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A PETROTRIN RETROSPECTIVE

posted 29 Nov 2020, 06:29 by Gerry Kangalee   [ updated 29 Nov 2020, 07:57 ]

As we patiently await (some eagerly) what is expected to be the final decision of the government on the Oilfield Workers’ Trade Union (OWTU), Patriotic Energies and Technologies Company Limited, proposal for the acquisition of the Petrotrin refinery, we consider it necessary and important to review some of the information, analyses, comments and projections which have been produced from various sour

POINTE-A-PIERRE - THE FACTS

Trinidad and Tobago’s largest crude oil producer, operating the country’s only petroleum refinery ceased refinery operation on November 30th 2018.

The government and some international publications gave the public the false impression that the refinery was 100 years old and in a totally dilapidated state, furthermore, it was communicated that the refinery was a ward of the state plagued by high and rising debt, low productivity levels, escalating manpower costs and the loss of billions of dollars every year.


The oldest plants at Pointe-A-Pierre are:

1. The catalytic cracker established in 1957 the year when Texaco, the US multinational corporation, acquired Trinidad Leaseholds Ltd.

2. The number 8 Topping Unit established in the 1960’s

The government failed to mention that major upgrades of the refinery were undertaken in the early 1970’s and the mid 1990’s.

Most importantly, no mention was made of the gasoline optimization programme (G.O.P) which operated from 2006 to 2014 at a cost of US $1.8 billion. 

This programme produced a number of new plants at Pointe-A- Pierre including:

1. The cat cracker was upgraded and was certified in 2014, by Lloyds, as fit for use. The upgrade increased the unit’s capacity from 26 thousand barrels per bpsd to 35 thousand bpsd; converting a higher percentage of vacuum gasoil to gasoline and enabling the refinery to produce a better quality of gasoline with improved ratings from 81 motor octane number (MON) to 83 (MON).

2. Isomerisation unit-A new isomerisation unit was established to produce the octane for light gasoline, the product is an environmentally-friendly component to enhance the motor gasoline pool enabling the company to compete in premium markets.

3. Continuous Catalytic Regeneration (CCR). This is a 27,800 BPSD platforming unit which provides for a higher yield of superior octane gasoline. This improves octane rating from 86 (M.O.N) to 90 (M.O.N). Additional benefits include reduced operating and maintenance costs; improved product yield and quality and increased hydrogen production.

4. The New Alkylation Unit/ Sulphuric Acid Regeneration Unit. This new 10,000 BPSD alkylation unit replaces the existing 1,800 BPSD Alkylation unit. It is geared to increase gasoline product to accommodate the increased feedstock generated by the upgraded cat cracker plant. The Alkylation product is a premium high octane, environmentally-friendly gasoline blending component which will add to the pool of high octane gasoline; assisting to maintain an increased refined product market share and eliminate the need for better storage and shipping facilities for liquefied petroleum gas (LPG).

5. Ultra-Low Sulphur Diesel Plant. This new plant is designed to process 40,000 BPSD of Diesel boiling-range feedstocks to produce a diesel product that will reduce sulphur content from more than 1,000 PPM to 3 PPM; aromatics from more than 45% to 25% and the cetane number from 41 to 50. The construction of this ULSD plant would enable the company to meet stringent new diesel quality specifications (Sulphur and Aromatics) in the local, regional and international markets.

ces.

The Closure of the Refinery is not a new Issue

In 1993, PNM Prime Minister Patrick Manning made a request that Petrotrin’s management conduct an evaluation of the options for the refining industry. One of the options presented was to shut down both the Pointe-A-Pierre and Point Fortin refineries and completely exit the refining industry.
Positive Financial Features of Petrotrin

In 2015 the refinery was making an operational profit. In April 2016, the then president of Petrotrin told a joint select committee that the refinery was a “Bright Spot”. Between 2010 and 2014 Petrotrin was the largest contributor of foreign exchange to the government of Trinidad and Tobago. 

In 2014 and 2015 Trafigura, one of the world’s leading energy trading companies, paid Petrotrin and T&TLNG ltd. (A subsidiary of NGC) a total of US$507 million for 1,381 barrels of refined products and 2.81 million barrels equivalent of gas respectively. 

Trafigura also disclosed that in 2016 it paid Petrotrin US$506 million for 10,586 thousand barrels of refined products and 1,425 thousand barrels equivalent of gas.

This total exit option was rejected on two (2) main grounds:

1. The negative impact it would have on the economic, social and psychological lives of the people, especially in South, Trinidad.

2. The loss of the security of the supply of petroleum products to the Local and CARICOM markets. Notwithstanding the above, the PNM cabinet under the leadership of Mr. Manning closed the Point Fortin refinery permanently in 1994.

No Recommendation for The Closure of the Petrotrin Refinery

Consultants Solomon and Associates and McKinsey both recommended a restructuring of Petrotrin with the refinery intact. The PNM cabinet, under the leadership of Dr. Keith Rowley, according to minute no. 365 of February 23rd, 2017, agreed to the appointment of a team to conduct a review of the operations of Petrotrin and make recommendations for its restructuring.

The committee was a
ppointed to conduct a review of the operations of Petrotrin; make recommendations for the restructuring of the company and submit its first report on June 1st 2017. It became known as the Lashley Report.

The committee’s report of the June 17th 2017 recommended: “The establishment of three operationally independent business units: Trinmar: Land Exploration and Production; Refining and Marketing.”

On January 22nd 2018 the Minister of Energy, Franklin Khan stated: “The Board (Petrotrin) is currently working on a plan for the restructuring and charting the company back to viability. However, before any decision is taken on these matters there will be widespread consultations with all stakeholders and particularly the employees’ union representative.” (Energy Chamber Annual Conference: January 22nd, 2018)

Some Assets of Pointe-A-Pierre

1. Petrotrin refinery encompasses two thousand acres or 809 hectares of Land which is Prime Industrial Real Estate.

2. The Point-A-Pierre harbour which enjoys an ideal location along the shipping routes connecting South America, West Africa and North America.

The Gulf of Paria provides a sheltered location where massive vessels can be bunkered with minimum delays, resulting in a fast turnaround.

3. The Augustus Long Hospital.
4. The Golf Course.
5. The Residential Bungalows.
6. Guaracara Park and its Facilities.
7. New Marine Building and Jetty.
8. Nitrogen Generation Facility.
9. New 5million gpd Water Treatment Facility.
10. Two (2) new 275,000 pounds per hour (lbs/hr) Steam Boilers.
11. Upgraded Refinery Switch/Gear.
12. New Refinery Laboratory.
13. Upgraded Refinery Bulk Electrical Power System (URBP).
14. The Fleet of Marine Vessels.
15. New Main Fractionator Column. 
(According to Information provided by the Government of Trinidad and Tobago State Enterprises Investment Programme - SEIP).

The Estimated Cost of Item 8 was $22 Million.
Items 9 and 10: the figure was $21 Million.
Item 11: the estimated cost was $177.5 Million.
Item 12: the figure was $190 Million.
Item 13: Estimated to Cost $265 Million.
Item 15: Estimated Cost was $46 million.
In commenting on the two (2) foreign consultants i.e. Solomon and Associates and McKinsey, one source stated: “… neither of the two studies recommended the shutdown of the refinery. Having exhaustively analysed all the potential impacts and risks, neither team came to the conclusion that we should cease refining operations.”

The same source remarked in relation to Petrotrin’s top management: “Furthermore the Board of Directors who had been appointed by Prime Minister Rowley have stated that they also did not recommend the termination of the refinery operations.” (David Walker, Corporate Finance Consultant)

Cost of Two (2) Studies to the Taxpayer

The same source informs us that the two (2) Foreign Consultation studies of Petrotrin were expedited “at a combined cost of almost 100 million dollars.” (David Walker Corporate Finance Consultant)

One source has described the Point-A-Pierre Refinery as the most complex Business in Trinidad and Tobago. In elaborating on the issue of complexity of Refineries, it is stated that: “The complexity of every refinery is expressed in the Nelson Complexity Index. The Nelson Complexity Index for our refinery is 8.8.

The higher the Nelson Complexity Index, the more likely it is a refinery will thrive. It is for this reason the Ultra-low Sulphur Diesel (ULSD) plant is important to the refinery going forward. The ULSD, if completed, would increase the Nelson Complexity Index to 9.8. It is unsure whether Patriotic Energies has a plan to complete the ULSD but if they do it will cost them US$300 million.” (Kevin Ramnarine, ‘Reopening Refinery no Easy Task’.
Express Business: December 4th, 2019)

What is very clear is that the refinery at Point-A-Pierre is not an ancient hundred year old white elephant. but a facility which has potential for growth and development under the right leadership and management.  This whole affair raises the question of lack of clarity on policy; lack of vision and consequent foresighting - features characteristic of political elites of neo-colonial countries  who are a component element of modern imperialism. 
Of course policy has to take into consideration the phasing out over time of the hydrocarbon industry; the ongoing impact on the climate and the environment and the the urgent necessity to move away from the plantation economy model. it is wishful thinking, though, that these elites are willing and able to grasp and implement such a vision and policy. In the final analysis, class interests trump eveything and their interests are tightly bound up with thoseof international capital.

(Economic Analysis unit of the Labour Advisory Bureau)
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