“We are now 101 years-old in the refinery business and the purpose of getting into it is no longer relevant, but we are holding on to it because there are emotional ties. And because it is there, what we’ve done now as a board is look at it hard and said “Hey, let’s start from a clean sheet.”
Espinet said when the current board was appointed last September, they were mandated to find ways to stop the company from losing money.
“With that, we had a continued programme of looking at all sorts of ways to make this work. We came to the conclusion that if we wanted to be able to pay back the debt, and if we wanted to be able to have a profitable company that could be sustained over time, we would have to take out what was the cancer of the operation and that would have been the refining and marketing.”
The board met with the Oilfield Workers’ Trade Union (OWTU) earlier in the day at the Petrotrin staff club and Espinet said the union was welcome to suggest alternatives to the shutdown.
He however pointed out that the course of action will not be changed unless the union can come up with a better proposal.
Espinet said workers will not be thrown out on the pavement, and the company will construct an exit plan to ensure that. But he said alternatives may not be accepted as the company has to make its bond payments.
The restructuring exercise is geared to curtail losses at the state owned oil company and get it on a path to sustainable profitability. Approximately 2,600 permanent jobs will be affected – the redesigned Exploration and Production business will have approximately 800 workers and all 1,700 jobs in refining will be terminated. Petrotrin is committed to cushioning the effects of any fallout that occurs from the planned changes.
The announcement follows months of careful review and analysis by the Company’s Board of Directors, which was appointed last September to identify the problems at Petrotrin and take the steps necessary to make the Company self-sustainable and profitable.
Petrotrin has lost a total of about TT$8 billion in the last five years; is TT$12 billion in debt; and owes the Government of Trinidad and Tobago more than TT$3 billion in taxes and royalties. The Company currently requires a cash injection of TT$25 billion to stay alive –– to refresh its infrastructure, and to repay its debt –– and even with that, if left as is, it is projected to continue losing about TT$2 billion a year.
“If we don’t come up with a solution to the bond payments within a matter of weeks, we are going to run into serious difficulties as a company.”
Asked about the possibility of the refinery being sold, Espinet said, “No, no, definitely not. Don’t even think of it being sold. There is no plan to sell it. The reason it is being shut down is because it is not economic to run it. I think we have to be careful that we don’t put things in people’s minds, there is no likelihood of that refinery being sold.”
Director of the Refining and Marketing unit Anthony Chan Tack also weighed in, saying with a 70 per cent higher operating cost than competitors, anyone who buys it will lose money.
“One assumes anything you sell can be a profitable business, you think someone is going to buy it to lose money? The refinery is a difficult business to make money in, given the state of the refinery and the kind of investment that has to be done, it is going to be very difficult for somebody to recover that, plus buying the refinery and running it,” Chan Tack said.
Chairman Espinet said: “With the termination of the refining operations and the redesign of Exploration and Production, Petrotrin will now be able to independently finance all of its debt and become a sustainable business. Petrotrin is no longer producing enough oil to operate the Pointe-a-Pierre refinery efficiently. We are producing approximately 40,000 barrels of oil a day and the refinery operates at a capacity of 140,000 barrels a day, so we have to go to the market to buy about 100,000 barrels of oil to make up the shortfall. This results in a net loss in foreign exchange."
The refining of oil will be phased out and the Company will import the refined products (gasoline, diesel, aviation fuels, etc.) that the country needs –– approximately 25,000 barrels of oil equivalent a day. All of the Company’s oil will be exported.
Espinet said: “Our goal is for Petrotrin be an internationally competitive and sustainably profitable leader in the local energy sector; and an employer of choice, that is a source of national pride.”
“The cost of the fuel that we make is not going to be any less expensive than the cost of the fuel you are importing. What is the cost and what you pay for it are two different things. That is a policy decision, it has nothing to do with costs of the fuel.”
Espinet says the company’s Exploration and Production departments will benefit from the refinery’s closure as money can now be invested in these operations.
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