricing, as the value of methanol, urea and ammonia had plummeted to unsustainable levels.

I was therefore happy to hear the Prime Minister, Dr Keith Rowley and later on, Energy Minister Franklin Khan reveal that the upstream natural gas producers were now selling gas to the National Gas Company (NGC) at reduced prices.

Khan told a land distribution ceremony in Point Fortin: “As a matter of fact, the upstreamers have recently reduced their price of natural gas to the NGC but still it is not sufficient to keep some of the plants in operation. So the companies have decided to shut in the plants for maintenance.”

Khan said the demand for ammonia and methanol was low because of the impact of COVID-19 and the commodities were being sold at below the cost of production. This he reasoned is responsible for several plants being “temporarily” shut down at the Point Lisas estate.

“Luckily we have companies who are here for the long haul and they plan to ride through the depression. They have maintained all their staff and are awaiting on the prices to rebound.”

He noted that ammonia and methanol were at their lowest levels in years; averaging between US$200 to US$250 per metric tonne pre COVID-19.

He said due to surplus in global capacity and the impact of COVID-19, there is a significant reduction in industrial demand for ammonia and methanol leading to the depressed prices.

“Some local companies have taken decisions to shut-in some plants and defer turnarounds during the COVID-19 pandemic. This has also impacted plants in other locations outside of Trinidad such as Chile as demand has fallen and storage levels are high.

“In spite of what I have just said, T&T is fortunate because of proper policy, planning and relationship building,” Khan told the distribution ceremony.

“The addition of new supplies into the market in 2020 and the coronavirus pandemic, which has exacerbated the already weakened market, will severely constrain the demand for methanol in the short term to medium term. Futures prices for methanol for 2020 range from US$215 per metric tonne to US$250 per metric tonne,” Khan explained.

You see, this is the kind of ole talk that I warned we should do without if we are to truly solve the crisis at Point Lisas.

I have, on numerous occasions, had to fact check the Minister of Energy and the Prime Minister, who are given to re-writing history. And, in so doing, pretend away the fundamental problems facing the sector.

Less Mr Khan misleads us, the reality is that the COVID-19 pandemic has caused significant reduction in demand and a further collapse of global prices.

But most companies accept that when a vaccine or cure is found the world will return to a much higher level of demand for the commodities.

What is unlikely though is that the prices of the US $700 per metric tonne of ammonia or methanol will return.

You see the advent of shale gas and the ubiquitous nature of the hydrocarbon has led to over-supply and therefore it calls for competitive gas prices and efficient operations.

T&T’s natural gas prices are no longer competitive both in terms of unit cost and in volume. COVID-19 or no COVID-19 that will not change.

Planes will resume flying but unlike what is being sold to the country by the Prime Minister, they will continue to choose aviation fuel as their fuel of choice and not methanol.

It is this reality why Mr Khan and the Government have now almost forgotten the famous Houston trip and removed it from their talking points.

Seventy days ago I warned that there is a great danger in groupthink and believing your own rhetoric.

Groupthink is essentially the practice of thinking or making decisions as a group, resulting typically in unchallenged, poor-quality decision making.

It is one of the challenges that the country has faced since independence when we took a position that the need for party politics meant the death of independent thought and speech.

I wrote then: “Even before the advent of the COVID-19 crisis the local petrochemical sector was reeling from the relatively high price of natural gas and the continued curtailment of the main feedstock into the production of ammonia and methanol. As far back as 2011, the petrochemical sector was complaining about natural gas shortages that was impacting its average cost of production and the reliability of operations.”

I noted that in 2018, in negotiations with the upstream companies who insisted they could no longer sell gas at the prices the NGC had been accustomed to and the hikes had to come before they would unlock investments, the NGC stood its ground insisting it could not agree to the prices being demanded and the situation reached a position where contracts were coming to an end and the upstream would be under no commitment to supply gas to the NGC.

Enter Prime Minister Dr Keith Rowley, Energy Minister Franklin Khan and Minister in the Office of the Prime Minister Stuart Young.

They jetted off to Houston in what they used to call the famous Houston Trip, a phrase that has now been apparently removed from their lexicon.

The PM met with the leaders of the upstream companies and when the meeting was over the NGC signed an agreement that is now proving to be unworkable.

The Government, led by Minister Young, rubbished the concerns raised by this column calling those raising the issue of the price as arm chair experts who did not know what was negotiated, but as they say: time is longer than twine, and now according to the chairman of the NGC, the Government has had to return to the negotiating table.

It is only group think that could allow the Minister of Energy to defend a price that he must know was not workable and it shows why politicians need to stay out of commercial arrangements.

But we were warned about this eventuality as economist, Dr Terrence Farrell did a significant study about the state of the petrochemical sector and predicted it could be lost if as a country we do not make the right choices.

In his study he said: “The downstream petrochemicals industry is at a point of inflexion. In a scenario of scarce and expensive gas feedstock, the industry is set for decline and possible demise. Energy policy has not adequately addressed the challenges which the industry now faces.”

In an interview on Tuesday, Chairman of the NGC Conrad Enill admitted that for now at least, the lower prices are temporary.

Surely this is not a long term solution to a market structurally changed as I previously indicated.

Enill could not commit to passing on the savings to the downstream companies saying the NGC had absorbed many of the hikes from the upstream companies and what the state-owned enterprise wanted was a price that the entire value chain could live with and eventually prosper with.

Enill is looking in the right direction. If only Khan et-al can be more focused on solving the problem and less on rewriting history.