Nitrogen+Syngas 371 May-Jun 2021
31 May 2021
Nitrogen and methanol in the Caribbean
CARIBBEAN
Nitrogen and methanol in the Caribbean
Gas availability and pricing continues to affect ammonia and methanol output from Trinidad, while Venezuela struggles with sanctions and political instability.
The Caribbean functions as an adjunct to the North American market for ammonia and downstream nitrates as well as methanol. Trinidad and Venezuela became important suppliers to the US market when US gas prices forced the closure of domestic nitrogen and methanol capacity during the 1990s, but the US shale gas boom has reversed this trend, and in the case of methanol turned the country into a net exporter at the same time that Trinidad and Venezuela face difficulties with production, via maturing gas reserves in Trinidad’s case and political disruption and sanctions in Venezuela’s
Trinidad
Although its oil production peaked in the 1970s, Trinidad moved towards exploiting its considerable gas reserves, and became a remarkable success story in the 1990s on the back of encouraging downstream gas-based industries to set up there, especially export-oriented ammonia, methanol and, in 1998, LNG capacity. Ammonia, methanol and LNG production and export came to occupy 90% of Trinidad’s gas output. However, gas production peaked in 2010 at 40 bcm per year, and since then has been in a long slow decline, reaching 31 bcm in 2017, with a slight uptick to 34 bcm in 2019. During 2020, gas output has declined more steeply, falling from 100 million m3 /day in January to 75 million m3 /d (equivalent to 27 bcm/year) in November.
The impact of the island’s falling gas output has been felt by the companies operating ammonia and methanol capacity there. The Natural Gas Company of Trinidad & Tobago has been trying to renegotiate gas contracts with companies as they come up for renewal, at higher prices to cover the additional cost of drilling further and deeper offshore. However, with cheap gas available just across the Caribbean in the United States, operators have been resisting price hikes and the negotiations have become difficult. As a result, plants have been closing rather than operate at a competitive disadvantage. In April 2021 Methanol Holdings Trinidad Ltd (MHTL), which operates four methanol units on the island, announced that it would be permanently idling two of them; M4 and M5000, after failing to reach a new gas supply agreement, although more recent indications are that an interim agreement may allow them to continue operating until a longer term solution is found. In January 2021 Methanex permanently idled its 875,000 t/a Titan methanol plant. The company’s 1.8 million t/a Atlas plant operates under a separate gas supply arrangement which lasts until 2024. If the MHTL plants are not able to continue operation, that would remove 3.3 million t/a of Trinidad’s 6 million t/a of methanol capacity from service.
On the ammonia side, Nutrien has shut one of its four ammonia plants permanently and another temporarily. Yara shut down its oldest and smallest plant on the island, Yara Trinidad, in December 2019, and idled another ammonia plant in July 2020. This leaves about 4 million t/a of ammonia capacity out of the 5.5 million t/a that was previously operating, much of it tied into 600,000 t/a of downstream urea and 1.4 million t/a of downstream UAN capacity.
Atlantic LNG has also become a victim of the island’s falling gas output. In January 2021 Atlantic idled its 3 million t/a Train 1 for an indefinite period. The company described this as being in “an operations-ready mode” for all of 2021 and 2022. This removes 20% of Atlantic’s 14.8 million t/a of LNG capacity. Production was already down 10% in 2020 compared to 2019. The different ownership structure of each of Atlantic’s four trains has complicated feedstock allocation since Trinidad’s gas production started to decline a decade ago.
Trinidad has five gas basins, three of which – the Trinidad Basin, the Tobago basin, and the Northeast Caribbean Deformed Belt – supply 100% of its gas, about 99% of which is offshore. However, Shell and BHP have been exploring further east in the remote, deepwater T&T North and T&T South blocks and have made some discoveries, although these would require new infrastructure in terms of pipelines to bring to market. However, there are also some other gas developments looking to start-up in the next few years which may bring some relief. Over the next two years, BHP’s Ruby block is expected to be producing 150 million cfd, BP have new gas coming from Matapal and Cassia-C (both 300 million cfd), and Shell’s Barracuda and Colibri projects should add 450 million cfd, plus another 300-700 million cfd from Manatee by 2025. These and other prospects such as Touchstone’s Cascadura and Ortoire fields could increase gas output by 3 bcf per day by 2030, although many breakeven wellhead prices are put at upwards of $4.00/MMBtu, significantly above the $2.50/MMBtu that Trinidad tends to charge customers.
There has also long been the prospect of access to Venezuelan gas fields only just across the international sea boundary between the two countries, and at one stage there was to be a joint LNG export project. However, political differences with the Chavez and Maduro regimes in Venezuela has precluded any significant petrochemical cooperation. It is estimated that up to 1 bcf per day of natural gas could be exported from Venezuela to Trinidad if relations were normalised.
Either way, while the Natural Gas Company of Trinidad & Tobago (NGC) admits that 2021 will be a “challenging” year for gas production, it looks as if the medium to longer term prospects for Trinidad’s gas production my be brighter, albeit not necessarily at a price that chemical producers wish to pay.
New capacity
Table 1 shows the status of Trinidad’s ammonia and methanol plants. The most recent has been the Caribbean Gas Chemical Company, a joint venture between NGC, Mitsubishi and Massy Holdings, part of the Proman Group (which also owns Methanol Holdings Trinidad Ltd), which started up a new 1.0 million t/a methanol plant and 100,000 t/a dimethyl ether side stream at Le Brea in December 2020. For the time being, however, the current gas shortages have served to put a hold on new downstream developments.
Exports
Trinidad produced 5.1 million t/a of ammonia in 2020, of which 3.9 million t/a was exported, according to official figures. It also produced and exported 730,000 t/a of urea, 1.4 million t/a of UAN and 30,000 t/a of melamine. Methanol production and export was 4.3 million t/a.
Venezuela
Oil-rich Venezuela developed its own nitrogen and methanol industries in the 1980s and 90s on the back of associated gas from oil production, run mostly by state-owned Petroquimica de Venezuela (Pequiven) and its subsidiaries. Pequiven has four complexes across Venezuela at El Tablazo, Jose, Paraguana and Moron, which have a total of 2 million t/a of urea capacity and 2.4 million t/a of methanol capacity, the latter split between Methanol de Oriente (Metor) with 1.6 million t/a and 820,000 t/a from Supermetanol, a joint venture with Italy’s Eni.
However, Venezuela’s economy has been in permanent crisis since 2010, via falling oil prices, falling oil output due to years of underinvestment, corruption, mismanagement, disputed elections, violent street protests and US-led sanctions against the Chavez and Maduro regimes. It is reckoned that the economy has shrunk by 75% over the past decade. In spite of this, Pequiven has managed to keep its urea and methanol plants operating, but often only intermittently. Metor has been the most reliable, but it has been constrained in terms of sales by US sanctions. Last year, Venezuela was reported to be transferring methanol from Metor to tankers via ship to ship transfers near neighbouring Aruba in an attempt to evade US sanctions. Only one urea line is said to be operating at Fertinitro at Jose.
“The last few years have seen a slowdown in new project development.”
United States
The third major player in the Caribbean nitrogen and methanol industry is the United States, which had been the major export destination for Trinidadian and Venezuelan product until the shale gas boom of the 2000s and 2010s. This saw US gas production leap to the point where the country is now a gas exporter, and the restart of idled capacity, along with some new plant construction. The largest developments were the construction of huge new ammonia-urea complexes for OCI at Wever, Iowa and CF Industries (now Nutrien) at Donaldsonville, Louisiana and Port Neal, Iowa, which between them added 2.5 million t/a of ammonia, 2.7 million t/a of urea and 2.8 million t/a of UAN capacity. Other plant restarts and new construction added 2.4 million t/a of ammonia and 1.8 million t/a of urea, the most recent being a 750,000 t/a ammonia facility for BASF and Yara which opened in Texas in 2018, based on off-gases from local petrochemical facilities.
In spite of this, the US remains a net importer of ammonia. In 2020, US government statistics show ammonia production ran at 14.0 million t/a, with fertilizer use the main demand segment. However, consumption stood at 16.0 million t/a for the year, with the remainder imported, mainly from Canada and Trinidad. As our Nitrogen Project Listing elsewhere this issue shows, aside from some revamps at existing sites, there are no major planned additions to US nitrogen capacity for several years.
Methanol
The US methanol industry also had a renaissance, with production rising from its low point of 1.0 million t/a in 2005 to 5 million t/a by 2015. This included Methanex’s relocation of two plants from Chile, where the company had faced gas curtailments, to Geismar, Louisiana, south of Baton Rouge, adding 2 million t/a of capacity, the restart of LyondellBasell’s 800,000 t/a Channelview methanol plant near Houston, Texas, and the 1.3 million t/a Celanese Clear Lake methanol plant in Texas. The addition of the OCI joint venture 1.8 million t/a Natgasoline methanol plant in 2018 took US methanol capacity to 7.8 million t/a.
However, the past few years have seen a slowdown in new project development. Chinese companies had become very interested in developing US methanol capacity to send cheap shale gas based methanol to China to feed olefins production. But the Northwest Innovations Works plans to build three huge complexes in the Pacific Northwest ran into local opposition and the projects are now all but dead. Yuhuang managed to gain permits for a 1.8 million t/a methanol plant at Lake Charles, Louisiana (YCI Methanol One), and ground was broken in 2015 and construction began in 2017, but the project ran into financial trouble in 2018 and was rescued by Koch Methanol, which eventually took a 60% stake in it in 2019. Delays, cost overruns and permitting issues have all dogged the project, which now may start up this year.
Big Lake Methanol, a Proman development, was looking at a 1.4 million t/a methanol plant in Louisiana, but work has been halted by the covid crisis and financial issues. Methanex planned to build a third plant at its Geismar site, with a capacity of 1.8 million t/a, but put the project on care and maintenance last year due to the covid crisis and weak methanol market. At the moment the only methanol plant due to start up in the US is the 200,000 t/a Liberty One plant at Charleston, West Virginia, a second hand relocated plant from Brazil, which the company says will come on-stream in 2Q 2021.
A net exporter
The US was a major methanol importer for most of the 2000s and 2010s. In 2010 it imported 5.1 million t/a of methanol, mostly from Trinidad. But the rapid ramp-up of new capacity turned the country into a net exporter in the final months of 2018 (though it was an overall net importer for the year). US methanol production rose to 5.7 million t/a in 2019, up from 5.2 million t/a the year before and the US was now a net exporter to the tune of around 500,000 t/a. However, 2020 saw demand fall in the US and globally, particularly in the first half of the year, boosting US exports, though US methanol producers were forced to look further afield for markets. Overall methanol demand was down about 5% in 2020 and is forecast to recover only slowly over the next two years. Nevertheless, US Gulf Coast methanol production remains lower cost than Trinidadian production, and so in an oversupplied methanol market, US producers may still win out over Trinidad.
