Will these Mega-projects fly?
PORT SPAIN
Trinidad & Tobago Express
Petroleumworldtt.com
03 09 09
WITH many of the existing downstream-energy plants experiencing temporary closures or cutbacks in production, huge question marks hang over other planned mega-projects. Every one of these projects is at least two years behind its original timeline schedule. The majority of these new plants are slated for construction on NEC's Point Lisas South and East Estate (PLSEE), and its Union Estate and Labidco Estate in La Brea. In spite of crowing by Government that these new plants will be constructed, there is little evidence that will happen anytime soon.
At PLSEE, which, if completed, would be the biggest industrial and manufacturing estate in the Caribbean (1,724 hectares, or three times the size of the existing Point Lisas estate), stunted sugar cane and wild grasses can be seen for miles. Thus far only the natural gas pipelines, which will provide energy for plants like Essar Steel and Westlake Chemicals, have been laid. A complex network of roads and other infrastructural works that are pre-requisite for the establishment of the estate, remain stuck in the design mode.
According to NEC's superintendent (engineering, designs and construction), Mr. John Jones, the corporation is still awaiting its CECs from the EMA. Its controversial port project that has been reduced from a nine-berth commercial port to a three-berth dedicated port, is still at the public-consultation stage. "We expect to have all our infrastructural designs for the estate completed by the end of March," Jones told Business Express. "Our application for a CEC for the PLSEE remains in the hands of the EMA. As soon as we get the green light, we expect to proceed with constructing roads, and installing water lines and electricity."
Asked if the NEC, a subsidiary of the NGC, has the funds to proceed with some $300 million in infrastructure, Jones said finance for the new estate will come from Government's PSIP. Jones was in no position to say if, based on Government's cutbacks in its 2008-09 Budget, the PLSEE would fall victim to lower capital expenditure. At a presentation to the Trinidad and Tobago Petroleum Conference back in February 2008, Vernon Paltoo, NEC's business development manager, spoke of TT$60 billion in expenditure on new projects between 2008-2013. Of that whopping sum, $2 billion is estimated for infrastructure ($290 million in PLSEE), $1.8 billion for port development, and $55 billion for "proposed projects and process plants".
Paltoo added: "Engineering designs and EIA are expected to be completed by mid-2008. Construction is anticipated to start in mid-2008 after receipt of the CEC, with construction to be completed in 2010." Clearly, the NEC under-estimated the time it would take to secure its CECs for different projects. A major casualty of Government's ambitious industrialisation plans is expected to be the Oropouche Reclamation Project. The Government came up with the idea of a 1,400-hectare "island" off Oropouche to accommodate, among other mega-plants, the huge Alcoa aluminium smelter that was all but chased away from Cap-de-Ville. This project was scheduled to start construction of the first phase in 2009, and had a projected completion date of 2012. The cost, according to Paltoo, stood at TT$1.4 billion.
At this point Alcoa seems to have abandoned the idea of any smelter in Trinidad. The biggest aluminium conglomerate in the world, Alcoa announced a US$1.2 billion loss in Q4, 2008. It is cutting global production by 18 per cent, cutting its workforce by 13,500, and reducing capital expenditure in 2009 by 50 per cent. Aluminium prices rocketed to US$3,350 per tonne in July 2008, only to plunge to $1,400 in January 2009. Unless there is some miraculous revival in metals' prices, Alcoa will hardly re-consider establishing an aluminium plant in Trinidad. That will put paid to Government's planned $1.4 billion "fantasy island". For a project of this magnitude to be viable it would need investments of
the kind Alcoa was prepared to make at Cap-de-Ville.
Also hanging in the air is the PLSEE $660 million port project. In Paltoo's presentation one year ago, he said contracts had been awarded for dredging the navigational channel and turning basin, as well as for building the piers. Construction was expected to start in mid-2008, with a completion target-date of the end of 2009. Reality is the NEC is yet to receive its CEC to begin work. If or when it does, it would be lucky to complete the three-berth port in 18 months. Experts suggest a minimum of two years for such a project to move from start to finish.
The port project impacts directly on another mega-plant, the Essar steel mill-another controversial plant that has met with strong protests against its construction, mainly from environmentalists, fishermen and some residents of the Claxton Bay area. The Essar mill is designed to have its feedstock transported directly from the port to the plant, using an overhead conveyor system. This means that the plant cannot go operational until the port is operational. Essar, unlike PLSEE, has secured its CEC. According to a spokesperson for the Indian company, all its design works and environmental mitigation systems have also been approved.
With the collapse of the Clico Investment bank (CIB), which was said to be the main financier of the Essar US$2 billion plant, rumours ran rife that the company had abandoned its 2.5 million tonnes per annum integrated mill. But the Essar spokesperson denied this. He said CIB was one of several banks the company was holding discussions with regarding financing the plant. "Yes, our company held discussions with CIB regarding financing the project. But we also held similar talks with other banks, in Trinidad and elsewhere. We are confident we can raise the capital necessary to establish the steel mill." Asked if current low steel prices (on average 60% lower than what they were six months ago) might be a disincentive to continuing with the project, he said they will not. But he admitted that a fully-functional port was critical to the plant's operations.
In the construction phase, infrastructure works on the estate, and construction of the steel mill and port would provide as many as 5,000 jobs. As the main multi-storied structures come closer to completion, a similar number of construction workers would face the breadline-unless these new projects come on stream. Meanwhile, construction continues apace at Methanol Holdings' (MHTL) UAN plant. A source at MHTL said the collapse of CL Financial and Government's intervention has not affected CL's methanol operations.
"We expect the ammonium component of the UAN complex to be operational by the end of March," said the source. This is the first plant of its kind in Trinidad, configured to produce urea ammonium nitrate, a liquid fertiliser. The melamine component should come on stream shortly thereafter, he said. Its cost was put at US$1.6 billion, which may have increased since construction started before the steep rise in prices of steel and other construction materials. MHTL's other methanol plants, including the M5000 that was down for repairs last year (when methanol prices were high), are operating at optimal levels in spite of low methanol prices. "We are accustomed to the cyclical nature of the markets for commodities like oil, methanol and fertilisers. We have been through this before we expect prices will rebound sometime soon. We just need to ride out the bad patch."
Work is continuing apace on the aluminium dock and storage yard at La Brea, NEC's Jones said. A 300-metre pier and a nearby 15-hectare storage yard will cost TT$250 million and will cater exclusively for Alutrint, the state-owned aluminium plant. Construction of that plant is also behind schedule, but Jones said he expected work to begin soon. "That plant has all its approvals," he added. "They did some test piling, so they should be ready to start construction soon." Alutrint, which is financed by China's Exim Bank, will cost US$800 million (NEC's estimate; another Alutrint source quoted a cost of US$400 million). The plant will be fully owned by the TT Government following the pullout of Sural of Venezuela, which had committed itself to 40 per cent ownership. A problem Alutrint will face is Sural owns the technology meant to be used for certain components of the plant, and it was also committed to marketing the products. Meanwhile, some 100 workers from the Chinese firm that will build the plant have already taken up residence in La Brea.
Among other major projects that are at least 18 months away from start of construction is the Westlake Polyethylene Complex. This US$2.3 billion plant will be located not far from Essar's mill. Scheduled start of construction was set for late 2008, early 2009. If Westlake is to go ahead as planned, it would hardly meet its operational target-year, 2012. Then there is the Lurgi/Basell US$2.2 billion gas to polypropylene plant, which has been allocated 15 hectares of ex-Caroni lands north of the Plipdeco Estate. Rumours are rife, though, that Basell has encountered financial problems, and the future of this plant is doubtful.
There are several smaller plants that may also be affected negatively by the global financial crisis, which makes financing of billion-dollar projects a serious challenge. The Maleic Anhydride Complex, though small by comparison (estimated cost: US$75 million), seems to have been put on the back burner. The major problem with these ambitious, not to add super-expensive, projects, is when they were conceptualised as far back as in 2006, their planned end-products fetched record high prices on the world market. Also, construction material and general costs were much lower than they were in 2008.
Whether any or all of them will come to fruition will be determined in 2009. And it all hinges on the global crises, how soon the world's major economies will come out of recession. With the TT Government revenues expected to slide to much lower levels than in the past three years, the question can be asked: will these mega-projects fly?
Story
by
Raffique Shah
from Trinidad & Tobago
Express
Trinidad & Tobago Express
Wednesday, March 4th 2009
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