DIVERSIFICATION OLD TALK: AN EXAMPLE

Post date: Mar 15, 2021 10:24:12 PM

Since August 1988 the Ministry of Finance and the Economy in its Draft Medium Term Programme 1989-1991 stated that one (1) of the projects planned to stimulate activity in the Oil and Gas sector was the production of: -

“Plastic and Chemicals, including melamine and associated downstream plastics processing plants…” With respect to the downstream plastic processing plants Nothing was Established! Fast Forward to 2008, some 20 years ago later, a leading technocrat from the National Energy Corporation (NEC) wrote in a feature article published in GASCO news Vol. 21, No1 March 2008:

“The thrust of the Government of Trinidad and Tobago (GORTT) is to develop the second and third derivatives from natural gas. The polyolefin industry is one industry and has been identified for development as it is viewed as a building block for expansion for the local plastics manufacturing sector. To this end the GORTT is considering a proposal for a Gas to Polypropylene (GTPP) as one of the project to achieve the desired expansion in the plastic sector.” (The Development and Growth of Propylene by Merlyn Rennie Browne, Team Leader Business Development. NEC)

In the article, the energy technocrat pointed out that propylene is derived from crude oil and natural gas. One of the main sources of propylene is steam cracking of naphtha obtained from the distillation of crude oil. Naphtha cracking yields both propylene and ethylene in a ratio of one third propylene to two thirds ethylene. In 2006 about 64 % of worldwide propylene production was obtained by way of Naphtha cracking.

The technocrat also stated in the article that: - “The product from a PP plant is in the form of resins. PP resins are a transformed into useful products by a wide variety of processes and their products” For example, the process of extrusion produces Fibres, carpets, slit tape, non-woven fabrics, apparel, cordage, pipes, film, adhesive tapes. labels, flower wrap and textile packaging.

The process of injection moulding which includes the input of propylene is responsible for the manufacture of a wide range appliances, automotive products and general consumer products."

According to the technocrat: “Externally PP is used in front and back bumpers, fenders, grills, wheel arches, tailgate and rocker panels. Internally PP is used for the dashboard, instrument panel, arm rest, door panel and the various fluid containers."

The article went on to list the general consumer’s products as: Luggage; Outdoor Furniture; Portable Coolers; Crates; Buckets; House Wares; Toys; Rigid Packaging. Finally, with the application of Blow Moulding process,” PP is used to make sauce, shampoo bottles, household chemical bottles and medical bottles.”

Such an impressive downstream industry picture did not result in the adoption of the manufacturing sector diversification option! Instead the political directorate chose the old colonial plantation model. It was business as usual! In other words, some 80% of our Natural Gas Reserves were allocated to Atlantic LNG trains 1,2,3 & 4 i.e. 9.7 trillion cubic feet for trains 1, 2,3 & 6.5 trillion cubic feet for ALNG4 making a grand total of 16.2 trillion cubic feet.

It needs to be pointed out that in early 2002 the official Natural Gas Reserves according to consultants Ryder and Scott were 25.1 trillion cubic feet. The remaining 8.9 trillion cubic feet of gas were likely to be needed for current domestic consumption i.e. industrial plants located in the Point Lisas Industrial Estate and Trinidad and Tobago Electricity Commission etc.

Undoubtedly the political directorate chose the old colonial plantation model of economics which exports most of the raw material (i.e. natural gas in liquefied form) to the core economies like the USA and Spain. This natural gas is then used to produce high valued products like previously outlined by the NEC technocrat.

The receiving terminals for LNG during the early phase of production were:

1. Lake Charles, Louisiana, USA; Elba island, Georgia, USA; Cove Point, Maryland USA; Everett Massachusetts, USA; AES Andres terminal Dominican Republic; Peñuelas, Puerto Rico; Bilbao Spain; Huelva, Cartagena Barcelona Spain

The Economic Analysis unit of the Labour Advisory Bureau is fully aware that a local plastics industry exists, however it is heavily dependent on imported resins making it vulnerable to its suppliers. Furthermore, the industry’s production leads to the leakage of foreign exchange which is scarce and becoming more and more expensive as foreign exchange reserves continue to fall!

What conclusion can we draw from this case in the Local Energy Sector?

The economy of Trinidad and Tobago remains stuck in the old colonial plantation model of economics. It continues to display the muscovado bias with most of the Natural Gas Liquids exported to the core economies in liquid form to facilitate the transport of the commodity to its destination. in essence, Trinidad and Tobago economy can be described as a modern oil/natural gas plantation economy. It is clearly business as usual not structural and institutional transformation.

(Economic Analysis Unit of the Labour Advisory Bureau)