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A REVIEW OF
DOWNSTREAM NATURAL
GAS PORTFOLIO
SELECTION CRITERIA IN
TRINIDAD AND TOBAGO
Edward Bahaw and Sherry-Ann S. Ganase
Conference on the Economy
October 13th -14th 2016
The University of the West Indies
St. Augustine
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AGENDA
Background to downstream industries
Review of downstream portfolio selection criteria
New realities facing the natural gas industry
Historical analysis of downstream sub sectors:
Efficiency – Output per bcf
Employment – Headcount per bcf
Value – Output value per bcf
Conclusions/Recommendations
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BACKGROUND TO
DOWNSTREAM INDUSTRIES
Upstream Gas discoveries
State led downstream investments
Technical and marketing challenges
Structural adjustments and privatization
FDI led downstream investments
Financial incentives
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UPSTREAM NATURAL GAS
Discoveries
Late 1960s
1970s
1990s
Early 2000s
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NATURAL GAS MONETIZATION
Previously vented/flared – no value
Government policy - create value
Development of markets – export oriented
Investments in infrastructure
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BEST USE OF OUR
PETROLEUM RESOURCES, 1975
Government conference
Expansions/Upgrades to:
Power Generation
Ammonia and urea production
Petroleum refining
Cement production
Establishment of export based plants for:
Alumina
Iron and steel
Methanol
LNG 6
Source: Boopsingh et al, 2014
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DOWNSTREAM SELECTION CRITERIA
Energy efficiency
Local content
Employment
Value added
Environmental Impact
See Baisden (2002), Julien (2005), Baisden
(2007), Jobity (2013) and Boopsingh (2014) 7
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STATE PROJECTS IMPLEMENTED
Electricity expansion
Production of DRI (ISCOTT, 1980)
Ammonia (1977, 1981, 1984, 1988)
Urea (1983)
Methanol (1984)
Cement (1984)
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SUBSEQUENT DOWNSTREAM
DEVELOPMENTS
State Divestments (Late 1980s to early 1990s)
Product related price formula (1987)
Methanol (1993, 1996, 1998, 1999 & 2004)
Ammonia (1996, 1998, 2002, 2004 & 2005)
LNG (1999, 2002, 2003 & 2005)
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PROPOSALS BY GCA 2002
Methanol & Ammonia - no additional expansion
LNG - continued expansion
Gas-to-liquids - limited state support
Iron ore reduction & Aluminum - employment
Power - Price electricity to recover costs.
Ethylene and polyethylene - world-scale plant
LPG - Continue Caribbean sales expansion
CNG - development of Caribbean markets
Added value products: private investment
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Source: Oil and Gas Journal, 2004
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RECENT PRIVATE SECTOR PROPOSALS
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Downstream Output Company
Methanol, propylene & polypropylene Lurgi/Basell
Ethylene & Polyethylene Westlake
Ammonia, UAN, Melamine MHTL, AUM I (2010)
Ammonia, urea, ammonia sulfate MHTL, AUM II
Steel Essar
Bitumen to Synthetic Crude Reliance Industires
Limited
Aluminum Smelter ALCOA
Aluminum Smelter Alutrint
Calcium Cholride Carisal
Maleic Acid Isegen
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UPSTREAM NATURAL GAS –
NEW REALITIES
No major gas discovery since early 2000s
Depleted larger fields
Declining natural gas production in T&T
Higher cost of upstream production
Smaller fields
Aging infrastructure
Lower condensate yields
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UPSTREAM NATURAL GAS –
NEW REALITIES
Needs relative higher gas prices for feasibility
• Availability of cheap natural gas in other
countries
• Investments in primary petrochemicals globally
• Not business as usual
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1200
1250
1300
1350
1400
1450
1500
1550
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual Natural Gas
Production (BSCF)
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15
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Natural Gas Utilisation in T&T
LNG Ammonia and Ammonia Derriavative Methanol Power Other
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16
0
100
200
300
400
500
600
700
800
900
1000 Ja
n-0
6
Au
g-0
6
Mar
-07
Oct
-07
May
-08
Dec
-08
Jul-
09
Feb
-10
Sep
-10
Ap
r-1
1
No
v-1
1
Jun
-12
Jan
-13
Au
g-1
3
Mar
-14
Oct
-14
May
-15
Dec
-15
Ammonia and Methanol Prices
Price of Ammonia (US$/Tonne) Price of Methanol (US$/Tonne)
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GAS UTILIZATION EFFICIENCY
Output capacity – tonnes per annum
Throughput capacity – bscf per annum
Efficiency - tonnes per bscf
17
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16,500
17,000
17,500
18,000
18,500
19,000
19,500
20,000
20,500
L1 L2 L3 L4
LNG Gas Utilisation Efficiency
tonnes/bscf
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19
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11
Ammonia Gas Utilization Efficiency
tonnes/bscf
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20 0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
M1 M2 M3 M4 M5 M6 M7
Methanol Gas Utilization Efficiency
tonnes/bscf
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EMPLOYMENT/UNIT OF GAS
Number of employees
Throughput capacity – bscf per annum
Employment per bscf
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22
0.0
1.0
2.0
3.0
4.0
5.0
6.0 L
1
L2
L3
L4
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
M1
M2
M3
M4
M5
M6
M7
Employment per bscf
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OUTPUT VALUE/UNIT OF GAS
Value of output – based on average destination
price
Natural gas utilization
Output value per bscf
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24
0
2
4
6
8
10
12
14
16
18
L1
L2
L3
L4
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
M1
M2
M3
M4
M5
M6
M7
Output Value
(US$M per bscf)
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25
0
500
1000
1500
2000
2500
Ethylene Maleic anhydride
Melamine resins
Propylene Propylene polymers and other
Olefins
Anhydrous Ammonia
Methanol
Price Trends of Natural Gas Derivatives
2011 2012 2013 2014 2015
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CONCLUSIONS
Declining domestic natural gas production
Evolving international market conditions
Varying – efficiency, employment and
value per unit of resource
Several projects have been cancelled
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RECOMMENDATIONS
Further downstream – greater value in terms of
employment and revenue
Plant conversion vs new plants
Opportunities – gas supply contract renewals
Risks - High price correlations
Product based natural gas pricing
Risks – to midstream, and upstream
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Thank You!
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