May 2013 Financial News

Neal & Massy CEO Confident of manufacturing’s role in Mitsubishi project

May 02, 2013

President and group chief executive officer of Neal and Massy Holdings Ltd, Gervase Warner, has told the Business Guardian the Mitsubushi/Neal and Massy methanol to petrochemicals project provides T&T with its best chance of finally having linkages with the manufacturing and the energy sectors because of the commitment of his company and the technology and contacts of Mitsubushi Corporation.

In an interview with the Business Guardian, Warner was asked why T&T should believe that this time manufacturers will take up opportunities to link the two sectors when, in the past, they have not invested in areas like downstream melamine.

Warner said the difference was that Neal and Massy was involved in the project and the company was committed to going further downstream. He said the involvement of Mitsubushi Corporation meant that both technology and market access were more readily available to T&T than in the past.

“Mitsubushi is a global connector. The number of entities they have brought into these negotiations, people with technology, people with access to markets for the products we are talking about, have been phenomenal. The eye they have for innovativeness in terms of how to find innovative routes to actually produce these products have been tremendous. I think the key difference is we have the creativity, you have a local partner who has the entrepreneur talent to make such investments, and you have an international partner that will provide the connectivity to the entities, whether we need technology, whether we need access to products.”

Warner said equally important was the fact that Neal and Massy was interested in downstream manufacturing and equity interested in viable manufacturing projects.

“You have a local partner like Neal and Massy that is in this for the downstream manufacturers, so we have looked at this and we think that those downstream manufacturing opportunities look interesting and potentially economically feasible.”

The TTMA perspective

T&T has for almost 40 years had a vision of going downstream of the energy sector. It has invested in gas-based petrochemical industries and attracted both international players, but to date has not been able to make the linkages between energy and manufacturing.

Local manufacturers say they continue to be cautious because of large sums required for investing in projects that link the energy and manufacturing sectors and a lack of support from Government for such investments.

In an e-mail response to several questions, the T&T Manufacturers Association identified three major challenges facing local manufacturers in investing downstream.

• Significant volatility within the sector that leads to boom-and-bust cycles.

• Increased competition from new players within the energy market like Nigeria and Mozabique that have more productive potential and larger resources

• The emergence of shale gas production in the United States and the search for alternative renewable energy technologies in recent times

The TTMA said the lack of investment in the downstream energy sector/manufacturing has little to do with their members being unwilling to take risks, and more to do with the environment in which they operate.

“Manufacturers may not necessarily be risk-averse, per se, but rather may lack confidence in the structures that are supposed to offer support to business and enterprise in T&T.”

The e-mail from the TTMA read: “Manufacturers would seldom be inclined to make huge investments in plant and other capital intensive outlays if an enabling business environment is absent.”

An economic point

Republic Bank’s chief economist, Dr Ronald Ramkissoon, agreed the lack of investment in the downstream sector by local manufacturers had less to do with a lack of entrepreneurship and more to do with a lack of sufficient focus.

Ramkisson said there needs to be a vision for the sector that includes existing and potentially new players in the possibility of linking the energy and manufacturing sectors.

He said there were real issues surrounding marketing and market access and that the Caribbean market, which is dominated by local manufacturers, may be too small and unless local manufacturers feel they can penetrate the global market, there may be reticence in going after the opportunities.

The TTMA said traditionally there had been a clear distinction between the non–oil and the oil- and gas-based manufacturing industries. As such, there was little exploration of the forward and backward linkages that may exist within the oil- and gas-based manufacturing. It said since the energy sector is a significant contributor to the nation’s economy, government policies within the sector are very government-intensive, regulated largely by the Government and a few foreign investors without there being market-oriented reforms.

The project:

Under the agreement, the consortium will invest an estimated US$850 million in the first phase of a methanol project on 50 hectares of land at Union Estate, La Brea. The project has two phases. Phase one requires capital expenditure of $850 million and a gas requirement of 100 mmscfd. This phase involves a methanol project with a component of that methanol being converted to dimethyl ether (DME).

DME is increasingly being used in the Far East and Europe as a substitute for propane and diesel. Energy Minister Kevin Ramnarine has said the project will help reduce the subsidy on LPG and diesel, whilst using a clean fuel.


Source:
Curtis Williams
Trinidad Guardian
Thursday May 2, 2013

http://www.guardian.co.tt/business-guardian/2013-05-01/neal-massy-ceo-confident-manufacturing%E2%80%99s-role-mitsubishi-project