Trinidad’s government is beginning to feel the expected political fallout from this week’s announcement that government will soon close the money-losing, debt-ridden and overstaffed major oil refinery and try to restructure it in the wake of declining daily oil production that has largely rendered the plant useless.
In the best of days in the ’80s and ’90s, Trinidad never produced more than 300,000 barrels of oil daily and appears to have larger reserves of gas than oil. Daily production in recent months has struggled to reach a mere 40,000 barrels. So, much of the refinery is idle for large portions of any day.
The result is that the cabinet and the board of directors at Petro Trinidad have decided to cease operations in the coming weeks. Almost 1,000 workers will soon face the breadline.
And despite the overwhelming evidence that keeping the current setup in place is a significant drain on the economy, labor unions are bracing for massive protests and are even advising their membership not to support the Afro-led administration of Prime Minister Keith Rowley and the governing People’s National Movement in general elections in 2020.
Trinidad had been banking on the prospect of oil from neighboring Guyana’s newly found oil and gas reserves being sent to Petrotrin’s facility in south Trinidad for refining, but lukewarm feedback from Georgetown has put a damper on such plans and hopes.
Actual production in Guyana is scheduled to start in late 2019 or early 2020 and by 2022 could be up to 750,000 barrels daily. ExxonMobil, which is leading a conglomerate of international oil majors in Guyana, just this week announced its ninth big oil find as the country prepares to become the Caribbean Community’s newest and largest producer.
Company Chairman Wilfred Espinet told reporters in the past week that Petrotrin simply could not continue bleeding the way it has been for years and carrying along a workers staff ledger with nearly 3,000 names on it refining 40,000 barrels of oil daily.
“We would have to take out what was the cancer of the operation and that would have been the refining and marketing,” he said. “We had a continued program of looking at all sorts of ways to make this thing 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.”
He also noted that the plant has a capacity to refine 140,000 barrels daily, but with the steadily declining oil production on the Caribbean’s most southerly island, it has been forced to cut 100,000 to make up for the shortfall.
“This results in a net loss in foreign exchange,” he said. “With the termination of the refining operations and the design of exploration and production, Petrotrin will now be able to independently finance all of its debt and become a sustainable business.”
A much leaner company will still, however, have to deal with of $1.2 billion in losses in recent years, $2 billion in debt and approximately $500 million in taxes and royalties owned to state revenue, according to the Daily Express newspaper.
Rowley, who is now under severe pressure from labor, civil society and the political opposition, had described Petrotrin as “an albatross around the necks” of the country because it was bleeding cash by the millions daily as oil production declines and new clients have failed to show up. The company also needs approximately $4 billion in cash to clear debts and restructure. This amount would include severance to workers, officials say.
If nothing else, Rowley has the support of the energy chamber in Port of Spain, as its leaders have also complained about Petrotrin’s inefficiency, high debts and apparent inability to come off the floor.
Chief Executive Thackeray Driver was quoted as saying, “We understand the economics behind the decision. It’s obviously a very sad day. It’s a very tough decision that had to be made.”