PETROTRIN is ranked near the bottom of all major international indicators for the energy industry, the state oil company’s board told a Parliamentary Joint Select Committee on Energy Affairs yesterday.
The company, director Nigel Edwards said, as he presented a financial viability and sustainability plant to the JSC, has engaged top international business analysts McKinsey and Company and Solomon and Associates, to assess its performance. The results were not promising.
“The world leader on benchmarking in the international energy sector (Solomon and Associates), they have told you that Petrotrin is functioning within the bottom of the fourth quartile? Does that mean the bottom of the bottom,” asked JSC chairman and Finance Minister Colm Imbert. “Yes it does,” Edwards replied.
“So the lowest of the low?” Imbert asked. “Correct,” said Edwards. Among the company’s shortfalls, Edwards said, Petrotrin has shown an inability over time to manage and execute major projects to deliver within budget and on time. This has resulted in consistent and significant cost overruns that have been” value destructive.”
“We have seen challenges in implementing improved operating practices that need to be in place to have sustained value generation. For decades, there has been a culture of complacency and comfort with the status quo,” he said. The board has put together a strategy, based on output from exploration and production; it will be implemented over the next 18 months, and, if all goes well, should bring about a positive cash flow position for the company over the next five years.
Over the last five years, from 2013 to 2017, the company had a positive cash flow of US$270 million, but that did not include royalty payments or capital expenditure.
This figure was a cause of some consternation for the Committee, since they didn’t understand how a company with an estimated $3 billion debt to the Treasury could still have a positive cash flow. Edwards agreed that the company owed royalties, but it had chosen which commitments it could honour and which it could defer.