METHANOL HOLDINGS (TRINIDAD) LIMITED

Domestic Private Sector Challenges for the Development of a Mega Methanol

Plant in Trinidad

A MHTL Perspective

July 23 , 2002

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OUTLINEOUTLINEMHTL PROFILEMHTL PROFILENATURAL GAS AND THE NATURAL GAS AND THE METHANOL INDUSTRYMETHANOL INDUSTRYM5000 MEGA PLANTM5000 MEGA PLANTDOMESTIC PRIVATE SECTOR DOMESTIC PRIVATE SECTOR CHALLENGESCHALLENGESCLOSING REMARKSCLOSING REMARKS

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MHTL PROFILE

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METHANOL HOLDINGS (TRINIDAD) LIMITED

T & T Methanol T & T Methanol Co. Ltd.Co. Ltd.

Caribbean Methanol Caribbean Methanol Co. Ltd.Co. Ltd.

Methanol IV Methanol IV Co. Ltd.Co. Ltd.

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MHTL’s MHTL’s METHANOL METHANOL COMPLEXCOMPLEX

CMCCMC

TTMC ITTMC I

TTMC IITTMC II M IVM IV

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ROLE OF MHTL

Finance

ManufacturingMarketing/Shipping

Corporate Governance

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MHTL BUSINESS ENVIRONMENT

HIGH CAPITAL INVESTMENTS

COMMODITY TYPE PRODUCT

GLOBAL MARKETPLACE

INTENSE COMPETITION

BUSINESS CYCLES AND PRICING VOLATILITY

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ASSET BASE

NO. OF PLANTS: 4

TOTAL CAPACITY: 2.2 MILLION MT/ANNUM

ASSET VALUE: US$ 1 BILLION

GAS CONSUMPTION (2002): 200 MMSCFD

GAS CONSUMPTION (2004) : 380 MMSCFD

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MHTL MARKETING

MHTL MARKETING HUB AT PT. LISAS RESPONSIBLE FOR:

GLOBAL MARKETING STRATEGY

MARKET INTELLIGENCE

CONTRACT NEGOTIATIONS AND ADMINISTRATION

GLOBAL MARKETING OPERATIONS

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PRODUCT DISTRIBUTION

EUROPE34%

NORTH AMERICA

65%

LOCAL1%

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MHTL METHANOL PRODUCTION AND WORLD

MARKET

1998 2002 2005Total MHTL Production (000’S MT) 1914 2170 4000

Total Trinidad Production (000’S MT) 1914 3020 6575

MHTL Production as % of World Capacity

5.6% 5.8% 10.4%

Trinidad Production as % of World Capacity

5.6% 8% 17.1%

MHTL Sales as % of World demand

8.3% 7.2% 13.6%

Trinidad Sales as % of World Demand

8.3% 9.9% 22.4%

MHTL Sales as % of Trade 19.2% 13.1% 19.6%

Trinidad Sales as % of Trade 19.2% 18.2% 32.2%

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MHTL’S EXPERIENCE

MHTL FACES THE FULL COMPETITIVE FORCES

OF THE GLOBAL MARKETPLACE ALONG ALL

ELEMENTS OF ITS BUSINESS OPERATIONS AND

MAINTAINS A FOCUS ON CONTINUOUS

IMPROVEMENT TO REMAIN COMPETITIVE

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MHTL’S EXPERIENCE

MHTL HAS BEEN ABLE TO DEVELOP A ROBUST

BUSINESS OPERATION RESULTING IN:

CONSOLIDATED LOW COST OPERATION

ATTRACTIVE RETURN ON EQUITY

SIGNIFICANT GROWTH IN ASSET BASE AND DEBT

CARRYING CAPACITY

SHIPPING & SHIPPING & LOGISTICSLOGISTICS

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POINT LISAS POINT LISAS LOADING FACILITIESLOADING FACILITIES

Savonetta Savonetta Pier IPier I

Savonetta Savonetta Pier IIPier II

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MHTL TANKER FLEET

VESSEL CAPACITY NO VESSELS TOTAL (DWT)

14,000 DWT 2 Goodrich Bay, Gulf of Paria

28,000

17,000 DWT 1 Ojars Vacietis 17,000

30,000 DWT 3 Naparima, Nariva, Maracas Bay

90,000

45,000 DWT 1 Las Cuevas 45,000

Total 180,000

Additional Cap.45,000 DWT 2 90,000

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STORAGE STORAGE FACILITIESFACILITIES

LOCATION CAPACITY

(MT)

POINT LISAS, TRINIDAD 200,000

WILMINGTON, NC, USA 23,750

HOUSTON, TX, USA 11,750

ST.ROSE, LA, USA 43,000

QUEBEC CITY, CANADA 19,259

ALTAMIRA, MEXICO 5,000

ADDITIONAL (M5000) 50,000

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NATURAL GAS AND THE METHANOL

INDUSTRY

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THE METHANOL BUSINESS

A PRIMARY PETROCHEMICAL BASED ON

NATURAL GAS CONVERSION

NATURAL GAS AVAILABILITY AND PRICING

STRUCTURE KEY TO METHANOL INDUSTRY

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CHANGING STRUCTURE OF THE METHANOL

INDUSTRY

US METHANOL INDUSTRY NO LONGER

CONSIDERED BENCHMARK; OFFSHORE

PRODUCERS NOW REPLACING

TRADITIONAL PRODUCTION IN THE

MAJOR MARKET CENTERS

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TRINIDAD AS METHANOL

PRODUCTION HUBTRINIDAD HAS BEEN A VIABLE LOCATION FOR

METHANOL PLANTS BASED ON:

READILY AVAILABLE NATURAL GAS SUPPLY

COMPETITIVE GAS PRICING STRUCTURE

PROXIMITY TO MAIN MARKETS

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TRINIDAD AS METHANOL

PRODUCTION HUBESTABLISHED INFRASTUCTURE

FACILITATING BUSINESS ENVIRONMENT

STABLE POLITICAL CLIMATE

PROGRESSIVE NATURAL GAS VISION (GORTT /

NGC)

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M5000 MEGA PLANT

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WHY M5000?

TO MAINTAIN COMPETITIVENESS AS A WORLD CLASS

PRODUCER

TO ACHIEVE GREATER SYNERGIES AND

ECONOMIES OF SCALE

TO CONSOLIDATE MHTL’S POSITION IN GLOBAL

MARKETPLACE

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OTHER CONSIDERATIONS

TECHNOLOGICAL ADVANCES ALLOW LARGER PRODUCTION

CAPACITY WITH IMPROVEMENTS IN EFFICIENCIES AND

ECONOMIES OF SCALE

5000 MTPD IS THE NEW WORLD SCALE BENCHMARK

M5000 WILL IMPROVE SHIPPING LOGISTICS AND DELIVERY

COSTS

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OTHER CONSIDERATIONSGROWTH OF BUSINESS IS BEST OPTION FOR ACHIEVING

SUSTAINED EFFICIENCY AND PROFITABILITY

NEW CAPACITY WILL BE BUILT IN ANY EVENT, EITHER BY MHTL

OR OTHERS

LOW COST PRODUCTION PLATFORM CAN LEAD TO NEW AREAS

OF DEMAND RESULTING IN FURTHER GROWTH IN THE INDUSTRY

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Owner: MHTLProcess ICI Low PressureDesign Davy Process Tech.

EPC ContractorFerrostaal/PromanOperator IPSLPlant Start-up Quarter 4, 2004Annual Capacity 1.8 million MT

M5000 PLANT

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ATLANTIC AVENUE

TTMC I CMCM5000Site

N

M5000 PLANT PLANNED LOCATION

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MHTL CAPACITY TO 2005

TTMC I CMC TTMC II MIV M5000 MHTL M1 M2 M3 M4

Start of Plant Prod. 1984 1993 1996 1998 2005 2005

Annual Avg. Plant 480 550 570 580 1,800 4.0MMProd. (‘000 MTPY)

ISO 9002 1995 2001 1998 2001Certification

Plant Design ICI Low Pressure ProcessTechnology

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DOMESTIC PRIVATE SECTOR CHALLENGES

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CHALLENGES

MAIN AREAS:

PROJECT CHALLENGES – M5000

GAS SUPPLY

DOMESTIC PRIVATE SECTOR ISSUES

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PROJECT CHALLENGES

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PROJECT CHALLENGES

FINANCING

MARKET

AVAILABILITY AND PRICING OF RAW

MATERIALS

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PROJECT CHALLENGES

SHIPPING AND LOGISTICS

AVAILABILITY OF TRAINED EXPERIENCED OPERATING

AND MAINTENANCE PERSONNEL

GOVERNMENTAL APPROVALS (TOWN AND COUNTRY

APPROVAL, ENVIRONMENTAL CONSIDERATIONS)

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GAS SUPPLY

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CHANGES IN GAS USAGE

PETROCHEMICALS NO LONGER THE

DOMINANT GAS USERS

NEW AND GROWING EMPHASIS ON LNG

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T&T GAS USE PROFILE 1999

Power Generation

15%

Methanol16%

LNG26%

Other Industrial & Commercial

12%

Ammonia31%

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T&T GAS USE PROFILE 2002

Ammonia21%

Other Commercial

and Industrial

11%

LNG43%

Methanol15%

Power Generation

10%

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T&T GAS USE PROFILE 2006

Ammonia15%

Other Commercial & Industrial

9%

LNG56%

Methanol15%

Power Generation

5%

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IMPACT OF CHANGES IN GAS USAGE

POSSIBLE IMPACT ON PETROCHEMICAL PRODUCERS:

REDUCED AVAILABILITY OF NATURAL GAS FOR NEW

PETROCHEMICAL PRODUCTION

CHANGE FROM PRODUCT RELATED GAS PRICING

STRUCTURE FOR PETROCHEMICALS

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METHANOL AS A VIABLE OUTLET FOR NATURAL GAS

PRODUCT RELATED PRICING STRUCTURE FOR

PETROCHEMICALS HAS YIELDED ATTRACTIVE RETURNS TO

GAS SUPPLIER

PETROCHEMICAL RETURNS SHOULD COMPARE FAVOURABLY

WITH LNG NETBACK RETURNS WHEN LNG SUPPLY CHAIN

COSTS CONSIDERED

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FUTURE PROSPECTS

METHANOL CONTINUES TO BE ATTRACTIVE AS A LONG TERM

INVESTMENT

BUSINESS CONTINUES TO BE CYCLICAL BUT AVERAGE RETURNS

MAKES BUSINESS A VIABLE OUTLET FOR NATURAL GAS USAGE

GROWTH PROSPECTS FOR THE INDUSTRY REMAIN ATTRACTIVE

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GROWTH EVEN WITH A WORST CASE SCENARIO OF THE TOTAL PHASE OUT OF MTBE IN THE US OVER THE

NEXT 2 TO 3 YEARS OVERALL POSITIVE GROWTH IN 2005 AND BEYOND IS PROJECTED

GOOD MEDIUM TO LONG TERM PROSPECTS FOR GROWTH IN NEW APPLICATIONS

METHANOL TO OLEFINS

POWER GENERATION

FUEL CELLS

DME

POWER GENERATION

FUEL CELLS

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OPPORTUNITIES FROM FURTHER METHANOL

EXPANSIONPOTENTIAL FOR FURTHER INVESTMENT ALONG THE VALUE

CHAIN: SHIPPING, BUNKERING, STORAGE

OPPORTUNITY FOR FURTHER DOWNSTREAM DEVELOPMENT:

MELAMINE

ACETIC ACID

FORMALDEHYDE

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DOMESTIC PRIVATE SECTOR ISSUES

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DOMESTIC PRIVATE SECTOR ISSUES

MHTL MAJORITY SHAREHOLDER IS A LOCAL HIGHLY

DIVERSIFIED CONGLOMERATE WITH EXTENSIVE

LINKAGES THROUGHOUT THE LOCAL ECONOMY

MHTL’S ENERGY INVESTMENTS CAN RESULT IN

BENEFITS TO A WIDE CROSS SECTION OF CITIZENS

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DOMESTIC PRIVATE SECTOR ISSUES

NEITHER MHTL NOR ANY OTHER DOMESTIC

PRIVATE SECTOR COMPANY ARE DIRECT

PRODUCERS OF NATURAL GAS IN T&T

MAJOR UPSTREAM PRODUCER ALSO HAS DIRECT

OWNERSHIP IN DOMESTIC METHANOL INDUSTRY

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DOMESTIC PRIVATE SECTOR ISSUES

A MAJOR CHALLENGE FACING THE DOMESTIC PRIVATE

SECTOR IS HOW TO ACHIEVE SUSTAINABLE GROWTH

AND DEVELOPMENT IN THE ENERGY SECTOR

ANOTHER CHALLENGE IS HOW TO ACHIEVE A

DIVERSIFIED PORTFOLIO OF PETROCHEMICAL PRODUCTS

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NEW INVESTMENTS BY MHTL AND

SHAREHOLDERS M5000 METHANOL PLANT

CNC AMMONIA PLANT

N2000 AMMONIA PLANT

PLANNED UREA PLANT

PLANNED MELAMINE PLANT

PROPOSED FORMALDEHYDE PLANT

PROPOSED ACETIC ACID PLANT

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CLOSING REMARKS

NEED FOR AN ENTITY SUCH AS NGC TO CONTINUE TO FACILITATE A

BALANCED PORTFOLIO OF NATURAL GAS USAGE AND TO MAINTAIN

SOME FORM OF REGULATORY OVERSIGHT

NEED FOR A BALANCE BETWEEN SHORT TERM RETURNS VS LONG

TERM SUSTAINABLE DEVELOPMENT

NEED FOR ENCOURAGEMENT OF DIVERSIFICATION INITIATIVES

WITHIN THE NATURAL GAS SUB SECTOR

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CLOSING REMARKS

THE NATIONAL GAS POLICY SHOULD PROVIDE FOR

CONTINUOUS REVIEW OF GAS UTILIZATION RATIOS ACROSS

INDUSTRIES TO OPTIMIZE VALUE TO TRINIDAD AND TOBAGO

SOME PORTION OF NEW GAS PRODUCTION SHOULD BE

RESERVED FOR PETROCHEMICAL INDUSTRIES TO CONTINUE

THEIR DEVELOPMENTAL AND DIVERSIFICATION PATHS

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THANK YOU