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Petrotrin’s woes continue
Last week’s decision by Petrotrin’s president Fitzroy Harewood to resign from the company has again raised the issue of its viability and stability and why a company that four years ago had a pre-tax profit of over $2 billion is now fighting for its very survival.
Harewood was Petrotrin’s fourth president in seven years and came to the job at a time when the company was haemorrhaging.
A study done by UWI economist Dr Roger Hosein demonstrates what happened in Petrotrin during the period 2009 to 2016 and how the company moved from profitability to deep losses.
According to figures, in 2011, the first financial year of the Persad-Bissessar government, Petrotrin recorded a pre-tax profit of $741 million.
One year later that profit shot up to $2.065 billion.
The increased profits were a direct result of a reduction in the percentage of cost that was attributable to salaries and wages.
That fell from 55 per cent of overall cost in 2011, to 50 per cent in 2012.
In addition crude prices were buoyant, averaging US$94 a barrel in 2012.
It must be noted that in 2009, Petrotrin had a pre-tax profit of over $1.7 billion, with crude prices at US $61 a barrel and its wage bill as a percentage of overall costs was 50 per cent.
But the Former Minister of Energy Kevin Ramnarine and former Petrotrin chairman Lindsay Gillette both denied that the movement from a profit of over $2 billion to a loss of $100 million in 2013—when oil prices were over US$97 a barrel—was a reflection of poor management by the last administration.
Both Ramnarine and Gillette blamed the change in company fortune on the impairment of the World GTL project which meant that over $3 billion had to be accounted for in the profit and loss statements for 2013 and 2014.
Gillette told Business and Money that what has happened at Petrotrin was not his fault, nor that of the former administration nor even the PNM government.
“We were lucky that when we were there we had high oil prices. The fact is that nobody is responsible for the collapse of the oil prices. Petrotrin’s assets were allowed to deteriorate over a long period of time and it had reached a stage where we had to invest significant sums to maintain a level of asset integrity. I used to write every year to the Ministry of Energy asking the government to assist us by using the Green Fund to pay for the improvement of Petrotrin’s asset integrity,” Gillette added.
Ramnarine admitted that he had received those letters from Gillette but said there was nothing he could do as a minister or the UNC as a government because the sums that Petrotrin needed was more than contained in the Green Fund and also the fund was not created for that purpose.
Ramnarine said, “Under the rules of the Green Fund, a company like Petrotrin cannot access the fund, which is taxpayers money. The Green Fund can only be accessed by NGOs and CBOs.”
Hosein’s study also showed that the movement from profit to loss in 2013 was accompanied by an increase in contract staff at Petrotrin.
In 2013, the number of people at Petrotrin on contract increased from 1,130 to 1,400—18 percent, while an additional 100 permanent staff were hired in the same year.
Ramnarine said he did not know that the staff levels had gone up in any significant way under his watch and then suggested that, in any case, ministers do not hire people.
He said the increase staffing levels may have had to do with the needs of the organisation.
Hosein’s study also revealed that during the time period 2009 to 2016, crude production at the state-owned enterprise remained fairly stable at about 44,000 barrels of oil per day but refinery throughput fell from 154,000 bo/d to as low as under 100,000 bo/d.
That fall in throughput also put pressure on the company’s generation of foreign currency with its contribution to the economy falling from US$10 billion in 2009 to US $500 million last year.
Hosein’s report read, “One major boost to the local economy of Petrotrin is its foreign exchange earning capacity. Alarmingly, though, as oil prices decreased in the last three years, the contribution of foreign exchange made by Petrotrin to the domestic economy collapsed dramatically from $70.7bn in 2009 to $3.5bn in 2016.”
By the time Harewood took over at Petrotrin at the end of 2015, the loss had moved from over $200 million to $1.7 billion.
He was able to reduce that loss by almost a billion with the same crude prices as the year before.
Harewood reduced contract workers by 500 and did not replace an additional 200 permanent staff that retired.
Harewood’s resignation came mere weeks after the so-called “fake oil scandal” was shown to be real.
His resignation takes effect on February 28, 2018.
Harewood was appointed president of Petrotrin in November 2015 by the then board led by Andrew Jupiter. At time of his appointment the Opposition had raised concerns about whether he was the best man for the job.