Trinidad Opposition Leader Kamla Persad Bissessar has raised the prospect of Guyana oil being used to rescue the beleaguered Petrotrin refinery but Prime Minister Keith Rowley last evening said the aged facility had no reasonable prospect.
Defending the decision by his government to close the over 100- year-old refinery, Rowley yesterday said he had no choice as the climbing debt was too much to saddle his country’s taxpayers with.
“Petrotrin was overburdened with debt. The net debt at financial year-end 2015 amounted to TT$11.4 billion,” Rowley told the twin-island nation in an address which was live streamed.
According to the Trinidadian Prime Minister, “Left as it is, Petrotrin will require an immediate TT$25 billion cash injection just to stay alive” and “there is no way that the company can find this money” as “no financier will lend it because the company simply will not be able to repay such an additional loan.”
He believes that it would be more feasible for the country to focus on exploration and production and export the 40,000 barrels of oil equivalent per day it produces and import the 25,000 barrels it needs for consumption.
“Today with a refining capacity of 140,000 barrels per day, the local production available for refining is 40,000 barrels. We really depend, mostly, on a daily importation of 100,000 barrels per day, which we refine at a significant loss,”
He would later add, “We consume less than 25,000 (barrels) of refined products. It makes far more sense to export the 40,000 that we produce and import what we need. Each barrel will be sold externally on the open market.”
Last week Tuesday it was announced that Petrotrin’s refining and marketing operations would be shuttered. With TT$8 billion in losses in the past five years and a bullet payment of US$850 million due in 2019, Petrotrin chairman Wilfred Espinet had said that terminating its refining and marketing operations and retrenching 1,700 permanent and casual employees was the only way to save the company after 100 years of operations in the industry. Petrotrin also owes the Trinidad Government more than TT$3 billion in taxes and royalties.
Rowley’s position last evening came even as that country’s former Prime Minister, Persad Bissessar called on him to pursue negotiations with Guyana to refine its oil there in order to save the company.
“I understand Guyana has found another well … can we not group in some way and find a way to work together as a CARICOM where we can help them refine their oil,” she told reporters on Saturday at her Legal Clinic Siparia Constituency Office and which was reported by the Trinidadian newspaper Newsday. Guyana won’t begin pumping oil before 2020.
“I am calling on him to let good sense prevail to be very cautious in making such a drastic and dangerous move, this will have a ripple effect throughout the economy and the country…of course they (Guyana) will build their own refinery but we have one and many of the units in the refinery at Petrotrin are new, so a lot of money has been invested on the refinery side and now they are shutting it down. It is total nonsense,” she added.
Currently, it is still unclear what the Guyana Government would do with its share – 12.5% – of profit oil from 2020 onwards, from its agreement with ExxonMobil but one government official said that several options are being explored.
One Minister yesterday said that it “Is an ongoing discussion and several workshops and engagements have been held. The options are to ask Exxon or to market, do our own marketing or take our share in kind and send it for refining somewhere. Several proposals have been received and the final decision-making process will be guided by the Department of Energy.”
Sources have told this newspaper that it has been suggested to the government that Guyana “takes a stake in the Petrotrin refinery and in this way acquire a strategic asset.” In that way, according to one source, Guyana could have its share of oil from the agreement with ExxonMobil and affiliates refined closer to home and secure jobs for persons in both countries.
But while it is still too early to tell what the Guyana and Trinidad governments will decide, a source said, “Guyana may gain a controlling or sizeable share and develop refining capacity and meet many of the outcomes from having a refinery without having to pay as much. Additionally, we can ensure that a percentage of labour is Guyanese who will have to be trained and also we can address some CARICOM integration goals.”
Last evening, the Trinidad PM made no mention of Guyana or even hinted at restarting the refinery although he said that Petrotrin’s refinery assets would be placed in a separate company.
“We largely operate a business that is largely dependent on foreign oil inputs. All the other refineries in the region that had this same business model, Aruba, Curacao and St Croix have long since closed because they saw it as not a viable business,” Rowley said.
“Our Pointe-à-Pierre refinery is 101 years old and has reached the end of its commercially viable days it is now at a state where it is haemorrhaging cash and the cost of rehabilitating it is way more than its potential to ever be potentially viable, competitive or sustainable. The only commercially sound and viable option is to close the refinery, export Petrotrin’s oil and to import products,” he also noted.
The government of the US Virgin Islands last month approved a proposed US$1.4-billion operating agreement between itself and Arclight Capital Partners LLC, Boston, to restart the former Hovensa Refinery at Limetree Bay, St Croix. The refinery is scheduled for opening by the end of 2019. With an initial crude processing capacity of about 200,000 barrels per day according to the USVI government, the investment is expected to create 1,200 local jobs during construction and as many as 700 permanent jobs upon restarting the facility. The Hovensa refinery was a joint venture between Hess Corporation and Petroleos de Venezuela until it closed in 2012.
Rowley said that the Petrotrin model has outlived its usefulness and it was now time to accept that and equip the company to stand the test of the ever changing global economy.
“Petrotrin’s model has become obsolete and uncompetitive and its operating practices are inefficient. The company was nowhere in line with global industry standards and best practices. In fact the company’s operations are identified as being among the most inefficient in the world. The company if left as it is would continue to operate at a loss at a rate of aboutTT$2B a year. It is not a viable option, to do so is to saddle future generations with a huge debt burden. If not dealt with now, the negative effects will get worst and it simply cannot work. To break even would cost TT$7B and would involve significant staff cuts and an ultra-low sulphur refinery,”
He believed that the “Gross mismanagement of the national patrimony within the last decade” such as many cost overruns and delays in projects for the company was part of the reason government is now saddled with the large debt.
A committee, headed by TT’s former Energy Ministry Permanent Secretary, Selwyn Lashley, had reported on the dismal state of the company since 2016 and the report showed that in addition to receiving huge subsidies from the state, Petrotrin was not paying its fair share of taxes collected to government.
“Taxes and royalties owed to Government amounted to $3.1 billion as at February 28, 2017. The company was not complying with the tax laws and even when it collected taxes from companies that paid their taxes to Petrotrin for onward transmission to the Ministry of Finance, Petrotrin was huffing and utilizing those monies in its own operations.”
“Money that should be turned over to the Ministry of Finance is held within the company and that is illegal,” he added.