Debate on Trinidad methanol project focuses on too-cheap natgas

09 February 2012 23:36  [Source: ICIS news]

A methanol plant in TrinidadHOUSTON (ICIS)--A political debate has erupted in Trinidad and Tobago over how the tiny country can make more money from methanol by giving a Middle Eastern producer a huge discount on natural gas, a US market source said on Thursday.

Saudi Basic Industries Corporation (SABIC) wants to build a $5.3bn (€4.0) methanol project in Trinidad that will include a methanol-to-olefins (MTO) plant and a methanol-to-petrochemicals unit.

What has touched off a government debate is that SABIC’s bid is based on getting what one newspaper editorial called a “a massive subsidy” from the government on the price of natural gas for the plants.

Energy Minister Kevin Ramnarine was quoted in the Trinidad Guardian this week saying the price SABIC wanted was 36% below the government’s cost for gas.

A US market source said the gas price SABIC wants is below $1/MMBtu. Front-month NYMEX gas futures closed Thursday at $2.48/MMBtu.

“Nobody in their right mind would even consider subsidising a foreign company when they won’t even do it for companies in their own country,” the source said.

SABIC did not return calls and emails regarding its proposal.

One methanol producer in Trinidad is based in the Caribbean country, Methanol Holdings (Trinidad).

Government subsidies received by methanol and ammonia producers in Trinidad generally come in tax breaks and tax holidays, the source said.

But producers do not get huge price breaks on the gas they buy from National Gas, which is the state-owned utility company, the source added.

Trinidad already has seven methanol plants with a total of 6.6m tonnes/year capacity, with much of the material shipped directly to downstream producers in the US.

SABIC’s project would be different because the new project would only make methanol to turn it into other downstream derivatives - petrochemicals such as acetic acid, or olefins such as ethylene and propylene.

Trinidad’s energy minister, Kevin Ramnarine, said in a speech earlier this week that the country must focus on linking its manufacturing plants to downstream production.

A US market source said Trinidad no longer just wants to make and sell methanol or ammonia, which are two major petrochemicals produced at its Point Lisas complex.

“There’s more value creation by going downstream,” the source said.

A newspaper report said the US Ambassador to Trinidad and Tobago, Beatrice Wilkinson Welters, wrote a letter to the government this week raising concerns about its possible acceptance of the SABIC proposal over competing bids that included US companies.

Texas-based Celanese was one of the companies that bid, according to news reports.

A US Embassy spokesman, Alexander McLaren, said Welters’ letter was a diplomatic communication and would not be released.

McLaren said the US State Department would send an email regarding Welters’ letter, but the email was not received by ICIS on Thursday.

($1 = €0.75)

By: Lane Kelley
+1 713 525 2653

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