Mon | Aug 21, 2017

Trinidad to overhaul state oil company Petrotrin

Published:Friday | January 13, 2017 | 1:00 AM

CMC: 


The Trinidad & Tobago government signalled Wednesday night that an overhaul of state oil company Petrotrin was likely, less than a day after it granted a five per cent salary increase for workers, in the process avoiding a 90-day strike within the vital energy sector.

Petrotrin said the agreement with the Oilfield Workers Trade Union spanning 2011-2014 would cost it around TT$80 million annually.

In a television broadcast Prime Minister Dr Keith Rowley said the taxpayers of the country “cannot continue to turn a blind eye or be uninterested in the challenges” at the oil company.

With more than 5,000 employees, the company has an annual wage bill of TT$1.9 billion, which is close to 50 per cent of its total annual operating costs, the PM said.

“This payroll ratio is exceptionally high even compared with that of other state-owned oil companies,” he said.

Alongside the wage bill, Petrotrin has two big external loans totalling US$1.6 billion to service.

“Even though the company is an integrated operation the weight of our capital spending - as we all know monies often not well spent - has been on refinery operations at the expense of oil and gas production, whether on land or offshore,” said Rowley. “Because of financial constraints at both the level of the state and the company, rectifying this imbalance now can only be effected by imports of external and domestic capital as well as new technology into oil and gas production at Petrotrin”.

Rowley said Petrotrin, the country’s major oil producer, currently accounts for more than one-half of total oil production of about 72,000 bpd and is a net earner of foreign exchange, estimated at TT$250 million per year in 2015 and 2016.

He said it is an important contributor to government tax revenues and a guarantor of the country’s energy security.

But the PM also said Petrotrin had been able to mask a range of fundamental weaknesses for many years as a result of high international oil prices.

The dramatic slump in crude oil prices, combined with an ongoing decline in refinery margins and declining local oil production led to a more than 50 per cent decrease in the oil company’s revenues, from TT$37 billion in 2012 to TT$16 billion in 2016, he said.

And, because of acute cash flow problems, caused by its drastically reduced revenue, Petrotrin asked for and received government guarantees in 2016 for short term loans up to a maximum of US$230 million in order to carry on its operations and meet its basic financial obligations.

“When you net off the money owed by the state to Petrotrin at this time for the fuel subsidy against the royalties and taxes belonging to the state, but withheld by Petrotrin, the company currently owes the Treasury TT$1.2 billion in unpaid taxes,” the PM said.