Cash-strapped Petrotrin has been advised to put price caps in its projects to avoid costs overruns.
Senator David Small, chairman of the Joint Select Committee (JSC) on State Enterprises, speaking at a press conference held at the J Hamilton Maurice Room, Office of the Parliament, said the energy company was told to put a limit to project costs with contractors. Should costs exceeds that cap, it would be at the expense of the contractor, not the company.
Members of the JSC had expressed concern about the delay in completion of an ultra-low sulphur diesel project which commenced in 2009 and had an estimated completion date of 2012. The contract went to Samsung Engineering and Construction at a cost of US$220 million, which was later increased to US$260 million.
However, problems developed with the project resulting in delays. The plant was 98 per cent complete when routine pre-commissioning activities in September 2013 revealed that several structural members were badly designed. Additionally, it was discovered that the wrong seismic resistance had been specified.
In September 2014, the company sought joint remediation of the structural and seismic deficiencies. Samsung committed to finding a solution to the problem but little progress was made and in December 2015, the board of Petrotrin decided to terminate the contract with Samsung.
A report in the project stated that Petrotrin is in the process of engaging a replacement contractor and is seeking an alternative solution to strengthen the plant to the appropriate seismic resistance. Base isolation, which was suggested by Samsung, is not an option. Officials said new completion date for the project, which has cost $3 billion so far, is the end of this year.
Petrotrin admitted that it suffered losses and faced challenges in several other projects, including the South-West Soldado Project, the Fluid Catalytic Cracking Unit and the Gas Optimisation Programme.
The JSC report shows that the state-owned oil and gas company's debt is currently at $13.28 billion and a US$850 million bond is due to be paid in two years' time.
Ronald Huff, Petrotrin's chief financial officer, told the JSC that proceeds from the US$850 million bond, which is due August 2019, were primarily directed toward capital expenditure, specifically the gas optimisation project.