7 months ago

ENERGY Caribbean Yearbook (2013-14)

local content Successive

local content Successive Trinidad and Tobago governments have tried to maximise local content in the energy sector, with varying degrees of success. The greatest progress has been made with support services for oil or gas exploration and development. But many of the 450 local service companies have complained that foreign service providers are being favoured in the current round of drilling activity by international companies. Local platform fabricating was a success story, and nine such structures were built at the La Brea fabrication yard between 2004 and 2010. But that activity seems to have come to a standstill, as companies opt for tying back new producing wells to existing platforms. Energy minister Kevin Ramnarine has spoken of his vision for Trinidad and Tobago as “a major international energy services hub.” This will require the “structured development of local companies along the entire value chain of the energy sector, from the upstream to the midstream to the downstream and possibly even beyond that.” With the lack of work at home, some local services firms have already expanded internationally, especially in their own region and more recently to African states such as Ghana and Nigeria. The ministry is anxious to establish relations with countries entering the oil and gas business. Explorationists and producers are urged by the ministry to use as much local content as feasible; so are major downstream gas-based industrial plants. Construction of Atlantic’s LNG trains was a landmark in this regard; a budget was agreed for the amount of work to be awarded to local contractors. Legislation may be forthcoming to enforce a percentage of local content in all energy projects. The energy ministry says it is currently reviewing the local content and local participation policy and framework, prepared as long ago as 2004, “which will guide the way for the drafting of local content legislation.” This “will seek to strengthen the existing local content policy, while allowing for consistent application” reflects the importance placed on local content 20 Energy issues Government may prescribe level of local input Companie The government should “enact into law the local content policy for the oil and gas industry as soon as possible” in the ministry’s 2012-2016 strategic plan. The ministry has a broad definition of local content in the energy sector, encompassing not only firms offering traditional services like drilling, cementing, casing, open hole logging, wireline, coil tubing and so on, but also companies involved in upstream oil and gas exploration, production Countries and finance. Locally-owned upstream “independents” have been disappearing in recent times, on the back of take-overs by foreign firms, an area that may need special attention. Lennox Sirjuesingh, president of the Trinidad and Tobago Local Content Chamber, formed in early 2011 primarily to promote more local involvement in energy, regards legislation as long overdue. He has called on the government to “enact into law the local content policy for the oil and gas industry as soon as possible.” The allocation of gas for downstream use is also being used as a tool to encourage the wider embrace of local content. Early in the life of the present government, the ministry laid out a gas allocation policy in which local content accounted for 15 points out of 100 when an applicant’s eligibility for a gas supply was scored. Local content in gas-based activity was defined in relation to ownership, local debt/equity financing, engineering design, feasibility studies, project management, technical skills, the number of permanent jobs per unit of capex, number of permanent jobs for operations, peak employment during construction, and average employment during construction. Legislation may be forthcoming to enforce a percentage of local content in all energy projects

Energy GAS-BASED DEVELOPMENT issues Will there be enough gas for everyone? Trinidad and Tobago’s gas-based heavy industrial development programme has been in abeyance since the opening of Methanol Holdings’ ammoniaurea-melamine 1 plant at Point Lisas in 2010. But it is springing back to life in 2013, with a number of new projects identified and moving forward. The only question hanging over this resurgence is whether there will be enough gas to service all the new entrants. The most recent Ryder Scott audit (2011) identified 13.2 trillion cubic feet (tcf) of proven gas reserves, which are almost all spoken for by the existing petrochemical and steel industries at Point Lisas and the four LNG trains at Point Fortin. Another 6 tcf of probable gas reserves could be transferred to the proven category with minimal drilling and reservoir reappraisal. Compani The “unrisked exploratory resources” of 30.4 tcf are probably the best insurance for the future. As Ryder Scott’s managing senior vice president, Herman Acuna, points out: “This shows upside potential for gas and sustainability of supply, which is really what you should be looking at.” Energy minister Kevin Ramnarine takes a bullish view of the matter, pointing to bpTT’s discovery of around 1 tcf of new gas with its Savonette 4 well in late 2012, which doubled the recoverable reserves in the field to 2 tcf. He expects the 2012 gas reserves audit to be “positively impacted” by this development. The largest of the forthcoming projects is the Mitsubishi/ Neal and Massy Holdings methanol to dimethyl ether plant. Ramnarine has confirmed that “the Ministry of Energy and Energy Affairs and the National Gas Company are in dialogue with an established natural gas supplier in Trinidad and Tobago who has advised that it could have gas available by 2016.” The projects spearheading the revival of gas-linked industrial development are: Methanol-to-DME The US$800 million Mitsubishi/Neal and Massy Holdings plant will convert 100 mmcfd of gas into one million tonnes a year (t/y) of methanol, of which 140,000 t/y will be diverted to the production of dimethyl ether (DME), a versatile chemical that can be used in power generation, transport, cooking and heating, among other things. It is considered a major move in the ministry’s policy of going as far as possible downstream in the gas-based chemical chain. (This was also the case with AUM 1, which delivered melamine Countries for a range of light manufacturing applications.) The government has been offered a 20% share in the methanol/DME project and has agreed to buy the 140,000 t/y of DME at cost price, to supply to investors who want to use it in connection with other investments. Mitsubishi, Neal and Massy and the other shareholders will make their money in the methanol market. Formaldehyde/Melanine This Chemtech cluster will obtain formaldehyde from methanol and melamine from ammonia, justifying its gas-based status on those grounds. It is envisaged as a US$200 million investment. The downstream products will be melamine-based resin, oriented strand board and veneer. Steel Neal and Massy Holdings and Metal Dom (of the Dominican Republic) propose a steel plant and rolling mill that will require 45-55 mmcfd of gas for heating purposes. The estimated cost is US$116 million. The plant will produce billets, reinforced bars, flats and angles, a very diversified range for a Caribbean steel plant. LNG The Gasfin (Luxembourg)/National Energy Corporation “midscale” LNG plant at La Brea, southwest Trinidad, will cost US$400 million, with a 500,000 tonne-a-year capacity; it will need about 70 mmcfd of gas. It has been named Project Constantine after Trinidad and Tobago’s late legendary cricketer. One major downstream initiative has been temporarily delayed: MHTL’s AUM 2, the successor to AUM 1. This is a larger project than its predecessor – 595,350 t/y of ammonia, 903,900 t/y of urea, 33,000 t/y of ammonium sulphate and 39,600 t/y of melamine. It has been costed at US$1.9 billion. A final investment decision has been held up by a dispute between the government (now the majority holder since it assumed ownership of the 56.53% formerly held by C L Financial) and the minority 43.47% shareholder Consolidated Energy, a consortium of three German firms, MAN Ferrostaal, Helm and Proman. The matter has gone to arbitration. A resolution is expected before the end of 2013. Another potential downstream project has been abandoned. Saudi Arabia’s SABIC and China’s Sinopec formed a joint venture but failed to reach an agreement with the government on gas pricing and supply. The partners were to have invested in two major complexes. Methanol to olefins would have opened the way to the production of propylene, polypropylene and plastics, while methanol to petrochemicals would have led to acetic acid, acetic anhydride and pharmaceuticals like asprin. energycaribbean YEARBOOK 2013/14 21

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