As the country awaits the ruling of the Industrial Court on Monday on the injunction brought by the Oilfields Workers' Trade Union to stop the closure of State-owned oil company Petrotrin, Finance Minister Colm Imbert is saying the last shipment of crude for the company has been purchased and the Government will not be spending any more money on purchasing oil for the refinery.
In a one-hour exclusive interview on the Morning Brew on CNC3 television on Friday, Imbert declined to comment on the court action saying the matter is “sub judice and I can’t comment on what is happening there.”
But he said “I can tell you no more oil is being purchased for the refinery. From next week or the week after there will be no more tankers in the Gulf providing raw materials for the refinery. So you will have an entity which does not have raw material because the refinery must have oil coming into it in order to refine the oil into gasoline.”
Imbert said Petrotrin had been buying 100,000 barrels of oil at a cost of “$50 million a day,” and that could not be sustained, "so there is no more oil going into the refinery.”
The last shipment of crude for the refinery, he said, came into the country on the day the transition to the closure of the company started, “October 1, was the cut off date for the cessation of the importation of that 100,000 barrels of oil to put into the refinery.”
He said one of the tankers has “enough oil for seven to eight days of refinery production,” and had either "been discharged or is in the process of being discharged.”
That, he said, is the “last cargo of crude oil, there will be no more purchases of crude oil.”
Imbert said the refinery will be wound down in a “scientific manner, in a professional way. It will continue to produce at lower levels going down to zero until oil supplies are exhausted and then that will be it.”
The Finance Minister said Government had to act on Petrotrin which he described as a company which was a “drag on the economy,” which had not been paying taxes and also has an effect on the public debt. “We have had to guarantee $1.5 bn in debt for Petrotrin, it affects our debt to GDP ratio.”
In the last five to seven years, Imbert said, international rating agencies had focused on Petrotrin and “speak to the unsustainable debt, it is not making a profit and is a drag on the economy.”
He said when the company is “remodelled and has a new business model and is re-engineered for profitability," it will "boost the economy.”
Imbert said the Government had no alternative to the decision which it took to shut down the company, as he revealed that “up to yesterday (Thursday) Petrotrin came to the Minister of Finance for government to guarantee for $1 bn.”
“Do we continue with that situation where every week there is the potential for Petrotrin to increase the public debt by $1 bn and wreck our debt to GDP ratio, destroy our international credit rating resulting in a downgrade of the country’s credit rating? Do we continue with that?” he asked.
Imbert said the refinery was losing $2 bn annually, and the focus in the new model will be on Exploration and Production which, he said, had been allowed to decline because money which should have been invested in exploration and the required infrastructure had gone into the refinery.
“Now that they no longer have the refinery, the saving can be put into drilling and boosting production, that is why we have targeted to get Petrotrin up from 40,000 to 60,000 barrels which will improve its revenue by $3 bn a year.”
Imbert said the US$850 m bullet payment due next year will be a debt taken up by the E&P company. “The Ministry of Finance can’t absorb that, it is $6 bn we can’t absorb that, and that $6 bn is only part of the $12 bn debt, the E&P company will have to shoulder that debt.”
Imbert said investors had refused to “touch” the debt without restructuring because they felt that Petrotrin could not repay. With the changes taking place, he said, “either they will get the existing investors to roll it over for another period of time or they would get a new group of investors to take out the financing.”
Asked what was his message for the more than 4,000 employees to be sent home, Imbert said the Government had mandated the Board to “do the best they possibly can for the workers. We have asked them to do that and we will support them in the process.”
He said the termination packages being looked at “are extremely generous,” and as Minister, he will give the company all the financial support it requires as it goes through the process.”
He explained that the $2.6 bn price tag involves the termination benefits for the employees, which is estimated at $1.8 bn, an outstanding back pay due to the workers from a collective agreement two years ago, vacation pay and payments for casual and temporary workers.
Imbert said the government was doing what it can to soften the fallout on communities when Petrotrin is shut down.
He assured that even when Petrotrin starts importing fuel the subsidy will remain in place, “the difference between the cost of the fuel brought in by Petrotrin and the price paid by motorists at the gas station is covered by the Government, that is what the fuel subsidy is about, so it does not really matter what the world prices are,” he said.
Imbert said the petroleum products will be imported from the eastern United States and the diesel fuel coming in “will be of a much higher quality than that which we get right now.”
He said the Petrotrin diesel “has significant impurities,” and “can no longer be sold on the world market, that’s another reason for the closure of the refinery,” Imbert said.