President of Petrotrin Kenneth Allum has painted a gloomy picture of the way forward for the State-owned energy company.
After suffering massive cost overruns on several ambitious projects, Allum told a South Chamber meeting, yesterday the company now has to become meaner and leaner if it is to survive in a competitive market. He said he did not see the price of crude oil moving from between $60 to $80 any time soon. He later told reporters the alternative was shutting down the company. "It is easy to shut it down," he said. Allum, who recently succeeded Malcolm Jones as Petrotrin's head, said they would have to take what ever action was necessary to become cost competitive and improve its position for growth. He said he recognised that Petrotrin has been referred to in the past as "a sweetbread company," but that culture had to change.
Addressing a group of energy investors and experts at the Cara Suites Hotel and Conference Centre, Claxton Bay, Allum said they anticipated a significant loss in their revenues for the fiscal year 2009 and even 2010. Petrotrin contributed more than six billion dollars in Government revenues in fiscal 2008. "For fiscal year 2009, at the end of August, our year to date revenue is just over US$3 billion. It is a great difference from the previous year," he said. In this regard, Allum added, the operating profit has moved from 14, 15, 16 per cent to three per cent to date. He said earnings before taxes and other deductions, at the end of August stood at about US$193 million. coming down from over one billion a year. Its net income, which in 2008 was just under $400 million, is just under six million at the end of August.
He said September was not a good month and they expected a small loss at the end of this month. Baring all before his audience, Allum pointed out that from 2,000 wells on land and 300 at Trinmar, they were producing just under 50,000 barrels of oil, and gas, even though the refinery has a capacity to produce 150,000 barrels a day. "This tells you that we are producing very little from each well, that the wells are very mature." The company also has 21 joint venture arrangements, on and off shore, which contributed over 30 per cent of its equity, he said. Allum said as it went forward, the greatest challenge would be the refining margins. He said: "Our challenge is to increase our equity crude to as much as we can towards meeting 150,000 barrels a day. "Our local consumption of petroleum products is just about 22,000 barrels. We are an export refinery. It means our competitors are international, who we have to compete with in the international market.
"To become cost competitive we have got to become a leaner company in all respects. We have to look at our cost structure, we have got to look at all aspects of our company and take what ever action is required to bring that down." He said while it continued to improve its operating efficiency, it had to also improve the relationship with shareholders to get support as it went forward in the challenging period. Turning to the Gas Optimisation Plant which will improve its efficiency, Allum admitted that scope changes, delays in the Environmental Impact Assessment Certificates, overheating of the construction industry, as well as equipment supply, had pushed the cost from US$350 million in 2003 to US$1.3 billion to date. Allum said, however, they have learnt that they should properly scope out their projects before they enter into them.
