Last week, the Trinidad Guardian reported that approximately 350 employees were to be laid off as the Canadian fertilizer company, Nutrien moved to indefinitely shut down its operations in the twin-island republic.
It was a stunning reversal for both Trinidad and the fertilizer company and a cautionary tale for Guyana on the medium to long-term projections for all segments of the petroleum industry here. Nutrien has pointed to restricted access to port facilities – following a dispute over charges – and the lack of a reliable and economically viable natural gas supply as the reasons behind its pulling up stakes.
The numbers associated with Nutrien’s impending departure from Trinidad are staggering. According to the Trinidad Guardian report, the company produced ammonia and urea for export markets around the world. Its four plants had a capacity of 1.79 million tonnes. Average monthly ammonia exports from Trinidad before the shutdown totalled 85,000 tonnes while urea was at 55,000 tonnes per month. It employed around 600 persons. Its substantial assets will now lie idle at the Point Lisas industrial estate.
“Beyond the direct loss of jobs, the shutdown is expected to affect contractors, suppliers and service providers linked to the operation, while Trinidad and Tobago stands to lose valuable export earnings and foreign exchange generated by the facility”, the report added.
While gas availability at a reasonable cost was a major factor in Nutrien’s decision, the Guyana Government may believe that it has sufficient access to both associated and non-associated gas from producing wells in the Stabroek Block. Guyana has embarked on a hugely expensive gas to energy project which is two years behind schedule and is already pushing ahead with a similar project for the Berbice area. For its part ExxonMobil is proposing the development of the Longtail project which will be its first exclusively gas enterprise. It is projecting to extract a whopping 1.2b cubic feet of gas per day in addition to 250,000 barrels of condensate per day.
None of those figures however provide a shield to poor planning or no planning. It will be years from now before it will be known at what price the gas will be available to Guyana and the disposition of the global market as underpinned by the volatile geopolitical situation. The devastating attack by the Houthis in the last few days on the King Khalid International Airport in Riyadh, Saudi Arabia is a case in point.
It would make perfect sense for Guyana’s growing fertilizer needs to be met from a domestic operation where the price of energy makes this feasible and to be able to export to the Caribbean, Central America and other markets in proximity. However, getting the sequencing of gas production and the petroleum economics aligned will likely prove challenging.
The Ali administration is yet to present to the public an overarching plan that justifies two proposed gas to energy plants based on domestic and industrial demand. The starkest evidence of the failure of the Ali government is reposed in two facts. First, it projected the completion of the first gas to energy project by the end of 2024 and even before that. This required ExxonMobil to complete a pipeline that would bring the gas to shore. In keeping with that schedule, ExxonMobil completed the project and the pipeline has been sitting for two years in the Atlantic without a single cubic foot of natural gas moving through it. In the meanwhile, it has had to undergo costly maintenance and there have been reports about the need for repairs.
If one were to total up the additional cost to the country from having to utilise generators on two Turkish power ships and other units from overseas compared to the projected lower generating cost from the gas to energy project for 300 MW then one gets a sense of the bill that should be sent to the PPP and its project managers, money that is profligately bleeding from the oil revenues flowing into the country.
The second damning indictment of President Ali’s promises is the failure to deliver a halving of energy prices to all users. The cost of that failed promise is also enormous and with the last quarter of the year well underway there is no assurance that there will be any amelioration anytime soon.
Given the failure by the government to renegotiate the 2016 Production Sharing Agreement, its delinquency in not establishing a Petroleum Commission and the extended delays in the gas to energy project and delivery of its benefits there is little confidence in its handling of the sector.
Before it proceeds with the second gas to energy project and devises plans for a fertilizer plant and associated infrastructure the government must articulate a vision for the sector and recruit recognized experts to draw up a framework placing sufficient weight on the various risks that might face the industry in 20 to 30 years and without leaving the country and its people with stranded assets while producers simply monetize crude oil and gas.
Discussion