Petrotrin Refinery

It is election time again. It is a time often referred to as the silly season when politicians make all kinds of claims and promises in an effort to convince the electorate to vote for them.

This pattern of behaviour is not unique to T&T and both major political parties are guilty of it. What I think the country should however reject are promises that are inimical to T&T’s interest. One such example is the UNC’s talk about the restart of the Point-a-Pierre refinery by the State, with or without private sector involvement.

I am on record in my support for the closure of the refinery, not because I wanted to see thousands of workers lose their jobs but because the country could not afford to continue to support operations that were bleeding the treasury, with little hope of a turnaround.

The decision to shut down the refinery was bold, risky and potentially political suicide but to the credit of the present administration they had the fortitude to do it.

As with most things in this government, the communication surrounding its closure was a botched job but it does not take away from the fact that the refinery could not, and was not making a profit.

In case we forget, by the time the refinery was shut down and thousands of workers sent home, Petrotrin had chalked up billions of dollars in debt, it had a US$850 million bond payment due, which it could not meet and was losing between US$1.50 and US$3.00 per barrel of oil.

The global refining business is all about margins, that is to say you purchase crude oil for the refinery, you process it into different fuels, like aviation fuel, gasoline and diesel and even fuel oil and then sell those products at a profit.

For you to be profitable it requires the ability to source crude at global prices and process that fuel so efficiently that you can make a profit on each barrel of product and then market that product.

It often requires a highly mechanised and efficient refinery, significant cost control systems, economies of scale, control on the provision of the crude and the marketing, inclusive of the downstream markets.

Most successful refineries are operated by large oil producers who use their crude and refine it, they control the ships, they control the crude, they have lean and efficient refineries and also control the retail sale of the product by having fuel stations. These conditions do not, and are unlikely to exist any-time soon at the Pointe-a-Pierre Refinery.

Even if one assumes that the refinery is free of all encumbrances it does not change the fact that in-spite of many upgrades, when benchmarked against best in class refineries, the Pointe-a-Pierre refinery consistently failed to match up to best in class.

But in thinking about writing this article I wanted to make sure that I fully understood the UNC’s plan behind the restart. So I reached out to its candidate for Pointe-a-Pierre David Lee, who in the last Parliament acted as the opposition’s shadow Energy Minister.

I asked Mr Lee what was the UNC’s plan in restarting the refinery. His response was “Ent Patriotic was going to restart it?”

I asked him to confirm if this restart as articulated by the UNC would have state involvement or if it would support private sector control of the refinery. He said it would be without the private sector.

I asked him if he was aware that most experts say the cost of just restarting the refinery would run between $300 million and $750 million for which his response was; “Whatever it takes, we would restart the refinery.”

I put it to him that you would then immediately have to fork out hundreds of millions of taxpayers dollars on a refinery which we don’t even know the condition of.

Lee said: “Well, first of all, the first thing we would have to do is reassess what is the status of the refinery, because the refinery has been down for over two years. So that we have to, as everything else in business, we have to assess and then make it work so, we are prepared to restart the refinery and it’s going to happen under the United National Congress. That’s as much as I would like to say at this point in time.”

I told him the country needed to have some detail about such a major decision but he said; “I wouldn’t be in a position right now to go indepth with what we have.”

Lee then asked to speak with me further on Tuesday morning.

I called him on four occasions on Tuesday morning including immediately after he had concluded an interview on TV. He neither took the call nor returned it at time of writing.

It sounds good to promise people to restart the refinery and make them feel thousands of jobs will return, especially if it is your constituency and you are in a battle because it is a marginal seat, but in an effort to win an election wild and dangerous promises must be called out, less we vote in favour of them and then find ourselves saddled with more losses.

The country made a painful decision to shut down the refinery. In some ways it was a national humiliation because we took over it from Texaco and after decades we were incapable to make it a profitable venture.

At the time the refinery was purchased by the then George Chambers government it was an attempt to save jobs and economic activity in the area. It was about pleasing the unions and nationalistic fervour. And what has it brought us?

As a country, we need less government in business and while I would love the refinery to be restarted it must be by anyone but the government.

The UNC does not have a good record in managing state-owned energy companies and in its last tenure almost brought the National Gas Company (NGC) to its knees, using it as a political football, making it build playgrounds in UNC controlled constituencies, spending a billion dollars on a failed waste-water treatment plant and raiding it of billions of dollars for budgetary support; even when oil and gas prices were at record levels.

The party promised to increase crude oil production using Petrotrin, instead it saw a 30 per cent drop in oil production, the largest fall in the country’s history.

It told us that the country would be right with the jubilee discovery that proved to be nothing but show-boating.

For those who talk about fuel security, I ask if the 95 per cent of the countries in the world that do not have refineries are especially vulnerable and don’t have fuel security?

The question David Lee and the UNC must answer are.

1. Would the restart of the refinery mean the crude now exported will have to be used in the refinery?

2. If so, where is the money going to come from to pay the interest on the bond?

3. Will we still have to import 80,000 barrels of oil per day?

4. Where are the hundreds of millions needed to restart the refinery going to come from?

5. What will that mean for the cash flow of Heritage?

Maybe Mr Lee will answer some of these questions in detail. If not this is nothing but playing smart with foolishness.