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posted 8 Sept 2018, 07:44 by Gerry Kangalee   [ updated 8 Sept 2018, 08:01 ]
David Walker is a corporate finance consultant. He also writes regularly on matters of the economy in the local media. He can be reached at d.walker@alcindorwalker.com.
We’ve been told that the refinery on which billions have been spent over the last decade or so is to be closed. We’re told that it is losing two billion dollars a year or something in that order of magnitude. If true, then that is clearly not sustainable and the haemorrhaging has to be stopped.

I don’t think anyone would support the continuation of an operation that is costing the nation that much money on an annual basis. This is a company that we expect to be a net contributor to the economy, not a burden, given that it is mandated and lavishly financed to exploit our oil reserves as it sees fit. It should never have gotten to this.

We’ve been told that the genesis of Petrotrin’s problems lie in bad investment decisions and a bloated wage structure. We’ve been told of the exorbitant cost of several failed projects at the refining side of the business. Are there other failed projects elsewhere at the company? We’ve heard of disputed figures about the wage cost. Why can’t we have a breakdown across ranges of pay? That will tell us for example, how much is for senior management, middle management and “blue collar”.

What we do know about wage costs is from this 2016 report in a daily newspaper -

In your submissions there has been a significant escalation in the cost for an item called ‘directors and key managers — remuneration’,” Independent Senator David Small said. “We would just like to get an explanation as to how it virtually tripled from the average, especially at a time of low oil prices. We would like to understand what happened there.” The Committee chairman said from 2006 to 2012, the item averaged between $6 million and $8 million. In 2013, it was $9 million.

In 2014, the item moved to $11 million. But in 2015 it was $29 million.

We need to know the figures for subsequent years.

Most importantly in my view, we’ve heard from Wilfred Espinet, the Chairman that the single greatest cause of the crisis is not the union, but political interference. Not enough attention has been paid to that statement as it points the only way forward and should provide a signpost to who should be held to account for the catastrophe that is about to befall the workers and their dependents. The silence about those who created this problem is deafening.

For those of you who are inclined to see only the union and the workers as the culprit, I wish to remind you of the following:

Who signed off on the disastrous billion dollar Gas to Liquids investment? Not the union but management.
Who signed off on the failed billion dollar Ultra Low Sulphur project? Not the union but management. 
Who saddled the company with a billion dollar loan at an extortionate 9.75%? Not the union, but management and Cabinet.

Who approved salaries and wages across the company? Not the union, but management.

I could go on but I think you get the point. The malaise rests entirely at the feet of management and the politicians (according to Mr. 
Image result for petrotrin financial reportsEspinet). Yet the usual suspects, some of whom were among the political directorate “in the saddle” try their very best to lay the blame at the feet of the union and the workers and feign anger that workers are upset. Even now, the only sacrifice to be made appears to be directed at workers. Bear in mind that a union’s job is to obtain the best compensation package for the workers it represents. If management failed to negotiate effectively, that’s not the union’s fault but management’s. 

Where is the examination of what really took place? Given that political interference has been identified as the root cause of the problems, why is there not a public enquiry into how and why? What specific steps are being taken to prevent such interference now and in the future? Did senior management fail to discharge their fiduciary responsibilities in their decision making especially at director level? We’re dealing with the avoidable loss of tens of billions of dollars inclusive of possible large scale corruption. Why are we only looking the other way and not holding former directors liable, or even attempting to investigate their actions?

I don’t know how many readers will heed my call but the time is right for a full and public investigation or inquiry into how these catastrophic decisions came to be made.

The fallout from this crisis is going to be severe. There will be contagion i.e. all the other businesses that benefit from contracts at the refinery or provide services to its employees and their families will also suffer. The loss of 2,000 or more well paid jobs and its knock on effect will deal a devastating blow to Pointe-a-Pierre and beyond. That is why the solution to this crisis must be well thought out and sympathetically implemented. We’ve not heard enough about the way forward.

Given the vast expenditure on the refinery in recent years, are we to understand that it now has zero value? How many billions of dollars of investment over the last decade are to be abandoned? We are now being told that the writing has been on the wall for several years, so on what basis was continued large scale investment approved, and by whom?

I return to my earlier statement that the projected annual loss in unsustainable and remedial action is urgently needed. In that scenario the workers must not however be the only or even the first victims of the collapse and closure of the refinery. We, the taxpayers need reassurance that the architects of this financial disaster are made to pay a price commensurate with the scale of their failures, be they directors or Cabinet members.

Their failure is demonstrably worse than in the CLICO saga as CLICO assets did recover value to the tune of more than fifteen billion dollars over time. We’re being told that these at Petrotrin are a complete write off. We should feel more anger and resentment towards the directors and those that interfered politically at Petrotrin than the anger shown towards the former directors of CLICO.

I hereby call for an independent inquiry unlike anything that we’ve done before. This situation is worse than anything we’ve previously encountered and deserves carefully considered treatment. Unfortunately, I’m hearing nothing about the culpability of directors and Cabinet members. I am also disturbed by the fact that this process still has an excess of political leadership or interference since that is at the root of our troubles then that must change if we are to progress.

This disaster is not the fault of the union, or even about the union. This problem can only be fixed by the appointment of the highest quality management, freed from the heavy and expensive hand of political interference. We should only be satisfied if those responsible are held to account and made to pay a price.

David Walker – d.walker@alcindorwalker.com : www.straighttalktt.com