Outside of the massive US$700 million upfront payment to the State for the Pointe-a-Pierre refinery, the newly-formed Patriotic Energies and Technologies Company Ltd (PETCL) would have to find at least US$1.4 billion to get the refinery up and running, says a member of the valuation committee that considered the bid.
The member of the team that was set up to evaluate the bids told the Sunday Guardian that there are concerns about whether the OWTU can keep the promises contained in its proposals, but that the decision was made because its bid was better than what was offered by the two other companies.
"There were no multi-national companies bidding on this refinery. The other finalists were someone who had a refinery in Germany and felt that this could have some synergies and the other was one interested in purchasing the refinery in Curacao and felt there would be a good fit with Pointe-a-Pierre. So we did not have great bids, to be honest," the committee member said.
Meanwhile, a former board member at Petrotrin, who requested anonymity, told Guardian Media yesterday that the Pointe-a-Pierre refinery lost US$130 million a year for the five years between 2013 to 2018 and after its shutdown last year, it will take as much as 12 months to get back on stream.
The former Petrotrin board member also questioned the status of the unfinished Ultra-Low Suphur Diesel plant.
"It will take another US$300 million to complete, is a new company financially prepared for that?" the executive asked.
The PETCL—wholly-owned by the Oilfields Workers Trade Union (OWTU)—was only incorporated in December 2018 but earned a top place as the preferred bidder for the mothballed refinery.
Back in October, the OWTU presented two companies—Suriname-based Sunstone Equities and MAK England as part of its consortium to take over Petrotrin.
Sunstone Equities joined forces with the OWTU last year to offer a long-term lease to own the Pointe-a-Pierre refinery.
It is unclear whether these two companies are still part of the current consortium and what will happen if the PETCL is unable to meet those prerequisites.
It is also unclear why, after being named preferred bidder for the refinery, the OWTU was given another month to "present to the Evaluation Committee a satisfactory and comprehensive work plan on how it intends to complete the process going forward."
According to the statement by Finance Minister Colm Imbert in Parliament on Friday, five companies were initially shortlisted, that list was then further tightened and cut down to three, with PETCL coming out on top with its US$700 offer.
The PETCL's offer far surpassed the financial offers made by the other two. Beowulf Energy submitted an arrangement to pay the State $US42,000 per month for 15 years and a future 50/50 profit sharing after the company recovered its financial capital, while Klesch offered nothing for the refinery and the Government's only income from the refinery would be through taxes.
•Patriotic Energies and technologies Company Ltd
10 conditions PETCL must meet
1.Confirmation of its ability to finance the purchase and operation of the refinery.
2.A draft Sales and Purchase Agreement (SPA) and various other Commercial Agreements inclusive of Crude Handling, Domestic Fuel supply, Natural gas supply, Product Offtake and Transition Support.
3.A finalised Business Plan that addresses other key deliverables inclusive of the provision of a guaranteed, reliable and seamless supply of refined petroleum products to T&T and the Caribbean region, ensuring the long-term viability of the refinery and reducing its carbon footprint.
4.A statement of any financial incentives or tax concessions required from the Government of T&T.
5.An approach to any historical liabilities.
6.A refinery start-up plan which involves any necessary additional work inclusive of the refinery refurbishment plan and the terminal start-up plan.
7.A plan for the supply of petroleum products during the transition to full operationalisation by patriotic of the refinery, inclusive of the finalisation of an MoU with Trafigura PTE Ltd.
8.A suitable staffing plan, inclusive of senior management.
9.Proof of qualification to engender the startup and performance enhancement processes for the new business as well as the evaluation of growth opportunities to deliver solutions that integrate information, analytics and insight to solve client challenges at all points along the energy chain.
10.Approval from, the Board of Directors of Patriotic for the definitive terms and conditions of the proposed transaction.
PETCL to sign an MOU with Trafigura PTE
As part of the conditionality for the agreement, the PETCL must provide the State with a "plan for the supply of petroleum products during the transition to full operationalisation by Patriotic of the refinery, inclusive of the finalisation of an MOU with Trafigura PTE Ltd."
According to the companies website, T&T is listed as a "candidate country" since 2014.
The company said it "source, store, blend and deliver physical commodities reliably, efficiently and responsibly anywhere in the world. We add value to the global trade in natural resources with exceptional service and performance across the supply chain. We strengthen market links between producers and end-users and supply our customers with the commodities they require when and where they need them".
According to the former board member, the refinery produced as much as 140,000 barrels per day but only has a ready market for 25,000 barrels. An additional 25,000 barrels is sold up the Caribbean, which leaves as much as 90,000 barrels unused and unsold.
Seepersad-Bachan: Agenda or gross incompetence?
Former energy minister Carolyn Seepersad-Bachan first applauded "any initiative that gets the refinery working," but questioned whether the refinery was overpriced.
"The company has to raise its own debt financing or equity financing for working capital, what would happen now is that the Government, the people of T&T would not be getting any money for this asset until three years down the road," she said.
"I am wondering what other real bids they had. Seems to me it was a distressed market because other refineries are up for sale and I find US$ 700 million, I mean if it is going to be realised, I mean the Government got a good deal," she said.
Seepersad-Bachan said she wondered why the Government chose to shut down the refinery last year, only to have the new owner go through nine months to one year trying to get it up and running again.
"They have to check every vessel, every line, they have to get everything re-certified, re-checked," she said in a telephone interview yesterday.
"When you shut it down and put it into the idle mode, all your pipelines have to be tested. That is a costly exercise by itself. Before you even start to seeing a drop of refined product, you're going to take a minimum of six to nine months."
The new operators will also have to check for any damaged, aged and missing parts and components before beginning the process of restarting the plant.
"That is an exercise by itself," she said.
She said in 2018 US-based Chevron offered to buy out the Brazillian-based Petrobras refinery for US$350 million.
"Same complexities as this refinery and then they started discounting, discounting for the state of the refinery and recommissioning of the refinery. So US$700 million is a surprising offer," she said.
She said that the Government made a huge misstep in shutting down the refinery in the first place because all the payouts and losses are borne by the taxpayers.
"The whole situation is just a bungling after bungling and there are a lot of questions."
Seepersad-Bachan also questioned whether the PETCL would be able to meet all the conditionalities required within the one-month time frame.