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Petrochemical sector crucial to our economic prosperity

Published: 
Monday, September 3, 2018
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Black flags line the perimetre fence of Petrortrin's Trinmar operations in Port Fortin earlier today, following Prime Minister Dr Keith Rowley's announcement that the Petrotrin Pointe-a-Pierre refinery will be sold last night.

In just over a month, the country’s financial year comes to an end and the Minister of Finance will find that the energy sector has grown in 2018. This growth has taken place on the back of continued increase in natural gas production which has had the effect of increased production downstream commodities and increased export from Atlantic LNG.

In fact, the Minister of Finance recently revealed that for the first half of the year the country had already collected 800 million more from the petrochemical sector than it had for the first six months of fiscal 2017.

He said, “Drilling deeper into the figures, in the petrochemical sector, collection of corporation tax has moved from $371 million in the period October 2016 to April 2017 to $1.2 billion in the period October 2017 to April 2018, an increase year-on-year of $835 million.”

Oil prices are also expected to assist the Minister of Finance because even though crude output is down by close to seven per cent by prices have averaged more than 25 percent higher than was budgeted.

In his mid-term review of the economy the Minister of Finance told the Parliament, “Accordingly, the energy sector is well poised to meet the demands of the downstream sector over the near-term horizon thereby supporting our medium-term growth recovery. Further ahead, access to additional gas from Venezuela will generate substantial opportunities for strengthening and supporting our economy. The pick-up in the energy sector is having a knock-on effect on growth in the non-energy sector where that sector is projected to break even in 2018, after years of decline, with growth estimates (for the non-oil sector) in 2019 of 1.2 per cent rising to 2.9 per cent in 2020. These improving growth forecasts are welcome in the context of the lacklustre performance of the economy over the 2013 to 2017 period.”

Since then Shell has announced the start up of production from both its Starfish field and its Dolphin extension fields that together will add 300 million standard cubic feet of gas per day to their daily output, leading to additional gas for both Atlantic and the downstream producers.

In a recent press release the company said it had achieved first gas from one of its developments in the East Coast Marine Area (ECMA). Shell delivered first gas from its first well in its Dolphin Extension Campaign ahead of schedule. The Dolphin development will consist of three production wells when completed.

“Our Starfish development, which achieved first gas earlier this year, and Dolphin development projects were both accelerated following the acquisition of Chevron’s assets in the ECMA which gave us full operation of the upstream value chain.”

Economist Dr Roger Hosein said told Business and Money that while the government should be happy about the extra gas that is going to be available for both downstream and LNG, he warns on the LNG side that the prices are likely to remain depress as the US ramps up production of the commodity.

He said the T&T government had to be aware of the supply side imbalance in LNG.

While there are those who it is the upstream producers and LNG that drive the energy sector, in many ways it is really the downstream sector that is the mainstay of the economy.

Consider this: it is the downstream petrochemical companies that are responsible for the purchase of close to 40 percent of the country’s natural gas. This means that the gas produced by the upstream companies like bpTT and Shell require a market. Without the downstream companies like MHTL or Methanex or even CNC a large part of that market is gone.

The Government has depended heavily on billions of dollars in dividend payments from the National Gas Company. The NGC makes most of its money from the sale of natural gas to the downstream companies. Therefore it is the downstream sector that is a major part of government’s ability to earn taxes and dividends from the NGC.

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