PORT OF SPAIN, Trinidad (CMC) — The Trinidad and Tobago government Monday reiterated its position that it was necessary to close down the refinery of the state-owned oil company, Petrotrin, insisting that the company was losing billions of dollars (One TT dollar=US$0.16 cents) annually.

Finance Minister Colm Imbert, delivering the TT$51.7 billion budget to Parliament, said that the Keith Rowley administration had agreed following a “comprehensive assessment and analytical review of its operations” to shut down the refining and marketing business unit of Petrotrin.

“We are repurposing Petrotrin which would now focus on the full exploitation of its exploration and production activities and on a new terminalling business through which imports will now meet the demand of Trinidad and Tobago and the Caricom region for the refined products previously produced by the refinery,” Imbert said.

He said these would include motor gasoline, diesel, aviation fuel, liquefied petroleum gas and other derived and refined products.

He said in 1985 when a former people’s National Movement (PNM) had decided to purchase the failing refinery assets from the international private sector in a bid to save jobs, the situation has changed.

“Since that time, the refinery economics have further deteriorated as the refinery has failed to adapt to the changing fuel environment which demanded cleaner standards for fuel technologies in local and foreign markets.

“The continuing efforts over time by the managerial, technical and governance personnel to improve the efficiency of the refinery to meet the standards for the internationally marketable products fell short of requirements.”

Imbert said that all the major plant upgrades failed – from the gas optimisation plant to the ultra-low sulphur diesel complex and the gas-to-liquids plant – all experiencing substantial cost overruns in the process.

He said the cost of these upgrades has loaded the company with an unsustainable debt burden estimated at TT$12 billion of which TT$5.780 billion is due in August 2019.

“While the company continued to incur persistent losses, the gasoline optimisation programme saw its cost rise from TT$2.45 billion in 2005 to TT$12.6 billion when it was completed in 2013, the cost of the unfinished gas-to-liquids plant rose from TT$1.55 billion to TT$3.15 billion and that the cost of the ultra-low sulphur diesel complex rose from TT$791 million to $2.89 billion “

He said while the project is 98 per cent mechanically completed, it cannot be operated because the structural specifications were not followed, meaning that the foundation is faulty and cannot be used. It would take TT$2.5 billion to rectify the defects, Imbert added.

5000 JOBS

He said in the context of these managerial failures, the size of the employee-base at Petrotrin remained in the vicinity of 5,000, divided between the refining and marketing business unit and the exploration and production business unit.

“In addition, the monthly wage bill amounted to TT$183 million per month or TT$2.2 billion on an annual basis. Coupled with this wage bill, the medical plan was running at an annual cost to Petrotrin of approximately TT$245.0 million per year but with very low contribution rates by the employees ranging from TT$50 to TT $80 per month.”

Imbert said what is interesting about this TT$245 million, medical plan is that it currently covers 21,000 present and past employees and their unmarried family members under the age of 21 or under the age of 23 if still in school.

“It effectively covered a Petrotrin employee and spouse until death. This has to be one of the most generous medical plans in Trinidad and Tobago, if not in the entire Caribbean region,’ Imbert told legislators.

He said the survival of the company was only possible through the non-payment of TT$3.5 billion in taxes and royalties, in breach of the law, and the procuring of government guarantees in the amount of TT$1.5 billion for loans from financial institutions which have significantly increased the public debt.

“This has placed a severe burden on the Treasury and on taxpayers, especially in view of the fact that Petrotrin extracts 40,000 barrels per day of taxpayers’ oil, at a value of six billion dollars per year, for which taxpayers receive no benefit.”

Imbert said that despite the fact that Petrotrin is tottering on the brink, as recently as last month, it approached the Ministry of Finance for financial support by way of another government guarantee in the amount of US$56 million to purchase a cargo of crude oil, since the shipper refused to discharge the cargo without a guaranteed letter of credit.

“And just last week, Petrotrin approached the Ministry of Finance for more financial support to refinance debt instruments totalling a further US$180 million as they become due for payment,” Imbert said, telling legislators that in its current form the company “remains unprofitable and whatever scenario is analysed, it cannot generate a profit without drastic restructuring.

“The financials generated by independent consultants, both local and foreign, provide a grim outlook of a deteriorating financial situation which cannot be improved even if billions of dollars in capital are injected into the company, which capital is simply not available.”

He said the latest financials for the company are illustrative of a looming crisis which if left unresolved would have a serious impact on the national economy.

Imbert said the government will do all that it can to assist displaced workers at Petrotrin to transition to their new circumstances.

“We will provide all available support at our disposal. And we will work with the company to ensure that adequate funds are available to pay termination benefits on time and in full,” he said, adding ‘we are confident that the reinvented Petrotrin will resume its rightful place as a leader in the oil and gas sector of Trinidad and Tobago and will become a profitable and efficient entity that makes a positive contribution to the Treasury.

“May I also point out that the company has advised that it will continue to be a significant earner of foreign exchange, in the vicinity of US$200 million-plus per year, after it completes the transition to its new business model,” Imbert added.