The history of Trinidad and Tobago contains some parallels with the history of our energy sector, which is over 160 years old, and one with which we as citizens identify ourselves. One may even argue that this identity is the reason for the seeming inability to diversify our economy.
In 1857 the first well was drilled for oil in Trinidad – 61 metres deep in the vicinity of the Pitch Lake by the Merrimac Company. In 1908 commercial oil production began near the Pitch Lake in La Brea and in 1910, the first export cargo of crude oil was shipped by tanker at Brighton, La Brea. Years later, in 1993, the Petroleum Company of Trinidad and Tobago Limited, otherwise known as Petrotrin, a local state-owned oil company, was established by the merger of Trintopec and Trintoc, two other State-owned oil companies. A third company, Trinmar Ltd was merged into the company in 2000. As a State-enterprise, Petrotrin is under the direct control of the Minister of Finance acting as the Corporation Sole, and the Ministry of Energy and Energy Industries is the line ministry that provides specialised technical analyses and statutory approvals for the company’s operations.
In an address to the nation in January, Prime Minister Dr Keith Rowley noted that Petrotrin was experiencing a dramatic slump in crude oil prices, combined with an ongoing decline in refinery margins and declining local oil production. He said this resulted in a more than 50 per cent decrease in the company's revenues, from TT$37 billion in 2012 to TT$16 billion in 2016. The situation was further exacerbated when the union served formal strike notice on Petrotrin in January. It is important to note that Petrotrin has more than 5,000 employees, with an annual wage bill of $1.9 billion, which is close to 50 per cent of its total annual operating costs. Additionally, the Finance Ministry has had to pay for imported oil to keep the refinery going, only to have Petrotrin sell the refined products at a loss.
Traditionally, Petrotrin has been a net earner of foreign exchange, approximately $250 million per year in 2015 and 2016. It is also an important contributor to government tax revenues and a guarantor of the country's energy security. For many years, however, high international oil prices masked a range of fundamental weaknesses in Petrotrin's operations. Among the main structural problems were a steady decline in domestic oil production, low productivity, escalating manpower costs and steadily increasing operational and capital costs, due to inadequate controls, questionable management practices, ageing assets and infrastructure, and higher levels of employment than needed for an oil company that size.
A new Board was recently installed at Petrotrin with a mandate to make Petrotrin sustainable and profitable in the next two to three years and to restructure it in the best interest of the national community taking into account all the competing interests and challenges. According to reports, Petrotrin has found itself in a distressing financial state with a US$850 million debt due in 2019 which the company would be hard-pressed to pay.
As the sole refinery in the country and the provider of the fuels that keep people and goods moving on the nation’s roads and on our seas and the earner of foreign exchange the future of Petrotrin is of direct interest to all members of the national community and the sustainability of the company has direct implications for our macroeconomic situation. Concerns about the financial viability of Petrotrin – and its heavy debt burden – directly affect the overall confidence of international investors in Trinidad and Tobago, as well as our international ratings.
Petrotrin also has an important role to play in the availability of US dollars and is a very important source of tax revenue for the government. Petrotrin paid a total of $6.6 billion dollars in 2014 and $4.1 billion in 2015 respectively in taxes to the government. Additionally, Petrotrin’s Corporate Social Responsibility efforts must also be recognised as the Company invested an estimated $15 million dollars in community projects across Trinidad and Tobago for the period 2014/2015. The company is also key to any short-term effort to reverse falling national oil production. While deep-water exploration has the potential for significant new oil production in the longer term, the reality is that any more immediate increase in oil production is likely to come from the mature acreage under the control of Petrotrin – both onshore and in the Gulf of Paria.
This is a national company, facing issues that have implications for all of us, our way of life, standards of living and ability for us to provide for our children’s future. Let us ensure we pay attention and let our voices be heard about the issues and the unfinished story of Petrotrin.