La Brea is a traditionally challenging area in which to execute a project, but it is possible. There is an expectation that these projects will bring lots of jobs and potential to the people in these locations. The shareholders have done a really good job in preparing for that and how to engage communities.

Eugene TIAH Executive Chairman MASSY ENERGY & INDUSTRIAL GASES

Massy’s massive CGC development

July 19, 2017

Eugene Tiah, executive chairman of Massy Energy & Industrial Gases, talks to TOGY about the schedule for completing the Caribbean Gas Chemical plant and issues associated with local content dissatisfaction in Trinidad and Tobago. Since beginning operations in Trinidad and Tobago, Massy Energy has worked on notable projects such as the Atlantic LNG development and the Trinidad Regional Onshore Compression project.

Massy operates as a contractor for the Caribbean Gas Chemical plant development. The company is currently engaged in the construction and operation of a natural gas complex worth USD 900 million. Construction of the infrastructure began in August of 2016 and is expected to be operational in Q1 2019. In his interview, Eugene Tiah discusses the new reality associated with low oil prices and adapting to survive in this environment. While the oil price crash had a significant negative effect on the industry in Trinidad and Tobago, Massy Energy plans to remain in the country while diversifying into different sectors and the greater Caribbean region as a whole.

• ON ANTICIPATING LABOUR DISCORD: “Typically, perceived differentials in wages by different subcontractors for the same [job] are a big source of discord. We have [mandated] that MHI set, through its subcontracts, minimum rates with which subcontractors have to comply with. To some degree, this avoids the likelihood of having wage differentials that cause discord.”

• ON LOOKING BEYOND TRINIDAD IN PURSUING RENEWABLES: “We are considering renewable energy where it makes sense to pursue renewables projects, in locations where there are good renewable energy resources (wind, hydro and solar) and where energy costs are relatively high. The current low energy price environment limits our ambitions in Trinidad. It is very difficult to develop a renewable energy project in Trinidad.”

Tiah also discussed the potential for renewables in Trinidad and Tobago’s hydrocarbons market and the economic feasibility associated with the renewables industry. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Eugene Tiah below.

How did Massy adapt to the 2016 business environment?
It was a very challenging year. Upstream, midstream and downstream operating companies had to adjust to lower-margin scenarios arising from low commodity prices. A lot of effort focused on actions to reduce operating and capital expenditures, both in the short and medium term.
Operating Companies’ services or products needs are meet from a plethora of local energy services companies. They left no stone unturned in finding ways to reduce their operational expenditures. It came in the form of either a reduction in scope of required services or a very blatant request for the services businesses to cut their margins. This was a new reality we had to face and adapt to.
On the capital side, it was about capital efficiency and pushing down capital expenditures. This had an impact here in Trinidad as well as globally. Our businesses had to respond to that reality, and that meant meeting clients’ requests to reduce costs.
[Clients] weren’t asking us, but rather urging us to comply. Most energy services businesses ended up with low margins, which can only be sustained for a limited period. We restructured some businesses and some went into the red. We had to restructure to be able to cope, which unfortunately led to some layoffs. Operators say this is the new normal. There is no reverting to what existed before. They are looking at their models and trying to make sure that they can survive a low-commodity-price environment.

What is the status of the Caribbean Gas Chemical plant project?
The facility is scheduled to start production at the end of Q1 2019. To date, the project engineering is mostly finished: procurement of all major equipment is completed and construction activity is in progress. These things don’t [always] go in sequence. You don’t necessarily have to completely finish engineering before starting procurement and construction activities. Large pieces of equipment and modules began arriving in June 2017. The engineering, procurement and construction contractor [for the plant] is Mitsubishi Heavy Industries (MHI). Local contractors and international contractors are being hired by MHI to conduct construction activities. The target is to get to mechanical completion by the end of Q3 2018 and then to commission and start within the next six months. First commercial production should start in Q1 2019. I believe this schedule will be achieved.
La Brea is a traditionally challenging area in which to execute a project, but it is possible. There is an expectation that these projects will bring lots of jobs and potential to the people in these locations. Also, the residents tend to be more vocal and express their dissatisfaction through protests if they don’t get what they believe they are entitled to. The shareholders have done a really good job in preparing for that and how to engage communities. A lot of effort has gone into that.

 

How is Massy avoiding labour issues such as those associated with the Juniper project?
I think Juniper had mechanisms in place to deal with the community, but they still struggled.The Juniper Platform construction activity in La Brea suffered from a lot of work stoppages arising from labor disputes for higher wages. Eventually, some of the work that was to be conducted by TOFCO in La Brea was moved by BPTT to Louisiana to minimise schedule challenges. The decision has been made for BPTT’s Angelin development to be constructed in Mexico.
We have adopted what we think are robust mechanisms to engage the fenceline community and maximise the opportunities for La Brea residents and minimise local sub-contractor issues. Efforts to work with the resident community began over two years ago. There are database mechanisms in place to assure that skilled workers are available to fenceline subcontractors and other subcontractors from outside of the community.
Typically, perceived differentials in wages by different subcontractors for the same [job] are a big source of discord. We have [mandated] that MHI set, through its subcontracts, minimum rates with which subcontractors have to comply with. To some degree, this avoids the likelihood of having wage differentials that cause discord.

What ongoing projects is Massy participating in?
We have a JV [joint venture] with Air Products (called Caribbean Industrial Gases) for an air separating unit that delivers oxygen to the Atlas facility and we have a JV with Wood Group (Massy Wood Group) for engineering, operating and maintenance services. We are continuously looking for energy services and industrial gases growth opportunities, not only here, but throughout the region.
We are attempting to make more efforts in the renewables space. We looked at some small hydro projects in Guyana and Panama and we have looked at some solar projects in other places. We have been invited to collaborate and partner in efforts in the Dominican Republic.
We have looked at small-scale LNG distribution in the Caribbean, which is a bit different than renewable energy. We are considering renewable energy where it makes sense to pursue renewables projects, in locations where there are good renewable energy resources (wind, hydro and solar) and where energy costs are relatively high. The current low energy price environment limits our ambitions in Trinidad. It is very difficult to develop a renewable energy project in Trinidad.

Are solar or wind power viable in Trinidad and Tobago?
The tropics should be positive for things such as wind and solar, but you have to look at recoverable solar energy and the extent of cloud cover for various days in the year. You have to have wind speeds sustained at a particular level, you have to have the interconnecting infrastructure and enabling mechanisms. The wind doesn’t go all the time, nor does the sun always shine.
Therefore, one has to have an enabling mechanism that allows you to sell the energy into the grid and buy it when you need it. You have to have that capability. All of the aforementioned solar and wind power generation at its most efficient can produce power at a cost of more than USD 0.09 per kWh. Power costs to consumers in Trinidad and Tobago is around USD 0.055 per kWh due to the subsidised cost of natural gas for power production. Developing renewable energy projects in Trinidad and Tobago is currently very difficult if not impossible.

How feasible is biomass generation in the country?
We looked at a project with municipality waste. We actually had an opportunity for a 110-MW plant that was built to combust municipality waste for another location in the US but eventually not used. Not all waste is created equally. Each [type of] waste has a different heat (Btu) value and all of that factors into the economic feasibility of a project.
When we did the study of the waste heating value that was available from our largest municipality waste dump in Trinidad and Tobago, it was not sufficient to be an economically feasible project. A biomass project is doable, but for the same reason mentioned above for solar and wind projects, it will require a lot of fiscal incentives to assure economic feasibility.

What is the outlook for Trinidad and Tobago’s energy industry?
Industry experts are of the view that we have to have a big game changer, a huge gas or oil find [discovery of more reserves] that is beyond everyone’s imaginations, to cause an outcome that will result in the future growth of the industry.
It’s more likely that Trinidad and Tobago will be able to slow the rate of decline and possibly even plateau at a natural gas production rate of 99.1 mcm-105 mcm (3.5 bcf-3.7 bcf) per day after the 2017 BPTT Juniper commissioning and start up

What are Massy Energy’s ambitions in the energy sector?
We continue to look for opportunities to grow organically and expand the existing business, which is difficult in the current environment. We have made significant investments.
We have a business that does instrument, electrical and control systems for process plants, for example. We have invested in a new state-of-the-art workshop that is currently being constructed to enhance both the quality and the number of services we can deliver to clients. This workshop is being built at the Point Lisas Industrial Estate. The shop will be equipped to provide welded fabrication services, abrasive blasting and painting and mechanical repairs for stationary, rotating equipment and valves. The infrastructure will also provide calibration testing and specialty services for the lines of equipment that Massy represents.
We are investing where we see prospects to grow. Where there is a trend of contraction, we are changing our business model, yet keeping in mind that there may not be a recovery in sight.
We still look for growth through acquisitions. We have an active business development team that looks at areas we are interested in, such as industrial gases, LNG distribution and energy services (engineering, operations and maintenance services).
We continue to look for opportunities to grow. We do not necessarily see ourselves as bound by the confines of Trinidad and Tobago. Besides Colombia, we are looking at opportunities in Peru, Panama, the Dominican Republic and Puerto Rico. We are very discerning as to which locations we will consider.
We are leveraging the expertise we have and will hopefully develop a range of different businesses. We need to have that kind of diversity in the mix.

For more information on Massy Energy & Industrial Gases in Trinidad and Tobago, including the company’s USD 900 million Caribbean Gas Chemical plant, see our business intelligence platform, TOGYiN.
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