4 months ago
24
Joshua Seemungal
Senior Multimedia Journalist
Yesterday, the Sunday Guardian began an analysis of the mothballed Pointe-a-Pierre (PAP) refinery as a potential restart moves closer. Last Friday, President General of the Oilfields Workers Trade Union (OWTU) Ancel Roget burned photographs of Prime Minister Dr Keith Rowley and Energy Minister Stuart Young to symbolise its disagreement with the refinery acquisition process. He called for a national debate about the refinery’s closure, saying the country was robbed of a major foreign exchange earner. As both sides of the divide grapple to gain control of the narrative, Guardian Media takes a critical analysis of the company, what it cost the country, and whether it should or could have been salvaged.
While the Manning government in the early nineties saw the formation of Petrotrin as a necessary move, the findings of reports suggested the merger also exacerbated existing cultural issues.
According to the Lashley Report, there was no comprehensive integration plan. This, it said, resulted in deficiencies in its operations, safety and environmental track record. The report described Petrotrin as complex and unmanageable. There were longstanding concerns about overstaffing and low productivity.
“The company lacks a clear purpose and identity, which has caused it to at times engage in activities that are not consistent with the professional practices of a commercial enterprise.
“While staffing is significantly higher than in comparative refineries, this is not a root issue but a symptom of the underlying management problems,” the Lashley report stated.
According to industry experts, the move to unify assets consolidated the OWTU’s power in the energy sector, making it more difficult to institute necessary changes. Experts said that given OWTU’s political power, successive government’s core mandate, as opposed to financial viability, was political patronage.
Flexing its muscles, the OWTU promised to remove two successive Prime Ministers: Patrick Manning and Kamla Persad-Bissessar. The union also sought alliances with Dr Rowley and Persad-Bissessar while their respective parties were in opposition.
“In short, the Petrotrin fix was always seen to be bad for politics and even one’s political survival, but we have arrived at a place now where its ongoing failure threatens national survival. Such is my lot. This Government does not have the luxury of not attending to this age-old problem. Time is not on our side,” PM Rowley said in his 2018 address about Petrotrin’s closure.
In his address, Dr Rowley said that Petrotrin’s wage bill accounted for around 47 per cent of the recurrent expenditure, employing more than 5,000 employees at a cost of around $1.8 billion (TT) a year. Petrotrin also had more than 1,000 vendors supplying materials and 2,000 service providers.
Petrotrin and the OWTU have had several standoffs in the past decade. In November 2011, workers shut down a large section of the refinery, citing management’s failure to address safety concerns. OWTU President General Ancel Roget claimed Petrotrin’s operations were adversely affected by political appointments.
He added that there were too many vacancies and an overdependence on contract work. “The refinery is a ticking time bomb. On the port, there are safety issues. At the marine department and the bond, there are similar concerns. A year ago, we submitted a new management structure for the company, and that has not been implemented,” Roget said.
In February 2012, the OWTU and Petrotrin agreed to a nine per cent salary increase in salary negotiations for the period 2008–2011. In March 2013, however, thousands of Petrotrin employees/OWTU members protested. They accused the company of failing to honour the terms of the collective agreement signed a year earlier. Roget argued that the company promised to fill 800 vacancies, make casual workers permanent, make the work environment safe, and settle outstanding payments for the period 2009–2010, but it failed to keep its promise. The strike lasted a week before Petrotrin’s lawyers won an injunction forcing workers to return to work.
“Workers will go back to work feeling demotivated and demoralised. An injunction doesn’t take care of poor management and nepotism.” Roget said.
In December 2016, OWTU served strike notice to Petrotrin after wage negotiations for the 2015–2018 period broke down. The union was offered 0-0-0 for the 2011–2015 period as well as the 2015–2018 period.
The company attempted a six-year wage freeze, citing its financial trouble. In January 2017, with a strike looming, the OWTU accepted a five percent wage increase offer for the 2011–2012 and 2012–2013 periods.
In an address to the nation, Prime Minister Rowley said the company’s current debt was $13.2 billion (TT), and borrowings to meet wage increases would add to the national debt. “With the need to suspend export sales, in the event of a strike, Petrotrin’s gross receipts would have declined by three-quarters and its foreign exchange earnings would have dried up … the planned strike would have caused a net income loss of close to $500 million (TT) during the potential 90-day period of the strike.
“It is estimated that this interim increase of five per cent will immediately increase Petrotrin’s wage bill by $81 million per year, and the back pay liability arising from the interim offer would be in excess of $300 million,” Dr Rowley warned.
Twenty-one months later, all 5,000 plus of those employees were retrenched.
Board games
Between January 2007 and its closure in November 2017, there were four different chairmen: Malcolm Jones, Lindsay Gillette, Andrew Jupiter, and Wilfred Espinet. During that period, 40 different people were appointed to the board—an average of four new annual appointees. Between January 2007 and 2010, when the Manning administration was in power, 11 different members served.
The board averaged eight serving members. Between January 2011 and July 2015, under the Persad-Bissessar administration, 15 different members served. The board averaged nine members during that time. Between October 2015 and November 2017, under the Rowley administration, 14 different members served. The board had an average of seven serving members.
With both changes of government (in 2010 and 2015), the entire incumbent board was replaced. The only board member to serve in two different administrations was Anthony Chan Tack, who served under Manning in 2007 and Dr Rowley in 2017.
According to the 2017 Lashley Report, the process by which the boards were appointed was detrimental to effective governance.
“The history of changes in management and demands imposed were not consistent with the interests of the company, further crippling its performance. Today, Petrotrin is overburdened with debt, which substantially resulted from poor investment decisions.
“The situation resulted: in Little room for continuity and planning successful projects beyond a five-year horizon; creating an unnecessary disruption of business strategies; A lack of consistency in strategic direction; A lack of corporate governance experience and skills; Poor decision-making; Loss of institutional memory; Power distance between policy/strategy and operational management; Loss of confidence and instability; Constant challenges for its engagement with major stakeholders; A loss of morale among the employees,” the report stated.
Ratings and bonds
From April 2001, Petrotrin’s Moody’s rating was downgraded from Baa3 (moderate credit risk) to Ba1 (subject to substantial credit risk) in May 2015, and then further downgraded to B1 in April 2017 (speculative and high credit risk). The company’s Standard and Poor’s ratings declined from BBB (Investment grade) in 2005 to BB (Non-Investment Grade, or junk) in April 2007.
“The committee noted that the current external and internal environments, coupled with continuing credit downgrades by rating agencies, also made it increasingly difficult for the company to manage liquidity through short–and medium-term borrowing for trade financing and working capital support,” a 2016 JSC Committee chaired by David Small reported.
The company also had two major long-term borrowings comprising two bonds: a US$750 million bond at six per cent from May 2007 as well as a US$850 million bond at 9.75 per cent from August 2009, which involved a substantial bullet principal payment. The US$750 million payment was amortised.
In September 2018, Finance Minister Colm Imbert said the Government guaranteed more than $2.5 billion in loans in just six months for Petrotrin. He said he wrote letters of guarantee for Republic Bank, Scotia Bank and First Caribbean for US$50 million, respectively; First Citizens Bank for US$55 million and FCB for US$25 million. Imbert stated that each guarantee affected the Government’s public debt.
As of September 2023, the Government’s public debt was $102.5 billion. The public debt as a share of GDP is 0.54. In February 2013, Trade and Industry Minister Paula Gopee-Scoon announced that Heritage refinanced the Trinidad Petroleum Holdings Limited groups’ debt of US$975 million.
She said it was the second time the debt had been refinanced. The debt, she said, resulted from Petrotrin’s US$850 million bullet bond and part of the amortised US$750 million bond.
The (un) foreseeable fallout
“The Government is not closing down Petrotrin, and in case you were just opening up your fridge and you didn’t hear that when you closed the door, let me repeat it. The Government of Trinidad and Tobago is not closing down Petrotrin.”
Prime Minister Dr Keith Rowley promised on September 4, 2018, during a political meeting in Marabella. The meeting was entitled, “Resurgence of Petrotrin.”
It came days after the Government announced its intention to shut down the Pointe-a-Pierre refinery. Up to then, there was no mention of the company being shut down as well. Twenty-three days later, chairman Wilfred Espinet announced at a press conference that the company would be shut down, with all workers retrenched.
The decision came despite both the 2017 Lashley report and a JSC into Petrotrin’s operations saying there were opportunities to turn the company around, albeit with significant and difficult changes. The Lashley report stated, “It is equally clear that this is a valuable source of income and very important for foreign exchange earning potential.
There is a great opportunity to harvest this potential, but significantly improved stewardship is urgently required. Petrotrin has significantly underperformed over the years, and given the current economic realities of T&T, it has become necessary to review the performance of the company with the objective of reducing its dependence on the State and creating value for present and future generations of the country.”
The 2016 JSC into Petrotrin’s Administration and Operations stated that “In spite of these issues, the committee is of the view that Petrotrin has significant potential for positive sustained growth, provided that the tough decisions needed are taken quickly to unlock the full value proposition of the company. Internally, the company really needs to take a hard look at how it has been conducting business in several areas highlighted in this report and make the necessary adjustments to protect the company from repeating the mistakes and the poor decisions of the past.”
Defending the company’s closure in March, Dr Rowley said Petrotrin would have lost at least another $5 billion between 2018 and 2023. To this day, economists and energy experts share opposing opinions on whether closing Petrotrin was the right decision. In May 2023, Heritage Petroleum reported a $1 billion profit in 2022.
Meanwhile, fenceline communities across Marabella, Pointe-a-Pierre, and Claxton Bay remain deeply affected by the closure.
Part 3 to be continued in the Sunday Guardian
English (US) ·