An­drea Perez-Sobers

Se­nior Re­porter

an­drea.perez-sobers@guardian.co.tt

The new process to find a buy­er for the Petrotrin re­fin­ery has re­ceived nine po­ten­tial bid­ders.
The bid­ders are CRO Con­sor­tium, IEM Re­fin­ery Com­pa­ny, GN Fence­line, Colum­bus Re­fin­ing Trinidad and To­ba­go, In­tegri­tus Group of Com­pa­nies, Oan­do PLC, Nau­ti­cal Part­ners, Pa­tri­ot­ic En­er­gies and IN­CA Re­fin­ing.

As the dead­line for sub­mit­ting pro­pos­als to ac­quire the re­fin­ery is ex­pect­ed to close by the end of this month, there is a pos­si­bil­i­ty that more pro­pos­als could be sub­mit­ted.

The re­fin­ery was moth­balled at the end of No­vem­ber 2018 and there have been three at­tempts by the Gov­ern­ment to dis­pose of the as­sets.

Prime Min­is­ter Dr Kei­th Row­ley at the rul­ing Peo­ple’s Na­tion­al Move­ment (PNM) fam­i­ly day last month said the Gov­ern­ment should be able to an­nounce whether it has found an op­er­a­tor by the end of Au­gust.

He said the team will have to eval­u­ate those who have the means to con­vince the Gov­ern­ment they are a good fit for the re­fin­ery.

Two bid­ders speak

The Sun­day Busi­ness Guardian spoke to two of the bid­ders, who asked not to be iden­ti­fied due to the sen­si­tiv­i­ty of the is­sue. They said they were not pleased with how the process has been go­ing.

They both said no de­tailed in­spec­tion of the re­fin­ery has been done since 2018, which is con­cern­ing.

One of the bid­ders said in­ter­na­tion­al fund­ing for brown­field as­sets is very dif­fi­cult as the re­fin­ery is an aged as­set.

“Bid­ders have been try­ing to get in­for­ma­tion, but noth­ing has been forth­com­ing from Sco­tia­bank Hous­ton, which is in charge of eval­u­at­ing the var­i­ous bids,” one bid­der said.

The oth­er bid­der said the longer the process takes, the more mon­ey it would cost to restart the re­fin­ery.

The bid­der in­di­cat­ed that three to five years ago it could have cost be­tween US$400 and 500 mil­lion dol­lars. Now it would be about US$1 bil­lion and it would take up be­tween three and five years to restart.

The bid­der not­ed that the Gov­ern­ment did not have a choice in shut­ting down the re­fin­ery as over ten re­finer­ies in the re­gion have been closed in the last two decades. These in­clude re­finer­ies in Cu­raçao, Aru­ba, St Croix, Hon­duras and Guatemala.

On Ju­ly 7, in the Sen­ate, re­spond­ing to a ques­tion from the Op­po­si­tion, Tourism Min­is­ter Ran­dall Mitchell said a team head­ed by T&T’s High Com­mis­sion­er to the UK, Vish­nu Dhan­paul (a for­mer per­ma­nent sec­re­tary in the Min­istry of Fi­nance ), will eval­u­ate pro­pos­als for the re­fin­ery. Mitchell was stand­ing in for En­er­gy Min­is­ter Stu­art Young.

The pro­pos­als will be for­ward­ed by Trinidad Pe­tro­le­um Hold­ings Ltd (TPHL), which is the hold­ing com­pa­ny for Her­itage Pe­tro­le­um, Paria Fu­el Trad­ing, Guaracara Re­fin­ing and Petrotrin. Guaracara Re­fin­ery over­sees the preser­va­tion of the re­fin­ery as­sets.

“With­in re­cent months, TPHL re­ceived sev­er­al pro­pos­als for the restart­ing of the re­fin­ery. As a re­sult, the board of TPHL de­cid­ed to have their ex­perts, in­clud­ing in­de­pen­dent in­ter­na­tion­al ex­perts, eval­u­ate the pro­pos­als to then ad­vise the board as to the fea­si­bil­i­ty of these pro­pos­als,” Mitchell de­tailed.

“To make it abun­dant­ly clear, nei­ther the Prime Min­is­ter nor the Min­is­ter of En­er­gy has been in­volved in any Re­quest for Pro­pos­al (RFP) process or any eval­u­a­tion of the pro­pos­al process. To date, the re­ceipt of pro­pos­als has been han­dled and man­aged by TPHL as stat­ed above,” he said.

Re­fin­ery need­ed to close

A for­mer se­nior of­fi­cial at Petrotrin said the best thing to do was to shut it down as every year the re­fin­ery was los­ing near­ly $2 bil­lion.

“Petrotrin’s ex­plo­ration and pro­duc­tion op­er­a­tions were in­ef­fi­cient and added to the high cost of run­ning the re­fin­ery as the in­put cost to the re­fin­ery was high.

“The re­fin­ery was a loss-mak­ing en­ter­prise that was sink­ing Petrotrin and threat­ened to bank­rupt T&T if it de­fault­ed on its pay­ment of the US$850 mil­lion debt in Au­gust 2019. That would al­so have trig­gered a call on the com­pa­ny’s oth­er debt of US$750 mil­lion at the same time, as well as the US$450 mil­lion short-term debt,” the of­fi­cial dis­closed.

In 2017 the se­nior of­fi­cial said Petrotrin de­clared a loss of $2.4 bil­lion, in ad­di­tion to de­fault­ing on its statu­to­ry pay­ments of roy­al­ties and tax­es.

The of­fi­cial al­so in­di­cat­ed that the rep­re­sent­ing union OW­TU was not pre­pared to work with the com­pa­ny af­ter the union ex­ec­u­tives were told that the re­fin­ery was not mak­ing mon­ey.

In Jan­u­ary 2017, the OW­TU se­cured a 5 per cent in­crease for the work­ers af­ter re­ject­ing 3 per cent.

The of­fi­cial added that for a re­fin­ery to be prof­itable there must not be any po­lit­i­cal in­ter­fer­ence, as that was one of its down­falls as well.

Lack of un­der­stand­ing

For­mer en­er­gy min­is­ter, Kevin Ram­nar­ine, said the de­ci­sion to close the re­fin­ery was based on a flawed un­der­stand­ing of the fi­nan­cials of Petrotrin, a lack of un­der­stand­ing of the busi­ness mod­el of an in­te­grat­ed oil com­pa­ny and a loss of in­sti­tu­tion­al mem­o­ry that hap­pened af­ter 2015.

In 2015 the re­fin­ery was mak­ing an op­er­at­ing prof­it and the fac­tors dri­ving the ac­count­ing loss were “non­cash” items in­clud­ing:

1) A re­duc­tion in the val­ue of in­ven­to­ry on ac­count of falling oil prices;

2) Ex­pens­ing of in­ter­est re­lat­ed to the start­up of new plants in the Gaso­line Op­ti­mi­sa­tion Pro­gramme (GOP); and

3) An in­crease in de­pre­ci­a­tion ex­pens­es when the GOP plants had to be de­pre­ci­at­ed.

In ad­di­tion, Ram­nar­ine out­lined that from 2012 to 2015 the re­fin­ery had to play catch up on main­te­nance that had been de­ferred for years.

“This meant ma­jor turn­around ac­tiv­i­ty which re­duced through­put, and this showed up as the neg­a­tive mar­gins. These fac­tors all con­tributed to the mis­di­ag­no­sis of Petrotrin and ul­ti­mate­ly to its clo­sure.”

Al­so, he said any new op­er­a­tor of the re­fin­ery will have to do due dili­gence on the plants and the util­i­ties. All of the re­fin­ery’s soft­ware, for ex­am­ple, would need to be up­dat­ed.

“Cer­ti­fi­ca­tion from in­ter­na­tion­al agen­cies would have ex­pired. It’s a huge task that I es­ti­mate would cost US $1 bil­lion. What is trag­ic is the fact that by 2014 the Gaso­line Op­ti­mi­sa­tion Pro­gramme was com­plet­ed and that in­clud­ed five new plants and an up­grad­ed cat crack­er. All that has now de­pre­ci­at­ed over the last six years with the con­se­quent loss of val­ue. It’s a tragedy that has to be ex­plained to the peo­ple of T&T,” Ram­nar­ine said.

The good news, he high­light­ed, is that it seems peo­ple are still in­ter­est­ed in the re­fin­ery, as the pub­lic knows of the OW­TU pro­pos­als and the in­ter­est by In­di­an busi­ness­man Naveen Jin­dal.

“I will let the eval­u­a­tion team do its work but it’s a daunt­ing task to restart that re­fin­ery. How­ev­er, all the ex­per­tise to restart it re­sides in T&T. A restart will al­so ben­e­fit the com­mu­ni­ties that most de­pend­ed on the re­fin­ery name­ly Mara­bel­la, Vista­bel­la, Clax­ton Bay, Gas­par­il­lo, and San Fer­nan­do,” the for­mer min­is­ter added.

Flash­back to find­ing a bid­der

Find­ing a pre­ferred bid­der to run the re­fin­ery seems to be an up­hill bat­tle. Back in Sep­tem­ber 2019, Fi­nance Min­is­ter Colm Im­bert in­di­cat­ed its in­ten­tion to of­fer for sale or lease the re­fin­ery and as­so­ci­at­ed fu­el trad­ing fa­cil­i­ties, where ap­plic­a­ble. The bid­ding process was di­vid­ed in­to two stages, with Stage 1 of the bid­ding process at­tract­ing 77 ex­pres­sions of in­ter­est.

Im­bert said of 77 po­ten­tial bid­ders, 25 elect­ed to sign NonDis­clo­sure Agree­ments (NDAs) which al­lowed them ac­cess to a vir­tu­al da­ta room, con­tain­ing high­ly con­fi­den­tial in­for­ma­tion on the as­sets and on the over­all process.

Af­ter eval­u­a­tion, a short­list of five bid­ders was pre­pared:

Be­owulf En­er­gy; Glen­core Lim­it­ed; Edge­wood Hold­ings; Klesch; and Pa­tri­ot­ic En­er­gies and Tech­nolo­gies Com­pa­ny Lim­it­ed (Pa­tri­ot­ic) which is a com­pa­ny set up by the Oil­field Work­ers Trade Union (OW­TU).

The min­is­ter out­lined that Pa­tri­ot­ic was the on­ly bid­der that of­fered an up­front pay­ment con­sid­er­a­tion. Their pro­pos­al in­di­cat­ed up­front cash of US$700 mil­lion for the re­fin­ery as­sets plus US$300 mil­lion for the non-core as­sets of lega­cy Petrotrin, for in­stance, the hos­pi­tal. How­ev­er, the non-core as­sets were not of­fered for sale by the Gov­ern­ment.

Things went down­hill for Pa­tri­ot­ic in 2021, as they were re­ject­ed three times, as the Gov­ern­ment said it failed on every oc­ca­sion to sat­is­fy the eval­u­a­tors.