May 2014 Financial News

Neal and Massy/Mitsubishi project: Investment nod to come in September

May 08, 2014

The goal posts have been moved. The new deadline for construction of the Neal and Massy/Mitsubishi dimethyl ether (DME) and methanol plants will be in the first quarter of 2015 by the Mitsubishi-led consortium, said Chikara Jitsumatsu, director of Caribbean Gas Chemical Ltd, the special purpose company formed to develop the project. While the original date for the start of construction was the fourth quarter of 2014, the new date has been pushed forward to the first quarter of 2015.

“We do not consider there has been a serious delay in the project. The original target timeline was a very aggressive one, with the premise of everything being fast tracked. In our experience all over the world, actual project development activity takes, on average, half a year or more compared with the original fast track target timeline for this one.

“The original target was to reach final investment decision (FID) by the end of March 2014, and our current target of FID is August/September 2014,” he told the Guardian.

The three developers for the project are Neal and Massy, Mitsubishi Gas Chemical and Mitsubishi Corporation.

In an e-mail, Caribbean Gas Chemical said Neal and Massy’s role in the project will be to provide wide range of local industrial expertise, lead of negotiation with Government and be a potential partner with Mitsubishi for more projects in T&T or international projects.

Two plants will be built, one is methanol and the next one is the dimethyl ether plant on the La Brea Union Estate.

Dimethyl ether is a natural gas derivative and has uses in transportation as an alternative for diesel. It can also be used in cooking and heating in place of propane and for power generation.

Mitsubishi has other DME and methanol plants in Venezuela, China and Saudi Arabia.

In April 2013, Minister of Energy Kevin Ramnarine and the other parties involved in the consortium signed a project development agreement. Ramnarine said this project will have a “far reaching impact on the economy for years to come.”

Jitsumatsu said the role of Caribbean Gas Chemical is to lead the project to the final investment decision.

“In July 2012, we had a meeting with the Government in laying the groundwork for a basic concept of the project. Then in April 2013, we reached an agreement that started the development of the project for the commercialisation of natural gas-based petrochemicals.”

He said there are important areas that must be approved before the final investment decision is made.

“One is financing, then one is the agreement with the contractor, and the other is regulation and commission, which is necessary to realise the project. There are many agreements that must be executed for the purpose of this and must be satisfactorily met for the stakeholders so that they can make a decision,” Jitsumatsu said.

He said the development project is so far “going well.”

“Our target is to reach the investment decision of August this year. After August/September, we can expect the project to be officially confirmed and investors are going to make a capital injection so that the construction of the plants can began,” he said.

The “initial estimation” is US$850 million, but that figure is right now “under review.”

“One of the main financiers is the Japanese Bank For International Co-operation and it will be financing the majority of it. The rest of it is a cash injection from shareholders, which is Neal and Massy, Caribbean Gas Chemical and the Mitsubishi Corporation. Right now we are negotiating with the bank over what the final amount of money will be,” he said.

Jitsumatsu spoke to the Business Guardian on April 30 at the La Brea Community Centre, Brighton Anglican Primary School, La Brea.

Two plants

Jitsumatsu said it would take roughly two years to build the DME plants.

“The final investment decision will be made by August. By the end of this year, we will begin site preparation. These plants will be built simultaneously. We want to commission and then start commercial operations in 2017,” he said.

He said the DME plant is an environmentally friendly source of energy that can replace diesel.

“Our agreement with the Government is to create industrial use of this and the replacement of diesel products, and to help the country become competitive. It is better than importing liquefied petroleum gas (LPG). The Government of T&T has been importing a high volume of crude to produce diesel and LPG. T&T is rich in gas resources,” Jitsumatsu said.

He said the DME fuel can eventually be used to replace diesel in vehicles similar to compressed natural gas (CNG) vehicles.

“Rather than rely on diesel, T&T can use DME as an alternative fuel in the future for vehicles. DME comes from natural gas. The change will not be rapid. It would be similar concept to natural gas vehicles. This is one of the main reasons the Government of T&T is supporting this venture,” he said.

He spoke about the methanol plant to be built.

“Unless it is consumed locally, methanol will go to the global market. Both Mitsubishi Gas Chemical and Mitsubishi Corporation are leading producers and marketeer of methanol. Mitsubishi Chemical owns the technology for the production of methanol and DME. Methanex is a giant in the Methanol market, but they do not actually own a licence to produce methanol. However, Mitsubishi Gas has been producing its own technology for more than 50 years. This has been exported to the Middle East, Africa, South America and other parts of the world,” Jitsumatsu said.

T&T as an investment hub

Jitsumatsu said T&T is an excellent investment site and it is “unfortunate” more Japanese companies are not in T&T.

“T&T is not a very familiar company to Japanese companies because of the far distance. In 2011, we were invited to a project opportunity in T&T. It is important when we consider the investment, how the Government invited a company like ours. Over the last three years in our relationship with Neal and Massy and the Government, we have recognised T&T is open to a project like this,” Jitsumatsu said.

He said the Japanese economy, which is one of the G7 leading industrialised countries, has “suffered” in the last 20 years, but the present Japanese government is taking measures to correct this.

“The current government is making quite some effort to stimulate economic activity. With Mitsubishi in T&T, it makes way for other companies from Japan to come here.”

Jitsumatsu said there has been a change in the balance of energy the world over.

“We are not finding many governments that are quite supportive to do this type of investment with T&T’s stable and competitive conditions,” Jitsumatsu said.

He said construction of the plants will create jobs.

“During peak time of construction, we estimate in the area of about 1,500 jobs. Once the operations start, we estimate 80 or more jobs as direct employment. There will also be indirect jobs, such as service providers, such as transportation, catering, food and other small business jobs.”

Jitsumatsu said they are trying hard to use local labour, especially from nearby communities, and foreign labour only as a last resort.

“T&T has the experience of building these types of petrochemical plants so there are these skills here. It is our understanding and expectation and we are trained to maximise the local content for this project as much as possible. The first priority is to create employment for the surrounding areas. Secondly, we want to maximise the use of T&T skills, then our last resort: going abroad for skills that may not be here.”

He said once completed and operational, these plants will have a “broad impact” on the national economy.

“It creates hard currency, it creates industrialisation of the area, it brings in taxes to the treasury of T&T. This wealth will also impact on small and medium enterprises and expands the economic scale.”

He said they have developed a relationship with the community of La Brea and continue to consult with them on environmental and other issues.

“When we first started, we said there must be a mutual relationship between the project and the community. We have been putting a lot of manpower and resources into this area. However, DME and methanol have been known to be low impact on the environment and we need to continue to consult with the community,” Jitsumatsu said.

Unlike past problems where many residents were unhappy with the last administration’s plans to build the Alutrint smelter plant in the south western peninsula, Jitsumatsu said they continue to communicate “step by step” with the community.

“Consulting with each and talking is the only way to make this project acceptable, otherwise we cannot proceed.”


New timelines:

Stage: Engineering, procurement and construction (EPC) price agreement
Original date: January 2014
New date: May-June 2014

Stage: Final investment decision
Original date: March 2014
New date: August-September 2014

Stage: Site preparation start
Original date: Q2 2014
New date: Q4 2014

Stage: Construction start
Original date: Q3 2014
New date: Q1 2015

Stage: Commercial operations start
Original date: Q4 2016
New date: Q4 2016 to Q1 2017


Mitsubishi Gas Chemical (MGC)…

… is one of the largest methanol producers in the world. Its methanol business owns and operates two joint ventures in Saudi Arabia and Venezuela, from which it markets methanol globally.

According to MGC’s Web site, new capacity in both locations, and a new location, Brunei, in southeast Asia, will increase the company’s global methanol market position, bringing it closer to the markets and more support of growing demands.

Mitsubishi Heavy Industries (MHI) has constructed three contracts methanol plants in Saudi Arabia, Venezuela and Brunei.

With the co-operation of Mitsubishi Gas Chemical Company, MHI has developed the methanol process. The main feature of the Mitsubishi methanol process is highefficiency in the reaction and energy saving for the methanol synthesis.

The process utilises a new type of reactor, called a “super converter”, a new catalyst, MAC (Mitsubishi compressor), and other equipment to achieve high performance.

The two Venezuelan plants produce 750,000 and 850,000 million tonnes a year, respectively.

Methanol, made mainly from natural gas, is used as a raw material in the manufacture of a wide range of products, including adhesives, agrochemicals, paints and synthetic resins.

The global demand for methanol is currently 60 million tonnes per year. This demand is expected to see a four to five per cent growth in the coming years.

DME (dimethyl ether) is a clean, colourless gas that is easy to liquefy and transport. It has remarkable potential for increased use as an automotive fuel, for electric power generation, and in such domestic applications as heating and cooking.

Recently, China has been blending DME with liquefied petroleum gas in significant volumes. The Chinese government has been promoting DME blends. Egypt is also developing a DME project to reduce dependence on LPG imports.


Source:
RAPHAEL JOHN_LALL
raphael.lall@guardian.co.tt
BG4 | NEWS BUSINESS GUARDIAN www.guardian.co.tt MAY 2014 • WEEK TWO
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